Navigating the challenges and benefits of buying a strata title property

Transcript

Peter Fletcher

[00:00:00] Peter Fletcher: Welcome to the WA Property Q& A, the podcast where I explore the ins and outs of buying property in Western Australia. I’m your host Peter Fletcher and each week I interview local property experts to help you to develop a deep understanding of the nuances of buying property in WA. From market trends to legal considerations, no topic is off limits.

But before we dive in, a friendly reminder, while we provide valuable information, it’s important to note that nothing discussed in this podcast should be construed as personal investment advice. Always remember to seek the appropriate professional advice for your specific circumstances. Now, let’s get started and unlock the secrets to successful property buying in WA.

So, officially, welcome to another episode of the WA property Q& A podcast and today with me today is none other than somebody I’ve known since about 2005 2006, Nikki D’Agostino. Nick worked at PFR. Just as I was parting stage left, Nikki came in as I think she was PAing or something in there, or sales repping. And and since then Nikki’s gone on to be a li become a licensed agent.

I’m super, super proud that you did that and you’ve become a really good license, you’re a licensee now for a Western Suburbs Agency. Can you say that who that is or? Yeah, yeah,

[00:01:31] Nikki D’Agostino: I’m over at Boutique Realty in Subiaco.

[00:01:34] Peter Fletcher: Boutique Realty, yeah. And you’ve been a doing retail property management, so that’s hard stuff, hard yakka.

[00:01:42] Nikki D’Agostino: Hard yakka. And a strata manager at some point in between over the last 20 years of being, selling strata, working in the commercial industry and development strategic, et cetera. And yeah, strata manager’s in there too.

[00:01:57] Peter Fletcher: Huge, huge, lot of experience. And now you’re doing a little bit of do you do any consulting work, Nikki, around the

[00:02:05] Nikki D’Agostino: Yes, I do.

So, I have aligned myself with the Efficiency Co. who do a lot of property industry consulting generally around property management. And I’ve come in with a strata and commercial arm. My client base is at this stage has been sort of

directed with commercial developers or developers doing their first time strata developments and leading that process from the development planning stage into setting up a strata scheme and into its first year as a strata company.

[00:02:36] Peter Fletcher: Some really technical stuff there. And I think the what we’re going to call this episode is going to be the pitfalls of buying Strata. And as our friend Rob Mandonici and we discussed before the start of this we shouldn’t be here beating up on Strata. We shouldn’t be here, you know, seen to be beating up on Strata because there’s a lot of benefits in Strata title, yeah?

Definitely. What do you see as being the big benefits of Strata?

[00:03:04] Nikki D’Agostino: Look, in, in regards to just society in general population growth, there’s going to be more people. We’re going to need more space for those people and places to live and it’s a good way. I’m quite pro development, so I like seeing new communities being built and where you’ve got, you know, like, you know, pay on our Vic Park strip here, there is lifestyle and livelihood and you can do that on a smaller scale with.

Strata development locations you know, having retail strips and cafes and restaurants with people living above it to actually fill those spaces and provide that energy.

[00:03:41] Peter Fletcher: Yeah, because you, you go down to say, let’s say Southern River where you end up on a, you know, 350, 400 square meter block, you know, They’re tiny blocks and you know, a really basic three by two, four by two, you know, like most of which is a double garage and you think, wow, where’s the nearest coffee shop?

And, while there’s a franchise coffee shop down in the nearest shopping center where there’s pretty much zero personality whereas, you know, strips like Vic Park, Subiaco, Leaderville, they’ve got so much on offer and you stack a really good quality strata in there.

You’ve got quality lifestyle and quality accommodation.

[00:04:25] Nikki D’Agostino: Absolutely. You’ll also find putting in higher density living, and again, you know, going out to Southern River as your example, there is a lifestyle choice for everybody, and there is a time and place for every stage of that lifestyle choice. So, Strata and these kind of communities will attract a certain demographic, whilst there does come a point where You might like to live a bit more rural or setback and not mind having to drive everywhere and being more at home a lot more.

So, there are lifestyle choices, but I think Strata does give, when we’re looking at one of the biggest epidemics at the moment being loneliness, Strata communities can be inadvertently a way to help solve that

[00:05:09] Peter Fletcher: problem. Sure, sure. Yeah, yeah, that’s a fair point. So, there’s a lot of good things about StrataTitle, there’s no, no question about that.

And I just wanted to use today as saying, okay, well let’s accept that there’s lots of good things about buying in a StrataComplex. And at the same time, let’s look at, the things that buyers should look out for when buying a strata. So where do we start with this conversation, do you think?

