With housing affordability prompting more buyers to choose apartments over freestanding homes, it’s important to consider the signs of a risky building before committing to a purchase.
Apartments are becoming an attractive option as freestanding homes exceed many buyers’ budgets.
Melbourne buyers agent Mario Borg says it’s a common mistake for buyers to focus on an apartment and not give as much thought to the building it’s situated in.
“It’s so easy to get caught up with the renovated kitchen, the nice shiny new bathroom, the amazing floor plan, and the fresh lick of paint, however this can distract people from looking under the bonnet – so to speak – of what’s really going on with the building,” he says.
Careful examination of the strata report, including meeting minutes, as well as an assessment of how the complex has been maintained can reveal a whole host of red flags that could indicate a risky building.
BUILDING DEFECTS
Recurrent water ingress issues are one such major red flag to be aware of, says Sydney buyer’s agent Michelle May.
Even modern buildings could have costly problems that need to be fixed. Picture: Rohan Kelly
“Water always finds the path of least resistance,” she says. “Particularly if there’s subterranean garaging. In those buildings, if not dealt with properly, it can keep coming back and coming back. It can take years and years – including taking builders to the High Court – and someone has to pay for it.”
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Borg says recurring building and maintenance issues can be a sign of deeper, more costly problems.
Buyer’s agent Mario Borg. Picture: supplied
“Things like water ingress, cracking, movement, concrete spalling, balcony deterioration, roof leaks or lift issues are serious,” he says. “If these problems keep appearing in AGM minutes or maintenance reports, that is usually a sign the building has deeper issues, not just one-off repairs.”
Repeated mentions of insurance claims, legal disputes or defect proceedings in strata meeting minutes, are another warning sign you shouldn’t ignore, he says.
“Legal disputes cost time, money and create uncertainty, and buyers often underestimate how messy that can get,” he says.
May says it’s also important to look into how often valuations are done in order to protect against the risk of the building being underinsured.
Buyer’s agent Michelle May.
POOR RECORD KEEPING
Poor record keeping and low attendance at strata meetings are also red flags that buyers should be aware of, May says.
“If they can’t hand over the meeting minutes, for example. Or they don’t have a record of any quotes that have been done or the window safety certificate or the fire safety certificate,” she says. “They need to be able to hand that over in a timely, organised manner.”
Borg agrees.
“Good buildings are usually well run and transparent,” he says. “When documents are messy, it often means the management is messy too.”
Similarly, a strata committee full of infighting and unresolved complaints, where members can’t agree on repairs, will also tend to be a problem, he adds.
“Even minor issues become expensive in buildings where nobody can make decisions,” he says.
A strata committee that can’t agree on anything is usually a bad sign.
NEW BUILDINGS
While many people assume new buildings will have less safety or maintenance issues, that isn’t always the case, says Borg.
“Some newer apartment buildings can actually carry more risk because defects have not fully surfaced yet, or owners are still working through who is responsible,” he says.
May says it’s better to buy a property with at least five years of strata history in order to give you some visibility around any problems and how they have been managed.
“That’s why as an agency we don’t buy anything new off the plan,” she says.
Water ingress issues can be catastrophic. Picture: Nathan Richter
WHY IT MATTERS
The consequences of ignoring these warning signs can be brutal – both from a financial and lifestyle perspective, says Borg.
“If major works are needed and the owners corporation does not have the funds, owners can be hit with special levies running into the thousands, and sometimes much more,” he says. “Then there is the lifestyle cost. Living in a building with leaks, scaffolding, ongoing repairs, lift outages, disputes or noise from rectification works can wear people down quickly.”
Selling the property can also prove challenging if the building demonstrates a bad reputation for defects or poor management, he says.
It’s important to do your due diligence carefully.
However, not all red flags are necessarily deal-breakers.
“The key is working out whether the issue is known, costed, manageable and reflected in the purchase price, or whether it is uncertain, escalating and open-ended,” Borg says.
He says if the scope of an issue is unclear, the cost is unknown or likely to blow out, the strata committee hasn’t been proactively attempting to fix it and you don’t have a financial buffer, it’s probably better to walk away from the deal.
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