Strata Tip #79: Insurance – Consequences of under insuring

The obvious consequence of under insuring is that if you do need to make a claim, there will be a short fall between the proceeds of the claim and the damage that you have suffered.  It’s pretty hard to reconstruct a $10 million building, with $8 million.  Bodies Corporate are generally obliged to obtain a […]

Strata tip #73: Records – Interested person access

When you receive a request for documents or to inspect the body corporate records, typically that request will be made by a committee member or an (allegedly) “interested person”. Committee members have reasonable access to the body corporate records without charge. On the other hand, “interested persons” must apply to the body corporate and they […]

Strata tip #72: Defects – Give the builder a chance to remedy

Once you have the cost to rectify the defects, you should provide the defects inspection report and the scope of works to the developer and/or the builder.  Give them a real opportunity to rectify.  That’s so that the Body Corporate makes a genuine attempt to minimise its’ losses.  If the builder/developer doesn’t rectify, then the […]

Strata tip #72: Site Acquisition – Authorities, approvals and consents

You have to acquire these too, including any associated intellectual property rights.  Sometimes the value of the land is an existing approval or consent (for example a development approval, water allocation or statutory licence).  It is surprising how many times these authorities, approvals or consents are not acquired, when they should be, as part of […]

Strata tip #72: Buying – Power of Attorney contract execution

If you are going to be in the back woods of Botswana during the contract negotiation phase, then consider granting a power of attorney to someone you trust; such as your lawyer.  Make sure the power of attorney is prepared and executed before you leave the country.  A well drafted power of attorney, and a […]

Strata tip #71: Meetings – Amending motions

At a general meeting a motion can be amended, provided that the substance of the motion does not change.  For example, a motion to approve spending might be reworded to approve the spending after a particular date (i.e. if cash flow for the body corporate is a problem).  The amendment is voted on by the […]

Strata tip #71: Site investigation – Engage your lawyer early

Interview a couple of development lawyers and don’t make the mistake of thinking that the cheapest will be the best.  As in all things, you will get what you pay for.  A creative lawyer who is interested in your development can add value in a myriad of ways.  You’ll know that you’ve made the right […]

Strata tip #71: Buying – Looking for a complex

Most online sale listing sites online will allow you to subscribe and set alerts.  Do that, but be specific and enter more than one saved search rather than casting your net too wide.  It’s better that you find something within (say) 2 or 3 specific searches that tick (most of) the boxes for you, rather […]

Strata tip #70: Post Settlement Issues – Get the body corporate paperwork right

When you conducted the first extraordinary general meeting of the body corporate, you would have knocked over the usual agenda items such as insurance, initial contributions (levies), the appointment of the body corporate manager and so on.  In most cases you will have also dealt with the requirements of any contract special conditions, where body […]

Strata tip #70: By-laws – Less enforcement means more breaches

It is one of the fundamental roles of a body corporate to enforce the community title scheme’s by-laws.  If the committee, or majority of owners, don’t want to enforce a particular by-law then the correct thing to do is to amend the by-law.  Unless or until the by-laws are changed, with very few exceptions, bodies […]

Strata tip #70: Selling – Don’t send mixed signals

Sometimes a two person team can disagree about how to present the business for sale, or the asking price.  Sometimes there’ll be more than one buyer and there will be a disagreement about which offer is the best.  If you’re a joint owner of management rights trying to sell, then make sure that all of […]

Strata Tip #69: Settlement – Settlement is like making sausages

You should stay away from settlement; avoid watching the process and simply enjoy the outcome! Whether it’s settlements being rescheduled, buyers losing their transfer documents, settlement agents getting held up in traffic or any number of other normal events, some settlements will be delayed, others will fall through and none of that should be witnessed […]

Strat Tips #69: Getting ready to sell – How to stand out

While the “market” for management rights can be pretty inconsistent, information about properties for sale is always available online. Look at what you’re competing against and consider what sets your complex apart from the other offerings. Once you’ve found those things, make sure you emphasise those points of difference in your online and other sales […]

Strata Tip #69: Insurance – Duty of disclosure

Under the Commonwealth legislation, Bodies Corporate have a duty to disclose “every matter that is known to the insured” which the Body Corporate knows to be relevant, or would reasonably expect to be relevant, to an insurer when deciding whether to issue a policy. The duty of disclosure arises again at renewal time when an […]

Strata tip #68: Construction – Finishes packages

Henry Ford once said that ‘you can have the car in any colour you like as long as it’s black’.  Providing options for finishes will make your buyers happier than Ford’s, but it can lead to ordering and supply issues for your construction contractor.  If you are going to offer different finishes packages make sure […]

Strata tip #68: Sinking Fund – Better to have and not need, than to not have and want

While you can’t refund excess sinking fund monies, you can reduce sinking fund levies in future years if you have excess funds.  Conversely, excess sinking fund monies can be used to undertake capital upgrades, either in advance of time or as whole new projects.  A well-managed sinking fund will have a contingency which hopefully you’ll […]

