By KATRINA CREER
Yet another Sydney apartment building with massive structural defects has recently hit the headlines highlighting the risks of buying a unit. The problem has become so widespread, that savvy investors and owner-occupiers are now utilising the expertise of buyers’ agents to help them determine the risk.
A 2021 survey by the State Government found 39 per cent of residential apartment buildings built between 2014 and 2020 had serious defects in their common property.
Waterproofing followed by fire safety systems were the most frequently reported problems. Structural and non-compliant cladding also impacted many buildings creating financial and emotional distress for homeowners, tenants and strata managers.
With 50 per cent of Greater Sydney expected to live in a strata complex by 2040, it is essential there is confidence in construction. So just how obvious are red flags when it comes to purchasing an apartment?
Trust your instincts
Simone Luxford, Director of Essential Property Wealth, often gets a feel for a property just by standing outside it. She looks for signs of how well the building has been managed and if there are any obvious structural defects such as cracking.
Even if a property looks good, she remains sceptical until reading the strata report. This key document provides a history of the building, pending works, all expenses incurred over the past two years, as well as any disputes.
“You wouldn’t buy a house without a building and pest inspection, and it’s like that with an apartment too – you don’t buy one without a strata report,” said Ms Luxford, who is a member of the REINSW’s Buyers’ Agency Chapter Committee.
“It is a snapshot in time of what is happening to the building now and also what has happened in the past.”
Ms Luxford’s instincts are often proven to be correct. Recently she advised a client not to buy into a complex after looking at its 400-page strata report and speaking with the strata manager. The building not only had seven owners in arrears of $50,000 in levies, but the Owners Corporation also needed to raise more funds after engineers reported its foundations were moving.
“While I was the bearer of bad news, my client was grateful that I saved him a big headache,” she said.
Get expert advice
Michelle May, who is also a Committee member, agrees that people are often completely unaware of the potential problems of buying into a high-rise strata complex.
She advises clients not to purchase an apartment that is less than seven years old. She also tends to see more problems in buildings that are predominantly investor-owned as they are less likely to spend on upgrades or attend strata meetings.
A lack of buyer experience combined with naivety often leads to poor decisions.
“People get blinded by newer apartments that are all new and shiny, they think what could go wrong, “said Ms May, who runs her own buyers’ agency.
“We are living in Australia, a first-world country, where we wouldn’t expect the experts to be cutting corners.
“Invariably, it’s younger people purchasing, they want to buy into a certain lifestyle and these buildings look amazing. But people simply don’t know the warning signs to look for when buying an apartment and the agent is there purely to sell it.”
Who is responsible?
Strata reports must be made available to buyers and while real estate agents arrange for this to happen, it doesn’t guarantee they have read the document.
Ms Luxford believes it is remiss not to know what is happening in a building and that a good agent will be 100 per cent across the strata report.
“Some won’t read it because they don’t want to know or, there are others who may have read it but won’t say anything unless directly asked,” she said.
Ms May agrees that the information is not always forthcoming. She recently advised a client not to buy an apartment that sold shortly afterwards for $1.2 million. A report from a structural engineer to the strata had said the building was ‘in danger of collapse’.
“Someone is not doing their homework and a lot of buyers are not doing their due diligence either,” Ms May said.
Get a clear picture
NSW Fair Trading encourages anyone considering buying an apartment to do their research. This includes checking there are enough strata funds to cover long-term repairs and maintenance. It also means talking to people living in the building and visiting at different times to check on issues such as noise.
Consumers should also ask if an apartment building was built by a developer with a rating under NSW’s Independent Construction Industry Rating Tool (iCIRT). Under iCIRT, developers, builders and certifiers are given a rating of between one and five stars.
The more stars, the more confidence consumers can have in the off-the-plan apartment or new property purchase.
“Confidence in strata is central to confidence in the entire residential property sector and will be an important element in delivering housing supply and affordability for the future,” a NSW Fair Trading spokesperson said.