Apartments and villa units are becoming the investment of choice for many Melburnians. With house prices going through the roof these types of properties provide an affordable alternative.
Provided the optimum selection is made they will produce exceptional capital growth.
As a result more and more Melburnians are becoming members of an owners corporation. Having to engage the services of an owner’s corporation manager and interact with other members of an owners corporation has provided a new set of challenges for property investors.
The main role of an owners corporation is to maintain and improve the common area of an apartment block. Common property may include gardens, passages, walls, stairwells, pathways, driveways, lifts, foyers and fences.
A property purchaser automatically becomes a member of an owners corporation if there is common area in the complex.
In most instances each individual owner is responsible for repair and maintenance within their own unit. The plan of sub-division will stipulate the boundaries separating an individual unit and the common area.
Most owners corporations will employ a manager to carry out the day to day functions e.g. organizing tradesmen in regards to any maintenance issues, conducting meetings, collecting and banking levies, placing building insurance and keeping financial accounts.
An exception to this is an apartment block with a small common area that can be managed directly by the unit owners.
Before buying a property that has common area it is essential to carry out thorough investigation into the financial situation of the owners corporation. It is also important to check the common area to assess its condition and future maintenance costs.
Property investors should be aware that once they become a member of an owners corporation they become jointly responsible for its current and future legal and financial obligations.
Below is my top half a dozen tips for property investors who are members of an owners corporation.
These tips will assist in making sure the owners corporation functions with a maximum of efficiency.
1.Make sure the owner’s corporation manager is acting in the best interest of the owners. For example some owner’s corporation managers will only use building insurance companies that offer them a commission despite the premium being more expensive to the members.
2.It is important for owners to always attend the owners corporation annual general meeting. A substantial outlay has been made in buying the unit. Therefore owners should have input into how and where their fees are being spent.
3.Prior to the annual owners corporation meeting owners should check the common area to make sure it is being well maintained. Any issues can then be discussed at the meeting.
4.Make sure that all contractor appointments have been made through a competitive tender. For example some owner’s corporation managers will only obtain one quote for maintenance works. This quote will be obtained from a maintenance company that is used by the owner’s corporation manager on a regular basis.This is a recipe for an inflated price. Owners should insist on multiple independent quotes.
5.Before completing any alterations or additions to your unit check with the owner’s corporation manager to make sure the work complies with the owners corporation rules.
6.Damage to permanently attached fittings such as kitchen cabinetry, sinks and baths is sometimes covered by the owners corporation building insurance.
Before buying into an owners corporation it is important that independent advice is obtained from a property professional before signing on the dotted line.