I

[00:05:38] Nikki D’Agostino: think where it comes to where you said the pitfalls and it is that, there is legislation, there are segregated or compartmentalized parts of this industry and people working in it, living in it or dealing in it. And it’s, it can be complex to navigate. As well as just not having an understanding, it’s not the same, as we know.

Selling a green title house is not the same as selling an apartment in a high rise building. But as agents and reps, we’re expected to treat them the same. And sometimes as buyers and sellers, we don’t understand the differences either.

[00:06:14] Peter Fletcher: Yeah, so when somebody buys a strata title here in WA they are given a strata disclosure document a strata disclosure statement, yeah?

[00:06:25] Nikki D’Agostino: Yep, pre contractual disclosure statement.

[00:06:27] Peter Fletcher: Pre contractual disclosure statement, there we go. Now, what are the things that a buyer should be looking at on a pre contractual disclosure

[00:06:36] Nikki D’Agostino: statement. Look, the first thing is ensure you get it before you sign the contract, because without that, there isn’t, like, for agents to be aware, there is an out for that buyer if they have not received that information prior to entering into a contract.

You’ll want to see your access to all the AGM minutes And any subsequent EGM minutes, if there’s been any extraordinary general meetings held within that time have a read through, you’ll get your strata plan and any additional

bylaws, there’ll be standard bylaws. And essentially from that information alone, you’ll be able to ascertain sort of like what the rules behaviorally and governance wise, how that strata complex runs what the surface boundaries might look like from the strata plan.

So, if there is a water leak in the bathroom, whose responsibility it will be. And also not so savvy owners AGMs do raise. things outside of what is required under general business in, at the AGM, and this can be shown in

[00:07:41] Peter Fletcher: the minutes. Okay, let’s pick some of these apart.

Let’s start with the strata plan. A buyer should be looking at what on the strata plan, and this is not intended to be a gotcha question what are we looking for there?

[00:07:53] Nikki D’Agostino: I think first is first, you want to see the location of where the premise sits what

[00:07:59] Peter Fletcher: So, the lot boundaries?

[00:08:00] Nikki D’Agostino: Yes, the lot boundaries where the lot, what floor they’re located on, how far the storeroom and car bays might be from the property itself.

[00:08:09] Peter Fletcher: And the lot boundaries aren’t always the lot boundaries, are they? They can define in the side notes to this strata title. It can say, well, the lot boundaries are the inside walls or the central line of the walls or the, yeah, the internal surface.

Or in some cases, it’s the external surfaces on some of the smaller. complexes.

[00:08:30] Nikki D’Agostino: Correct. And look, easy way of that, I used to say is from the paint in belongs to you and from the walls out is the strata company. So it depends on the surface boundary.

[00:08:41] Peter Fletcher: Yeah, it depends on which strata that you’re buying.

That’s right. So, what in some of the smaller strata titles, you’re actually buying imaginary lines in the ground. Correct. Or airspace. Airspace. Yeah, well, yes, straight up, yes. So, and another one, some of the old old Strata titles, like these ones are, I think 69 to 71 King George and Lennon Street.

They used to have on the, in the car parks, they’d have these dotted lines and they’d, it’d say. for use of lot one and so on, and that notation meant absolutely nothing.

[00:09:25] Nikki D’Agostino: No, that’s right. it doesn’t comprise the size of the lot itself. So you might have a hundred square meters with a 20 square meter car bay.

That’s a very big car bay. But that car bay is not exclusive to that lot. So it actually does not come into play. And that’s where you can then fall into the trap of having under. under enough floor space for a bank to learn on. Yeah. Things like that as well. Yeah.

[00:09:48] Peter Fletcher: So, it is important that people understand what they’re buying.

In most cases, it really, If they didn’t quite get it right, it wouldn’t have a lot of impact. And I’m thinking about things like balconies, which are often not included in the lot. So the balcony would be technically a common property. But people go, well, that’s mine. And for all intents and purposes, it is.

Because really, no one else is going to go there. But technically, it is. Common property. So in most cases people get it.

[00:10:27] Nikki D’Agostino: And that’s one of the biggest, I think, strata management hat on balconies can be one of the biggest issues when it comes to Structural and ceiling and things like that.

[00:10:38] Peter Fletcher: So so let’s say on a big strata like a multi story strata Oh, I’m of the view and tell me if I’m wrong That there’s pretty much zero point in having a structural inspection done on a multi story strata unit, because the unit is actually the interior space.

So if there’s any structural defect it belongs to common property. It belongs to the whole, everyone.

[00:11:13] Nikki D’Agostino: So when you say, I’d look at if you’re doing a structural, you’re talking like an Annexure A?

[00:11:19] Peter Fletcher: Yes, so somebody puts on a contract Annexure A forms part of this agreement, Annexure A being the standard REIWA, the major structural defects fault.

