Unlike buying a standalone home, buying a strata property is a significant investment that involves buying into a community with shared responsibilities, costs, and decision-making. Asking the right questions upfront can save you from costly surprises down the track.
Questions About Finances
1. What are the current strata levies, and what do they cover?
Strata levies typically cover building insurance, common area maintenance, administrative costs, and contributions to the reserve fund. Ask for a breakdown of what’s included, as some schemes cover utilities like water or gas, while others don’t.
Don’t focus only on whether the levies seem low or high. Unusually low levies might indicate inadequate maintenance or an underfunded reserve, which could mean special levies in your future.
2. How healthy is the reserve fund?
The reserve fund (also called the sinking fund) is the strata scheme’s savings account for major capital works like roof replacements, repainting, or lift upgrades. A healthy reserve fund should have sufficient funds to cover anticipated major expenses without requiring special levies.
Request the most recent financial statements and compare the reserve fund balance against the depreciation report recommendations. If the fund seems low relative to the age and condition of the building, investigate why.
3. Have there been any special levies in the past five years?
Special levies are one-off charges to owners when the reserve fund doesn’t cover major expenses. Ask what these levies were for and how much they cost per lot. A history of frequent special levies could indicate poor financial planning or significant building issues.
4. Are any lot owners in arrears with their levies?
Outstanding levies can indicate financial stress within the scheme and may affect the strata’s ability to maintain the property properly. While some arrears are normal, significant or long-standing debts should raise concerns.
Questions About Building Condition and Maintenance
1. Can I review the 10 Year Plan report?
In Western Australia, strata schemes with 10 or more lots, or a value of $5M of more, must have a 10-year plan. This document outlines the expected lifespan of major building components and estimates future replacement costs.
This report is your roadmap to understanding what major expenses are coming and when. If the report is outdated or doesn’t exist, this is a significant red flag.
2. What major works have been completed recently?
Understanding recent major works gives you insight into what shouldn’t need replacing soon. Ask about roof repairs, repainting, plumbing upgrades, lift maintenance, or any building envelope work. Recent quality work adds value; deferred maintenance costs you money.
3. What condition is the building in overall?
Beyond the paperwork, use your eyes. Look for signs of water damage, cracking, peeling paint, or deteriorating common areas. These visible issues often indicate larger problems and potential future costs.
If you’re serious about the property, consider engaging a building inspector who specialises in strata properties. They can identify issues that might not be apparent to the untrained eye.
4. Are there any known defects or ongoing building issues?
Ask directly about any building defects, water ingress problems, or structural concerns. Review strata meeting minutes for discussions about building issues. Transparency here is essential, as undisclosed defects can become your expensive problem.
Questions About Strata Management and Governance
1. Who manages the strata scheme?
Find out if the scheme is self-managed or professionally managed. Professional management typically ensures better compliance with legislation and more efficient operations, though it does come at a cost.
If professionally managed, research the management company’s reputation. At Perth Strata Co., we believe quality management makes a tangible difference to property values and owner satisfaction.
2. How engaged is the strata council?
An active, engaged strata council generally indicates a well-run scheme. Ask how often the council meets and whether they have difficulty filling positions. A council that struggles to find volunteers might signal owner apathy or internal conflicts.
3. What do the meeting minutes reveal?
Strata meeting minutes are goldmines of information. They reveal ongoing disputes, deferred maintenance decisions, financial challenges, and the general culture of the scheme. Request minutes from at least the past two years and read them carefully.
Look for patterns: Are the same issues raised repeatedly without resolution? Are owners frequently voting down necessary maintenance? Is there evidence of conflict between owners or with management?
4. How quickly does management respond to maintenance requests?
Ask current residents about their experience with maintenance responsiveness. Slow or inadequate responses to maintenance issues can indicate poor management or insufficient funding.
Questions About Rules and Lifestyle
1. What are the scheme’s bylaws?
Bylaws govern everything from pet ownership to renovation restrictions, parking rules to noise limitations. These rules significantly impact your lifestyle and what you can do with your property.
Common by-law considerations include:
- Pet restrictions (size, type, number)
- Renovation and alteration requirements
- Parking and visitor parking rules
- Short-term rental restrictions
- Noise limitations
- Use of common areas
Make sure the bylaws align with your lifestyle before you buy.
2. Are short-term rentals permitted?
The presence of Airbnb-style short-term rentals can affect your living experience and potentially your property’s value. Some schemes prohibit them entirely, while others allow them with restrictions. Understand the rules and the current situation in the building.
3. What’s the owner-occupier to tenant ratio?
A high percentage of owner-occupiers typically indicates a more stable, well-maintained building. While there’s nothing inherently wrong with investment properties, buildings with very high tenant ratios can sometimes experience higher turnover and less engaged ownership.
Questions About Insurance
1. What does the strata insurance cover?
Strata insurance typically covers the building structure and common property, but understanding the specifics is important. Ask about:
- The total insured value
- What’s included and excluded
- Excess amounts
- Whether fixtures and fittings in your lot are covered
You’ll need separate contents insurance and may need additional coverage depending on what the strata policy excludes.
2. Has the building been properly valued for insurance purposes?
The insured value should reflect the full replacement cost of the building and common property. An underinsured building puts all owners at risk if a major claim is necessary.
3. What’s the claims history?
A history of insurance claims might indicate building problems or a higher risk. Ask about any significant claims in the past five years and whether they’ve been resolved.
Questions About the Specific Lot You’re Buying
1. What’s included in the sale?
Clarify exactly what comes with the property. Does it include car bays, storage areas, or fixtures? Are appliances included? Understanding what you’re actually purchasing prevents disputes later.
2. What are my maintenance responsibilities?
Depending on the type of strata plan, your maintenance obligations vary significantly. In a standard strata scheme, you’re typically responsible for everything within your lot. In a survey-strata scheme, you may be responsible for external maintenance of your lot as well.
3. Are there any exclusive-use areas?
Some lots come with exclusive use rights to areas like courtyards, balconies, or parking spaces. Understand what you have exclusive use of and any associated maintenance responsibilities.
Questions to Ask Current Residents
1. What’s it like living here?
Current residents can provide invaluable insights that paperwork can’t. If possible, speak with neighbours about their experience. Ask about:
- The community culture
- Any ongoing issues or concerns
- Their satisfaction with management
- Noise levels and neighbour relationships
- Whether they’d buy here again
2. Have there been any disputes or ongoing conflicts?
While some conflict is normal in any community, ongoing disputes can make life unpleasant and affect property values. Understanding any tensions helps you make an informed decision.
Red Flags in Strata to Watch For
Certain warning signs should prompt extra scrutiny or even reconsideration:
Financial red flags:
- Consistently low reserve fund balance
- Frequent special levies
- Significant owner arrears
- Levies that seem too low for the building’s age and condition
Management red flags:
- Outdated or missing depreciation reports
- Incomplete or missing meeting minutes
- High turnover of strata managers
- Difficulty getting information from management
Building red flags:
- Visible signs of water damage or structural issues
- Deferred maintenance on major items
- Ongoing building defects or disputes
- Recent or pending litigation
Governance red flags:
- Inability to form a strata council
- Repeated voting down of necessary maintenance
- Evidence of significant owner conflicts
- Very high tenant-to-owner ratio
At Perth Strata Co., we’re experts in strata management and can recommend some of the best strata properties in Perth for your next investment. Contact us for more info, or to switch your existing strata management to us.
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