Strata tip #68: Operating – The sweet spot

Like most things in life there is a sweet spot when it comes to occupancy and room rate.  Dropping tariffs may increase your occupancy and revenue, but only to a certain point.  Increasing tariffs may reduce your occupancy but increase your profit, again only to a certain point.  The sweet spot is optimal, sustainable profit […]

Strata tip 67: Spending – For major spending, consider two motions

If you’ve just voted to accept a quotation and enter into a contract with the successful tenderer at a given price, what happens if there’s a contract variation?  In the worst case you’ll have to go back to the owners in general meeting to approve the variation.  One way to avoid this is to pass […]

Strata tip 67: Sales – Buyers will ask for Special Conditions

Whether it’s a change to your standard conditions, a due diligence clause or making their purchase subject to their sale, you can expect a number of requests for special conditions from buyers.  A good lawyer will prepare a set of ‘standard’ special conditions ready for use during the sales process.  That way they’re on hand, […]

Strata tip 67: Buying – Settlement delays and early possession  

Few lawyers appreciate just how much hassle is involved in moving house; including packing, booking removalists and then being on hand to distribute those dozens of boxes throughout the (usually much smaller) unit that you are moving into.  If there is a delay with settlement, ask your lawyer whether it’s possible to obtain early possession, […]

Strata tip 66: Utilities – Rain water harvesting

Sending rain water down the drain these days is almost criminal.  Storage is cheap and there are many options to choose from.  With a little planning, rain water can be redirected through toilets and washing machines in new buildings.  In older buildings rain water can easily be used for common area cleaning, topping up the […]

Strata tip 66: Marketing – The role of the agent

A good marketing agent is not only a salesperson, they’re an advocate, marketer and public relations officer.  These days, they also need a little dash of lawyer!  Brief them properly, give them firm instructions (e.g. about what they can and cannot say) and then give them some space to do what they do best.  

Strata Tip 66: Buying – The Body Corporate Interview

Most Committee’s don’t appreciate that a resident manager is a contractor of the body corporate and not an employee.  As a result, almost all committees will treat the interview as a job interview.  That being the case, use all of the old tricks; arrive early, dress well, smile, project a positive attitude, be on top […]

Strata Tip 65: Spending – Body Corporate Managers – They’re not judges

Often a malfunctioning committee or body corporate will, in effect, refer issues to their body corporate manager to determine; most commonly disputes about by-laws.  Some body corporate managers make excellent mediators; bringing parties together to exchange information in an effort to reach an agreement.  Don’t ask your body corporate manager to act as a judge […]

Strata Tip 65: Buying – Notifying of finance approval

Ideally, you should receive the loan documents and not just a finance approval letter, before you notify that finance has been approved.  While there will be a lot of pressure to “go unconditional”, sometimes there are unexpected things in the loan documents; e.g. a further guarantee or a top up condition.  Given your capacity to […]

Strata Tip 65: Development financing – Pre-sales coverage

Most construction finance facilities contain conditions regarding pre-sales.  That is, the number of “off the plan” sales contracts that need to be achieved before the first, or another, drawdown can be made.  The banks are fairly sophisticated about this and will only count ‘arms length’, third party pre-sales.  To avoid embarrassment and delay, make sure […]

Strata Tip 64: Management Rights – Superman doesn’t work for peanuts…

If you pay peanuts, not only will you get monkeys, odds are that things will end up going a little bit ‘Jumanji’.  As a general rule, every dollar that you underpay a caretaker, below a fair rate, is $2 that you’ll end up spending on a dispute or poor performance later on.  By all means […]

Strata Tip 64: Buying – Most due diligence issues are fixable

Aside from a business that’s not making enough money, most issues that arise during due diligence are fixable.  It might take goodwill and perseverance, but even void management rights agreements can be fixed (which can happen if the seller forgot to exercise an option!).  A good lawyer will give you a list of things to […]

Strata Tip 63 – Records – Records held other than by the body corporate manager

Email is a curse!  Emails between committee members, that never reach the body corporate manager, have been held by Adjudicators to be body corporate records.  Ignorance of their creation is no excuse for the body corporate failing to capture them, or to hand them over on a search.  Conducting discussions by telephone or, better still, […]

Strata Tip 63 – Concept and design – Minimise the dangers of mixed use

Separate different uses physically, and if possible legally.  In community title schemes opposites do not attract.  The archetypal dispute ridden complex is the one that contains residences plus a restaurant and bar.  Mixed use executed correctly can provide significant advantages both in terms of the marketing and sale of your product and the lived experience […]

Strata Tip 63 – Buying – Verification of financial records

Make sure your accountant sights all of the Form 6’s.  When conducting the verification report process, the buyer’s accountant may attend on site to extract relevant financial information from the seller’s records.  That is an ideal time for the accountant to also sight each one of the POA Form 6’s (letting appointments), to check that […]