I don’t know why he’d even put it on there, because they can’t inspect anything on,

[00:11:35] Nikki D’Agostino: You’re probably better off inspecting the Strata Company records and looking at any building issues to see whether there’s been structural reports or 10 year maintenance plans or anything like that done to show that there might be issues that could then resultantly impact your unit.

You know, from that perspective, recently, as an example, sold a Strata property. They had a inspection done. It’s just some waterproofing from the shower came through not something that’s going to Impact in that sense, but can then cause headaches for the sale process.

But that’s not a not gonna be a structural defect Anyway, it’s just a maintenance defect.

[00:12:12] Peter Fletcher: So, you know,

[00:12:13] Nikki D’Agostino: Perhaps a new annexure or standard annexure needs to be written up for the sake of strata

[00:12:18] Peter Fletcher: Okay, so we’ve talked about the strata plan. Next one is the levies. Yes. That’s what I would think would be probably the next big one to look at. Is that right?

It can be. What are the things that people should be looking out for there?

[00:12:39] Nikki D’Agostino: Well, again on your Strata plan there is a schedule of unit entitlement, so it’s not always to say, in minutes might say, we are raising 50, 000 worth of levies this year. That’s not automatically split between X number of units.

It’s divvied by entitlement. Yes. And I’ve actually seen some strata management companies trying to, or issuing the accounts as just splitting those levies without looking at this unit entitlement.

[00:13:06] Peter Fletcher: That is a real thing.

[00:13:07] Nikki D’Agostino: It is a real thing. I’m, I’ve been surprised to see it, but it happens more than you would think.

[00:13:12] Peter Fletcher: In our building, and it impacts on the buyer, impacts on the incoming proprietor. So in the building that my office is in, it’s it’s four

stories, three stories have two units each on them, and the fourth story has one unit, yeah? And that unit goes across the whole top of the fourth floor, and that includes The lobby area, so they are paying, they have extra unit entitlement because they’ve got their own foyer and their own bathrooms, so they’ve got extra unit entitlements, so they’re paying it.

extra portion of the straddle levies, so when we do, when we renovate the third floor bathroom, they’re paying for some of that renovation.

[00:14:05] Nikki D’Agostino: Correct. In turn though, you’ve got a lift going to that fourth floor and that’s where a lot of electricity is being used or we’re in tear on that lift.

But I think, don’t quote me, but I think at the point when they do the sort of Quantity surveying of a strata complex that consideration is even taken into what views it might have and you know what the overall property value might be this is worth maybe running past a property value I think you heard Ben on the other day

[00:14:35] Peter Fletcher: Buddy, he was good value too.

[00:14:37] Nikki D’Agostino: But worth asking the question because there was a time in my time selling off the plan probably about 15 years ago where the value of the apartments was based on these things and hence the unit entitlement also increased by floor level, river views, size, et cetera. Special levies.

[00:14:58] Peter Fletcher: Special levies? That’s the one that catches people, bites people in the bum.

[00:15:05] Nikki D’Agostino: Yeah, we’ve got admin fund, which is just our standard operational levies. Then we’ve got a reserve fund, and then special levies are separate to that.

[00:15:12] Peter Fletcher: So, admin fund just covers the day to day running of the complex? Correct. So, gardening, bit of painting, bit of repairs and maintenance, all that sort of, insurance.

And and the Reserve Fund covers things like, well, we know every 10 or 15 years we’re going to have to replace the lift, so we need to have 100, So put aside for that.

[00:15:37] Nikki D’Agostino: Essentially the savings account for what’s to come, hopefully based on a 10 year maintenance plan.

[00:15:42] Peter Fletcher: Yes, yes. Can you remind us to get back to that 10 year maintenance plan?

Because I’m actually a big fan of 10 year maintenance plans, but so often in these strata title strata complexes, they’re just Tick boxes and they’re paid off

[00:15:58] Nikki D’Agostino: Coming from shopping centers and having life cycle maintenance plans, which is essentially the same thing. I think they’re being underutilized and they’re just a tick box exercise at the moment, but we’ll definitely come back to that.

[00:16:10] Peter Fletcher: Yes. I’m passionate. Good. Okay. And now special levies, give us an example of a special levy.

[00:16:15] Nikki D’Agostino: Oh, I’ve had examples where, after crazy flooding up north, et cetera, et cetera, insurance premiums. Almost tripling from what may be budgeted or considered and to be able to insure a building and not having the funds there, having to raise a special levy to get those funds imminently to pay for something.

like that. So there’s an example. I’ve also had and you’ll probably want to come back to this into more detail too, but cladding issues and ACP where, you know, to be able to ensure new claddings needed to be put on the facade of the building and essentially. loan taken out by the strata company to then have to pay special levies, which is the repayment on the loan to get the works done to be able to ensure the building.

