Check body corporate finances before purchasing sectional title property
Category General News
If you’re looking to purchase an apartment in a block, you’ll usually begin your research with the location, surrounding facilities and amenities. You’ll check the specs of the property and do the sums for monthly levies and rates. One thing often overlooked, however, is the financial status of the body corporate in charge of the entire block.
The finances of the body corporate are actually one of the most important factors that can have a large impact on your investment. The way the block’s finances are managed can dictate how the property will appreciate (or depreciate) over time. This financial management can also affect the monthly levies and future increases if things go awry.
Before making the final decision to purchase a sectional title property, buyers can request the latest copy of audited financials from the body corporate. These financials can be used to see how well the body corporate does its job and can be a good indicator as to whether special levies may be introduced in the future.
These levies are usually paid by all the homeowners for the upkeep and maintenance of the property, as well as being used to pay garden services and security. The financial records of the body corporate can show if these levies are being used for the right purposes. Well-maintained blocks and secure apartments will rise in value over time.
When the usual levies do not cover all the expenses of the apartment block, special levies are then implemented as an addition to the standard rates. Special levies are usually only initiated when big expenses arise such as major construction or repainting the entire building. If special levies are implemented frequently, it can be a warning sign to potential buyers that the building is in a bad state or that the body corporate is mismanaging funds.
When checking the financial documents, keep an eye out for the levies that are in arrears. Too many levy arrears means that not enough residents are paying their monthly instalments, which means the financial stability of the complex is in jeopardy. Obviously, special levies are to be avoided to reduce the financial burden on residents, but if the residents aren’t paying their share anyway, you’ll want to avoid buying a property in the block.
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Author: Berman Brothers