Question: Our strata fees have been reduced to make units more attractive to buyers. To me, changing Admin or Capital Works Funds to sell a unit is unfair. Is this illegal?
I live in a block of 3 townhouses in NSW. On two occasions now our strata fees have been reduced so a particular unit can sell with lower fees to be more attractive to buyers.
I am against this manipulation and I’ve been outvoted 2 to 1 both times. Our Strata Manager has said they only produce a budget and it’s up to the owners to decide on what budgets to adopt. The Managers don’t offer options and are only there to administer our Strata.
Trying to get investors interested in mainly a well balanced Administration and Capital Works Fund is very difficult.
To me, changing Admin or Capital Works Funds to sell a unit is unfair. Is this illegal?
Answer: There are rules designed to prevent this practice but it still happens sometimes.
Your strata manager is right. They can only make recommendations to the owners. The owners determine the levies and ultimately they have to meet the costs of running the strata plan. We see many buildings that set levies below the required level. This happens for a variety of reasons but often it’s to keep the quarterly levies as low as possible. Usually this results in periodic special levies to fix problems and a poorer quality building over time.
In your example, I assume the drop in levies is temporary so they look lower to potential buyers. If those buyers do proper due diligence they should be able to see the trend of levies over the last 3-5 years and be alerted that current levies are lower than trend.
I agree with you that it’s being tricky to lower levies in this way, but it’s not easy to stop if a majority of owners agree. We see this happen sometimes in new buildings where developers offer units with seemingly reasonable levies, only for them to rise significantly in the following years. There are rules designed to prevent this practice but it still happens sometimes.
For any buyers reading these comments, please ensure you get a search of the strata records done so you can see the history of levies and other issues in the building. This is the only way to get a clearer picture of the building you are thinking of buying into.
Michael Ferrier Eyeon Property Inspections E: michael.ferrier@eyeon.com.au P: 02 9260 5510