* Body Corporate Fees are made up of an administration fee (what is needed per year to run the complex) and a sinking fund fee (what is needed for long term maintenance). The Section 119 in the contract shows how much is in the sinking fund plan. Cheap body corporate fees look good on the surface, but if funds are not available to do guttering or painting in a particular year, the body corporate will issue a Special Levy Notice to increase the amount of funds in the sinking fund to do the required maintenance.
* The Section 119 will include two years of body corporate minutes – but it is the actual AGM papers that were issued in the leadup to that AGM that you need to read as that will have all the financial information of what a body corporate spends their money on. Some Body Corporates do not include these AGM papers in the Section 119 so ask the agent to get a copy of them from the owner for you to look through.
* Ask for a copy of the Sinking Fund Plan for the complex. The smart body corporates already have a document projecting what is needed in each year for 10-15 years, so they can accurately ensure the funds will be available to do these anticipated works. This may mean the body corporate with a Sinking Fund Plan will not be cheap, like others you are looking at, but strategically is a better buy.
* Ask your Solicitor if they are going to check every page in the Section 119 and tell you if there are any items to focus on in the minutes. Some Solicitors believe they just have to check that the contract is a valid contract (ie consists of all the legally correct items), not exactly what the contents are of every page in a Section 119 in the contract. No matter how big the contract is, read every page and flag every item as a question to your Solicitor. If there are references to engineers/professionals needing to visit, ask for details. That could be a red flag. Do not presume that your Solicitor is going to tell you there is a Special Levy Notice of $10,000 needing to be paid within 6 months – as you may have a Solicitor or conveyancer who doesn’t see this as their job.
* If there is any Special Level Notice needing to be paid, ensure that this is a condition of settlement that it be extinguished by the owner prior to settlement, or if you take on the debt, that your purchase price is reduced by the amount of the Special Levy Notice.
Hope this helps! Look out for our advertisement in this weekend’s First Home Buyer section in the Canberra Times!