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Independent Inspections CEO Peter Greenham says that Strata Management and awareness of specific issues are escalating and need to be looked at carefully. Peter has outlined critical areas when owning or buying a strata titled unit. There are critical pitfalls that can catch unwary owners.
There are 5 elements of risk when owning or purchasing a strata titled unit, these include:
Insurance Valuation value of the unit complex,
Tax Depreciation for the deduction of capital works,
Sinking Fund Forecast balance to look after the building,
Asbestos Management and identification of materials,
Safety Management and identification of hazards and rectification.
One escalating issue includes high risk of building complexes being under insured where the replacement of the building would exceed the sum insured, leaving the owners the need to acquire additional funds to rebuild the complex. The Replacement Insurance Value is the sum of money that would take to construct a building with the same functional use and of the same useable area as the original building. A case study of where an event occurred, took 26 Months to return the building to the original state, the debris was on site for over six months and then the site was vacant for another 12 months. An insurance valuation report should be conducted once every five years to ensure the building is adequately covered. The buildings in north Queensland have been regarded as a high risk, with regards to flooding and storm damage.
The second issues is to look at the Sinking Funds & Maintenance programs for the building, where there is a high risk of having a shortfall in funds. The purpose is to keep the building in the same condition as it was when it was initially built. The problem is the legislation differs from state to state and this varies the protection to the owner. Just like cars in general need to be serviced to last well, the same applies to buildings, if people don’t look after the car properly, the cost will likely be more to fix.
More information here http://iigi.com.au/services/strata-services/sinking-funds-maintenance/.
Another thing to consider is the Asbestos Identification in the complex, as this can impact on insurance. Some insurance companies are refusing insurance cover as a result of an asbestos roof identified and then the body corporate has to replace the roof at own cost that may exceed $25,000. These are some of the hidden traps.
Also Safety management and control of hazards on common property can also lead to risks to insurance and the actions taken from the committee. Hazards need to be identified and controlled, especially with public liability claims of slips trips and falls. With the legislation and the duty of care is imperative that risks are identified in the building complex and that they are managed in an effective manner. Slips trips and falls can result in payouts of $50,000 or more from a single event, and this can impact premium. So, is important to protect and be proactive in this area, to reduce the risk of being fined and penalised for not providing a safe workplace. Examples of some risks include falling hazards with pot plants on balcony railing, one of the worst issues encountered was a BBQ mounted on a railing on the second storey of a unit complex, above the unit door of the level below which would result in a hot reception.
If the building is self managed or has a strata Management Company is also a risk. The risk is generally lowered with a strata manager than by self-management. On a recent audit, there was over 20 reasons to use a strata manager with the breaches of compliance.
In Summary there are a number of risks when buying or owning a unit, Caveat emptor /?kævi???t ??mpt?r/ is Latin for “Let the buyer beware”[1] (from caveat, “may buyer beware”, the subjunctive of cavere, “to beware” + emptor, “buyer”).
Generally, caveat emptor is the contract law principle that controls the sale of real property after the date of closing, but may also apply to sales of other goods.
To find out more about this article head over to …. http://konnect20.com.au/Strata-Services
About Independent Inspections
Independent Inspections was founded in 2006 and serves the Strata Services industry. Independent Inspections started as a successful family business and has built a strong reputation for getting things done and very well respected with great capabilities to offer the marketplace.
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