Hi Everyone,
I am hoping to buy a villa that is going to auction soon.
Problem is, the agent says there is No Strata Manager because the existing owners have not paid their levies. A year or so the owners decided to take back the management but the complex is now very very poorly managed.
My biggest issues are that there is no building insurance, there is no sinking fund, no admin fund.
If I buy there is likely to be a special levy at some point to get some money in the bank account if and when a manager is again appointed.
Because there is no building insurance, if my place burns down then?
Does anyone know if I can separately insure a strata titled property? Normally the building insurance is via the strata but this situation is a little unique.
If I can purchase this place 15% under value is it worth all the risk?
Thanks,
Marsmac
Hi Marsmac
Have you tried giving a few insurers a call to discuss the dilemma with them? Be very clear about whether the villa is attached to or detached from the other dwellings, and be very clear about the fact it is a strata property and there are common parts. I would personally insist on speaking to the underwriter. In that regard, maybe call an underwriter directly. Perhaps Allianz.
The bottom line is, if you buy this thing, it has no insurance, the burns down, you will be the proud owner of a piece of dirt, you will have to find money to remove the debris, you will have no villa unit, but you will still have to pay back the mortgage. No insurer will magically call to say they feel sorry for you and will build you a new villa out of good will, and the 6 o'clock news won't run an appeal for your cause either. I think you know it's a bad idea to chase such a property.
Let us know how you get on… it would be interesting to know what the insurers have to say about the situation.
jac
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
If the bank knows there is no insurance they will not lend you the money. I would not take the chance with insurance. Now some may say "what are the chances of it burning down". OK not great BUT insurance also covers public liability. So if someone visits you (or your neighbours) and trips down the stairs. Guess who pays the bills YOU. If they are off work for 6 months. Guess who they sue. YOU!!!!
Are you willing to risk everything you own? That's what it comes down to.
The other things I could live with if the deal was right, but not the no insurance bit.
I would steer clear of this minefield. Simple things like Who does the maintainence/gardens/lawns – are they insured if they injure themselves on premises? How about visitors? The owners would be personally liable for any claim. Many on the forums are concerned about asset protection, with this one you could lose the lot.
If the present owners have scant regard for the basics, where will this apathy lead?
AFAIK the strata act requires the formation of a body corporate as well as effecting various insurances & requirements on the owners corporation. They cannot override the law.
Depending on which state the property is in you may find (NSW) that the strata management committee or owners committee are in breach of the state laws. In NSW it is against the law not to maintain a strata building up to it’s current standard. So they would be in breach in NSW. This came into play when a lot of older builds were let to run down by (very) older owners who by a (nod, nod, wink, wink) agreement were not maintaining their buildings and the new owners were having to wait until they could get enough numbers (the old people died) on the board to increase the levies. Call the state authority an ask the questions.
You may have a bargain on your hands here, more so if everyone else thinks it’s all too hard!
Modernity Investing
Email MeHi everyone,
Thanks so much for your advice and views on this matter.
Well, the property did get sold at auction on the weekend for a price that suggests only a First Home owner could offer. (i.e a price probably $40,000 or 20% above what it should have sold for). Hopefully their Solicitor has informed them of the risks buying the property with no strata manager and no insurance!
Thanks again,
Marsmac
Hi Marsmac
For future information on any unit you buy in Victoria, by law all Owners Corporations must have strata insurance to cover them for public liability and the building. If owners have not paid then they are potentially legally liable for any cost incurred. So if the place burns down or if someone falls over and hurts themselves and sues the Owners Corporation and they're not insured then the entity of the owners corporation would most likely be liable for cost. As the entity makes up all the owners they would have to falk out the cost out of their own pocket.
Generally I would recommend to steer away from such developments as they can be very hard to sell again in the future. Particularly the one you've described. It can also create unnecessary stress and headaches in getting things done.
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