So there can be very complicated reasons or it could be something so simple as, Oh, we don’t have enough money for a maintenance cost that’s popped up, that wasn’t budgeted for.

[00:17:11] Peter Fletcher: Yeah. So the cladding you’re referring to is a hint at I think it was the Grenville Yeah. The Grinville Tower.

Disaster? Yes. And there’s a lot of complexes that have cladding on the outside that doesn’t meet there’s a fire requirement.

[00:17:26] Nikki D’Agostino: Aluminium composite panels. Oh my god. Aluminium composite panels. Yes. But I’ll leave Jason Cotton to talk the dirty maintenance talk.

[00:17:35] Peter Fletcher: Yeah, yeah. But basically, they’re dangerous and while you could leave them in place, but if you left them in place and you had a fire, you’d be get, you’d get sued to within an inch of your life and life would not be fun.

So they have they create special levies to get those replaced and because you’re replacing something, you need lifts.

[00:18:00] Nikki D’Agostino: Sort of like we need something done now, we don’t have the money for it, so we’re going to have to raise a fee.

[00:18:05] Peter Fletcher: Okay, so how does a buyer know if there’s a special levy in place?

[00:18:09] Nikki D’Agostino: Okay, generally it’ll be in AGM if it’s not in the AGM being Annual General Meeting Minutes.

Yes. If it’s not included there and it’s come up at some point within the year before the next AGM, an Extraordinary General Meeting. It’s to be held and we’ll notice, go to all the owners again, as part of that pre contractual seller’s disclosure statement, any EGMs should also be included. So our reps should be potentially asking for copies of the AGM minutes and if there have been any subsequent EGMs in that year always do your due diligence in contact the strata manager, ask questions, ask other owners.

[00:18:51] Peter Fletcher: So Nick, when we get a a pre contractor, well let’s call it a PDS for just the sake of it pre contractor disclosure statement, a B, a PDS through what we do is do a we open up the PDF and we do a control F. And type in special and if there’s any special levies, generally, it’s not a guarantee.

It will generally show up as a, there’s a special something in here.

[00:19:23] Nikki D’Agostino: You might find special business talking about where there may be the potential of a levy needed at some point. Yes. So the levy might not be there yet, but you may be able to ascertain from those minutes that you do have that, hey, it looks like something’s going to happen here.

[00:19:38] Peter Fletcher: Yes. Yes, so it is important for buyers and sales reps for buyers to read the. AGM slash EGM minutes. Yeah,

[00:19:51] Nikki D’Agostino: and try and understand the financials too. That’s a really good indicator to show, if you’re just looking at your proposed budget to

your actual spend and what’s being proposed for the following year and whether that’s going to align just taking into just general inflation, CPI, anything else, 10 year maintenance.

There’s a, there’s a real science to it if you really wanted to get into the nitty gritty, but at a basic level, look at what, what is in the bank account. What’s being raised? What’s the proposed expenditures?

[00:20:20] Peter Fletcher: The little trick that I it’s not a trick. It’s, what I would urge anyone to looking at reading the AGM is read the general business section.

Yeah. Because if there is a problem, if there’s a problem there that hasn’t been budgeted for Mrs. Smith from unit 78 will say something in the general business section. What about the carports replacement of the carports or Bob Jones from Unit 19 will say what about the replacement of the security cameras that we talked about and that’s your kind of your red flag in there.

[00:21:00] Nikki D’Agostino: I wouldn’t depend on it. No, you It’s not a requirement to have general business and this is where I said earlier you’ll have not so savvy owners that might say these things which could then deter the saleability of their properties because they’re putting, behavioural issues or proposed issues into their minutes.

I would suggest a 10 year maintenance plan is where you’re going to see it. So again, as I like to call it, a life cycle maintenance report. Are we in year seven? How much is in the budget, but they’re saying we need to repaint the building next year. How are we going to do that?

[00:21:33] Peter Fletcher: Yeah. I’m thinking that it’s a bit of, a bit from column A, a bit from column B.

Do, do it all.

[00:21:40] Nikki D’Agostino: Chat to your neighbours. I think I’ve, I said that initially, like one of the pitfalls of buying Strata and one of the benefits too, are your neighbours. You don’t necessarily know who. You’re going to be living within that complex,

[00:21:52] Peter Fletcher: So we were settling a a property in a regional, southern regional town.

A strata property. And we were acting for the buyer. And the buyer comes to us and said we’ve just received a thing from, I can’t remember where, how they got notified. A special levy of 15, 000. And we go. What? 15, 000? Like, we weren’t notified by the Strata when we did the Section 110. There was no notification from us leading up to, to settle, up to settlement that was in place, that there was a special levy in place.

