BUYING AN APARTMENT OR A TOWNHOUSE? WHEN IS A COMPREHENSIVE BODY CORPORATE REPORT WORTH THE MONEY?
When purchasing within a body corporate, there is a significant amount of information that you can obtain to ensure you are going in with your eyes open. To obtain this information, we recommend ordering a comprehensive body corporate report (sometimes known as a pre-purchase strata report).
What is a comprehensive body corporate report?
A comprehensive body corporate report is an inspection of the records held by the body corporate. It should give you a good sense of how the body corporate is functioning. Depending on the report, it will cover information such as:
- Financial position – are there sufficient funds in the admin fund (to fund day to day expenses) and the sinking fund (to fund capital improvements)? If these are low, you could be hit with a special levy if body corporate works need to be completed
- Building defects – have any major structural defects already been identified? Is the body corporate considering undertaking major repairs? These have the potential to lead to special levies
- Evidence of legal proceedings or disputes – is any legal action being taken against the body corporate committee (e.g. for misappropriation of funds) or by the body corporate against third parties (e.g. contractors who haven’t completed works properly)? Is there any disharmony amongst lot owners? This can affect your enjoyment of the property and could impact levies
- Compliance with legislation – is the body corporate complying with the wide variety of legislative provisions to which it is subject?
- Management issues – is the body corporate being managed appropriately? Poor management may result in issues not being resolved leading to significant stress and costs
- Reports eg. fire inspections, general building & pest inspections or structural reports – are these a cause for concern and has the body corporate actioned any recommended items?
A comprehensive body corporate report will summarise all of this information and highlight any areas of concern so you don’t have to trawl through body corporate records.
How do I obtain a comprehensive body corporate report?
As everyone has a different risk appetite, this report is not part of our standard searches (see below).
Multiple companies however offer this service. If you require any recommendations for a provider of this report, please contact us.
What happens if the report identifies an issue?
Before signing a contract, we recommend including the below special condition in your contract:
“This Contract is subject to and conditional upon the Buyer conducting satisfactory searches of the Body Corporate records within fourteen (14) days from the date of the Contract (‘the Due Date’). If the Buyer is not satisfied with the searches, the Buyer may terminate this Contract by giving written notice to the Seller at any time before 5.00pm on the Due Date and the deposit must be refunded to the Buyer in full. If the Buyer does not give notice by 5.00pm on the last day of the period, then the Seller may terminate this Contract by notice in writing to the Buyer and in that event all deposit monies shall be refunded in full to the Buyer. This Special Condition is inserted for the benefit of the Buyer and may be waived by the Buyer at any time.”
This will give you the ability to terminate the contract should the comprehensive body corporate report identify adverse findings and you no longer wish to proceed with the purchase.
If you don’t have this special condition, please speak with our team to determine the best path forward.
What is included in MAP Lawyers’ standard searches
As part of our standard process, during the conditional period of your transaction, we order the following standard body corporate searches:
- Community Title Statement (“CTS”) – this search confirms that a lot is registered within a community title scheme
- Community Management Statement (“CMS”) – this search identifies the Scheme land and name, the applicable regulation module, the contribution and interest schedules which affect your portion of costs, the relevant By-Laws of the Scheme which will affect your daily enjoyment of the property, and any exclusive use areas you are entitled to
- Body Corporate Information Certificate – this search provides information on annual contributions, special contributions and other amounts payable to the Body Corporate. This information is used for calculating settlement figures and checking the completeness and accuracy of the Disclosure Statement
- Body Corporate Insurance Certificate of Currency – this search ensures that the Body Corporate has insurance in place over the common property. Your lender will require this document
