Question: Why isn’t the strata company required to provide details of the 10 year maintenance plan or disclose known liabilities during the purchase process?
Under the Strata Title Act 1985, when purchasing a strata property the strata company is required to provide two documents, Section 110(1) and (2). These documents provide a good overview of the strata company and indicate the finances. However, is there a requirement to disclose the 10 year maintenance plan?
We recently purchased a strata property. The Section 110 documents indicated some fundraising for the 10 year plan. We requested the 10 year plan from the strata manager and were told to ask the vendor. The vendor said to ask the strata manager. The strata manager refused. When we settled and received the 10 year plan, it showed significant and costly maintenance was required. Additionally, we’re faced with significant costs associated with replacing an asbestos fence. Both the seller and strata management were aware of this before settlement.
Why doesn’t WA Law require the vendor to disclose known liabilities?
Answer: The Section 110 certificates are not designed to be used for due diligence!
Section 110 requires a strata management company to provide a certificate to the property seller so they can disclose very limited information about the apartment for sale.
Currently, the only information required under Section 110 relates to:
- levies due for the relevant lot/apartment (how much you pay),
- insurance for the building (basic compliance),
- information relating to the strata management contract (who to contact)
- and certain information about leases or exclusive use provisions (any specific rights).
Section 110 does not require disclosure of the financial accounts, meeting minutes, 10-year maintenance plan, defects reports or any other relevant documents held by the strata management company.
Why? We think it’s because the Section 110 certificates are not designed to be used for due diligence! They give the lawyer preparing the contract confirmation of a few core facts about the property for sale – and nothing more. In our view, it is impossible to gauge the status of the building from the limited information provided in this certificate.
However, there is a way to find more detailed information about the building, such as upcoming projects, financial position, 10-year maintenance plan, disputes, defects, annual reports, recent works, etc. You can arrange an inspection of the strata records under Section 107(1)(b) and Section 109 of the WA Strata legislation. There is a cost for this process.
We recommend anyone buying into a strata scheme arrange an inspection and receive a report covering a wide range of issues associated with the building or complex. Sellers can also arrange a strata report so that all potential buyers can benefit from this service more quickly and with less cost.
This post appears in the August 2024 edition of The WA Strata Magazine.
Michael Ferrier EYEON Property Inspections E: michael.ferrier@eyeon.com.au P: 02 9260 5510