And so what we did is we went back through the minutes that the sales rep had given to the the buyer. And they relied upon, and the what had happened is the property had been listed in April and sold in and so the PDS was prepared in April based on the most recent AGM, which was October of the previous year and then the property was on the market for quite a while they had another AGM before it sold and in that second AGM they they struck the special levy of 15, 000.

Yep. And of course the buyer relied upon the original AGM. Not the Yeah. And wasn’t given the updated ag GM should have been updated. I agree. And what we argued, and we are and successfully is that directly prejudiced our client. Correct. And so it came out of the seller’s pocket 15 grand on that.

[00:23:40] Nikki D’Agostino: And. How to be aware of that is an annual general meeting is held annually. A bit of legislation’s changed so, which brought all Strata companies to the end of financial year being 30th of June. But there can be a bylaw put in place which a lot of Strata companies are doing. to change your end of financial year because previously they were everywhere, could be the end of January, could be the end of April, the end of October.

So always look at the AGM when the last one was held and it’s every 12 months and they have within three months from that 12 months, they’ve got a compliance issue there one. But secondly, you can. almost guarantee or anticipate that an AGM should or will or has been held in that time.

[00:24:25] Peter Fletcher: Yeah, yeah.

And it’s really, really important that the buyer be given that up to date.

[00:24:33] Nikki D’Agostino: Oh, absolutely. They should be given the agenda and invited to the meeting. They do have the right to attend that meeting if it’s held within the time of their offer.

[00:24:42] Peter Fletcher: Is that right? That’s right. Okay. So they can attend. Yeah.

Yeah, right. Wow. There you go, so I’ve just learned something.

[00:24:51] Nikki D’Agostino: The one golden nugget

[00:24:52] Peter Fletcher: today.

That’s good. Alright Okay, so that’s Strata Minutes. We’ve covered that pretty well. Is there anything else on the PDS that we, we should be looking for?

[00:25:04] Nikki D’Agostino: Look a lot of it’s tick box so you know in general things you want to make sure that it’s freehold property and it’s not subject to a lease i. e. if it was some sort of government lease or a caravan park situation etc that may have been strata titled. I guess we didn’t talk about the difference between survey strata and strata title and I also just wanted to throw in what I see a lot of now, especially in the Western suburbs where we’re selling, where we’ve got two McMansions next door to each other, but they’re Strata titled, and no one believes they’re Strata titled, but it was the way the subdivision was done, obviously, as to do it a bit cheaper than splitting it into two green titles to have the surveys done, etc.

So that always refer to your certificate of title in the first instance and it’s going to tell you straight up if it’s a survey strata or a strata plan and I have seen many agents and reps not even realise it or try and argue that it is not because of what the property looks like.

[00:26:01] Peter Fletcher: Wow. Okay.

Wow. Yeah, okay. This, the CT, the certificate of title is your source document when you’re selling copies.

[00:26:11] Nikki D’Agostino: Yes, that’s your very first, very first reference point, then on to your strata plan or survey strata plan. There are options. You’ve got your buyer’s agents. You can ask the real estate agent.

As a buyer, you have the right to inspect the Strata records. So unfortunately, Strata managers aren’t always going to be forthcoming with anyone, whether you’re an owner. prep or fire but you do have the right under the legislation, the Strata Titles Act to search the records and they will gladly help you with that.

And it’s as simple as filling in a form, paying a fee and organizing a time to be there. It can also be a painful experience because It’s not necessarily what you’re looking for is given to you. You have to go through those records and sometimes it is old compacts boxes.

[00:26:55] Peter Fletcher: Oh my god, Nikki so my experience, and I guess I’m going to get somebody here and find me and shoot me for saying this, my experience dealing with Strata managers is that they are an angry bunch.

They’re just, they just seem to be angry and uncooperative. Is there a reason for that? Why do they make things so difficult?

[00:27:22] Nikki D’Agostino: There’s a real lack of understanding between, like I said, the compartmentalised parties involved in a strata complex. And what can sometimes not be understood by, say, an agent or a buyer or a seller is that the strata manager is not essentially as a property manager would be of your property, they’re more of an administrator.

So they are the administration behind the council of owners or the strata company. We’re being owners making the decisions and calling the shots and don’t generally have a lot of influence over what and how things may happen. So it’s a very niche, whether the title of a strata manager needs to change or, in the same token, there are some and I’m going to get shot for this one.

But there are some out there that just are difficult, that just don’t have the service factor of, basic customer service to go, Hey, I do know this off the top of my head. Let me give you some information. You’ve shown me a listing agreement. I know you’re legit, right?

[00:28:24] Peter Fletcher: Yeah, so, like, we as settlement agents will phone up a Strata manager and ask for your information.

