One question prospective buyers repeatedly ask themselves is what comprises a pre purchase strata report. A pre-purchase strata report, also called a strata inspection report, a strata search or Section 108, is a document containing extensive financial and management information of a strata, community or company property that a buyer is interested in.
A strata scheme is a building or housing complex that has been divided into individual apartments or houses. When you acquire a single unit, you share the ownership of the scheme in question with the owners of other units.
It is not mandatory to have a pre purchase strata report, but it equips a prospective buyer with adequate information on the health of a scheme's management and finances. This makes the report important because of the risk involved when purchasing such property.
While a strata report is quite similar to a building inspection report, it does by no means replace the building report. The major difference is that a strata search gives precise details such as:
- The current owner of the property
- Intricate financial aspects for the property and levies including any special levies
- Your unit entitlement pertaining to voting rights
- Whether the strata scheme adheres to safety regulations
- Whether pets are allowed
- Copies of building reports and compliance reports
- Whether there are pending legal matters or known disputes within the scheme
- Any building defects
- The current value of the unit
- Insurance and cover
- Copies of AGM minutes and other committee meetings
Although you can conduct a strata search yourself, it is best to commission a certified consultant to draw the report.
A pre purchase strata report can be requested for all residential and commercial properties. The report must meet the requirements of the Strata Schemes Management Act.
What you need
Due to the confidentiality terms of the corporate records it contains, you can only obtain a strata report after going into a contract with the seller. It will then be upon the scheme's management to make the report available to the buyer and meet the finance or building inspection clauses as per the contract.
Failure to comply with the timeframe set for providing the report can lead to cancellation of the contract by the buyer.
A letter of authority from the property seller is required for the search to go ahead. You will also need to provide details such as the scheme name, lot owner's name, lot number and contact.
Typically it takes a duration between 24 hours and a few days to obtain a strata report. Normally, most buyers prefer to get the document within five days of signing the contract. A clause in the contract can extend this time-frame as well as allow for the negotiation of terms once the report is out.
Since a pre purchase report requires a search into the records of the strata scheme, it may take time depending on the willingness of the seller's managers to avail the information.
Pre purchase strata reports can be quite intricate to compile and source, hiking the cost in the process. Some consultants have a fixed rate while others charge as per the time taken to compile the report. The charges include a search fee paid to the Owners Corporation. However, the cost of the report is small compared to what it might cost you to invest in a poorly managed or maintained strata scheme without first obtaining the report.