Nah, you send us an email in triplicate, whatever, it’s just like, oh my god, what?

[00:28:38] Nikki D’Agostino: I’m going to say something I really shouldn’t say, Pete. I’m going to say something I really shouldn’t say. And it could potentially start a war. But I just want to point out the difference. between a strata management company.

Yeah. Which is a strata manager or a licensed real estate agency looking after a strata management company. Yeah. Okay. Yeah. And just the difference there with a cross reference of understanding perhaps being able to have the information in house because you’ve got, your property managers on.

Or, in having a relationship with the Strata Manager, as opposed to the Strata Manager being a separate entity that’s roadblocking. everything else from

happening for the buyers, sellers, agents, etc. Yes, yes, yes. Yeah, ooh, that’s gonna How many people listen to this?

[00:29:30] Peter Fletcher: There’s no, there’s no mandatory CPD for strata managers at this stage.

[00:29:34] Nikki D’Agostino: And again, education is coming in, so you’ll see the likes. of our training organizations releasing a Cert IV in Strata Management come July 24, so imminently and by 2026 there being, some sort of, however it’s going to look, it’s not determined yet, but some sort of education requirements and possibly a licensing or such.

[00:29:58] Peter Fletcher: Nick, can we talk about the risks of buying properties off the plan? Yes. I was, my favorite. Yeah. So I was looking at a property in the western suburbs. Beautiful. Good spot. Oh, yes. They look really, they make some, there’s some stunning strata properties out there, or products out there.

So what are the risks for a buyer buying? off the plan in terms of the strata. Set up.

[00:30:30] Nikki D’Agostino: Yeah. You’ll be given a contract a lot bigger than a standard sales contract. So as a starting point, you’ve got a lot more detail in your contract to look at. And you want to look at things if you’re buying from the developer, like what their oh, word escapes me now, but their variants may be in what they’re selling you on the proposed strata plan in the contract, as opposed to, oh, well, actually we can, Take a meter off this bedroom or whatever, and that’s okay with the contract.

So you want to look at that kind of thing as a first tool. Like any contract, have a professional look over it for you. If you’re not sure, reach out to a lawyer or a real estate agent. Someone that knows that you trust that may give you some information. Yeah.

[00:31:14] Peter Fletcher: Nick, one of the things that I would imagine could be, Like an area of risk for a buyer is that the strata levies understated.

[00:31:25] Nikki D’Agostino: This was my next point, yeah. So you will see, like, Oh wow, look at this amazing development with all these things and such low strata levies compared to the one next door that’s been operating for three years. And yes, that’ll happen every time because, one, a developer is going to make their off the plan development.

look appealing. But secondly, for that first year most things are under warranty, including the service of these items. And you have a defects liability period. So where it’s not actually the maintenance man, you’re going to call out to fix an issue. It’s the developer and the builder of the building that’s going to come out and fix the issue.

I guess that takes us to we can go into managing defects, so you’d want to Managing defects, I’d suggest if you’re buying into a Strata property off the plan, once that becomes a Strata company, that the owners get together and do a full, like get a, get a structural engineer in or get a full building report done and note every single defect no matter how minor in that report and provide it to the developer within that first year so that no matter what comes up down the track, it’s raised in that defects liability period and they still.

There can be risk big time if a building is under four stories. I’m sorry, over four stories. Because it’s not covered by the builders indemnity or warranties. I did see the Cook government released just recently some building. Industry reforms that will require independent inspections being done through the process of a strata development to help mitigate or prevent that from happening.

But again, if your builder goes bust or anything happens whatever costs may have been covered will fall on to the owners and a strata company.

[00:33:14] Peter Fletcher: Because these things are a thing. We settled a property a while back, probably two years ago now in it was in Perth or North Perth or something like that.

And I was doing the pre settlement inspection for the client. And I noted some Some water damage on the wall, and I thought, oh, okay, well, it’s water damage, like, it’s not unusual but in Estrada, it, it’s sort of like, hmm, and I didn’t think anything more of it, and then I went down to the car park, the car parking area, and there was puddles everywhere, and I’m thinking, okay, it’s winter, but These puddles, they seem to be in weird spots, like there was some in the stairwell and some in the fire hydrant recess and some just laying on the floor, and I go, where’s all this water coming from?

Because it didn’t seem to be coming from a source. And I went back to the office and got talking about it, and they go, We’ve had some issues here because there’s a special levy being put in place for, I think there was a special levy put in place for rectification of some sort of water pipes that were installed incorrectly.

And and again, it was something that our client had never been made aware of. And so there was a whole bunch of legal action around that. And I think he ended up Holding 10 grand back at settlement or something to get it sorted.

[00:34:51] Nikki D’Agostino: Yeah, that’s some big Big issues across the board and you’ll see in a lot of larger complexes Water is just one of those things once it’s there It’s really hard to find its source and I’ve had buildings where oh, you know We’ve been raising over 20 grand every year just to fix water leaks because we can’t find exactly where it’s coming from So everything’s just a fixed job Yeah.

No matter how many engineers and things that you’ve

[00:35:18] Peter Fletcher: Yeah, I believe there’s some sort of Pipes that were installed that were sort of substandard

[00:35:25] Nikki D’Agostino: and yeah, and then they’re within the concrete and it comes

[00:35:28] Peter Fletcher: Oh god, what a disaster Yeah

[00:35:33] Nikki D’Agostino: You could do a whole podcast on just water issues in strata complexes.

I think

[00:35:37] Peter Fletcher: Yeah, it’s a big thing Isn’t that because once that water starts getting off the chain? it’s Yeah, it’s a problem. Yeah, so Right, is there anything else, Nick?

[00:35:49] Nikki D’Agostino: Let me just have a little look at what I was thinking. You’re

[00:35:55] Peter Fletcher: starting to run out of time here, Nick.

[00:35:56] Nikki D’Agostino: Oh no, no, I’m, I’m, I think I’m pretty good, like.

Unless there was anything else you want to know about, it’s not the most exciting subject but I could definitely talk about it for days on end.

[00:36:07] Peter Fletcher: I actually love it because so often people buy in a strata complex and they, the PDS is given to them and they just sign off on it.

Because that’s where the, where DocuSign said to sign off. But they don’t read it. And, like, it’s so important to read it and to know what you’re buying into. Because to go back to those 10 year maintenance plans you’d only have to read, Like, I, I was looking at one of these ten year maintenance plans for one of these units, unit blocks down here in King George or Leonard Street and suddenly you realise there was, I tallied it up and over the next ten years there was probably seven hundred.

Thousand dollars to spend, there, there was walls starting to come away from the out outer leaf of the walls starting to come away from the building. There was concrete cancer the roof needed replacing, like that on a big roof like that. It was probably, I don’t know, a couple hundred thousand dollars just to reroof the place.

And whoever buys into it is buying into. The cost to fix that up. Yep. So.

[00:37:14] Nikki D’Agostino: Yep. 100%. And I think if I can just give a, my hot little tip on looking at a 10 year maintenance plan is the simple way of doing it, if you’re not, a facilities management savvy kind of person is consider the age of the building, where it’s at in its life cycle.

How much money is in the bank account and considering from there where it’s at, what costs are going to be involved in the next five to 10 years, what money is in place at the moment, because that’s where you’re going to get stung with special levies, increased reserve fund levies, et cetera, to start meeting lift replacements, roof replacements all of that kind of thing.

Yeah.

[00:37:54] Peter Fletcher: Cause just the lift is going to cost you, I think about a hundred grand. So. If your building’s got two lifts in it, not uncommon, there’s a couple of hundred thousand dollars and very often we see people going, Oh, but the levies are too expensive and I’m going, actually, no, you want expensive levies.

You, you want to have.

[00:38:13] Nikki D’Agostino: To look at that return you’re getting on your investment in your levy.

[00:38:16] Peter Fletcher: You want to have people put money into the coffer so that when something happens. It can get fixed up or we can fix it up proactively out of the funds in the reserve fund or,

[00:38:28] Nikki D’Agostino: 100%. And, looking at older Strata companies, of course there’s going to be bigger maintenance work and replacements and things happening.

Look at the wealth within that Strata company too. So don’t always just look at the problems at hand. Don’t look at the expense. Look at the wealth. Yeah. You may find, yeah, okay, there’s going to be problems there and there’s going to be work to be done, but they’ve been saving for it for a long time.

Yes. And there are a lot of, those 70 complex, 70s complexes and things like that. It’s great. A lot of Strata coming up is shiny and brand new but it is still great to see our older complexes in

[00:39:00] Peter Fletcher: great community. Yeah, yeah. So, I helped someone to buy a property down at 48 McMaster Street.

That’s a, an older style block on the corner of McMaster and I think it’s Washington. And the levies in there are quite high, but the, The complex is really, really well maintained, really well maintained, like there’s, there’s nothing that’s broken or, like badly repaired, it’s, it’s sorted and ready to go.

And I, I think that’s the model, if you get something with nice high levies. And a quality complex. I think I’d prefer that any day of the week over something with a, 2. 50 levies and

[00:39:39] Nikki D’Agostino: 100%. and look, on levies, like just quickly a big question is why are these levies so high?

And you need to consider, what’s running in that building? Are there lifts? Are there facilities? Pool, spa, gym, sauna, are there massive gardens to maintain, et cetera, et cetera. So there can be a wide spectrum as to why levies vary so much per complex.

[00:40:02] Peter Fletcher: They’re your big ones, aren’t they?

Yeah. Your lifts, number one.

[00:40:06] Nikki D’Agostino: Your pool. Surprise, insurance is pretty, can be huge but lifts. You’d be surprised how much just in electricity and maintenance, call out fees, etc, safety requirements and

[00:40:16] Peter Fletcher: Yeah, I think the one in our building is costing us I think it’s around about a thousand a month to, to maintain and that’s only four, four stories.

That doesn’t sound unreasonable. No, and and we’ve still got, a hundred grand in the bank, just, okay, when it finally tips over, we’ll, we’ve got the money to fix it up. That’s it.

[00:40:34] Nikki D’Agostino: And then as a buyer You are buying into that pot of gold. Yes. You are buying into that money. That’s money that you are not going to have to spend and raise when the time comes, when and if the time comes.

Yes, yes,

[00:40:46] Peter Fletcher: yep. Yes, so don’t think that for a moment that low levies are a good thing. Yeah. They’re often not. So, there’s a complex of units in Lath Lane, not far from where I live, and I’m not going to name it because it’s probably, not, not fair, but when I walk past it, Nicky, the gardens, the front lawns are like cornflakes, like, it’s just, and I look at it and go, well, here’s a strata complex that, where The council of owners have just gone, well we don’t, we don’t give a damn.

And I I think that, well the levies are probably too low. And, but someone’s going to pay the piper in five or ten years time.

[00:41:30] Nikki D’Agostino: And you don’t know I’d look at that and go, okay, these are investor owners. There’s not many owner occupiers here because nobody’s tooting the horn.

Which is a bad recipe. That’s it, no one’s tooting the horn. Or they may have. In the back of their mind, okay, let’s watch it deteriorate because we want to terminate this scheme and do a massive development and someone in there might be trying to buy up every conflict unit.

[00:41:52] Peter Fletcher: It’s less than 10 years old, Nikki.

Oh, okay. Yeah. No, it’s bad. It’s terrible. Yeah, so, and they’re some of the things that I would look at. going into a complex, how well maintained is it? If it’s well maintained and things are, lawns are taken care of, the pool’s well maintained, there’s no scratches and dents and all that sort of things out of walls.

[00:42:17] Nikki D’Agostino: And then again, that’s going to be your owner occupiers versus investor owners. Not necessarily because investor owners don’t care, but they might be a bit more hands off.

[00:42:25] Peter Fletcher: They’re hands off, yeah. Yeah. Yeah, and they’re just going, Oh, I’ll just leave it to someone else.

[00:42:29] Nikki D’Agostino: In the current climate as well. I’m sure money can be put in better places for many people.

Yeah.

[00:42:37] Peter Fletcher: Nick, our time is about up. We did circle back to 10 year maintenance plans as promised, which is great. Thank you so much for your time and the wisdom you bring to the table. Now, if someone wants to reach out to you and ask you a question about Strata titles how would they do that?

How would you want

[00:42:56] Nikki D’Agostino: Instagram here, otherwise my mobile. Do I say it? Yeah, yeah. Yeah, so my 662 000. And you’ll find my email and everything on my Instagram

[00:43:13] Peter Fletcher: profile. Excellent. And are you inviting LinkedIn connections? Oh, yes, of course. Oh,

[00:43:18] Nikki D’Agostino: yes. And look, I’m hoping

[00:43:19] Peter Fletcher: Some with about 5, 000 followers

[00:43:21] Nikki D’Agostino: like you, of course.

I would mention I am on the Riwa Strata Network Committee and actively working to advocate for this industry. Good. So, there’s many ways to find me. Socials. Boutique Realty’s website, The Efficiency Co.

[00:43:35] Peter Fletcher: Anyone that doesn’t know Nikki D’Agostino hasn’t been around for

[00:43:40] Nikki D’Agostino: long enough. Hasn’t boug

[00:43:43] Peter Fletcher: Ah, it’s been awesome, Nick. Thank you so much. And folks, that’s all we’ve got time for this week. I’ll catch you next week when we’ll interview some other genius of the real estate industry. Until next time, talk soon. And that wraps up another episode of the WA Property Q& A. We hope you found our discussion valuable and gained some valuable insights into the world of property buying in Western Australia.

Remember, while we strive to provide useful information, It’s crucial to consult with the appropriate professionals before making any investment decisions. Don’t forget to tune in next week for another exciting episode where we continue to unravel the mysteries of the WA property market. If you have any questions or topic suggestions, feel free to reach out to us.

Until then, happy property hunting and remember to seek the right advice for your personal circumstances.

Thank you for listening.