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Investing in Strata - the first AGM

Tuesday, 13th October 2015

Top Tips from Chris Duggan from Bright & Duggan

If you’re a unit owner in a new residential development, it’s likely you’ll need to attend the first Annual General Meeting of your strata plan. Chris Duggan, Joint Managing Director of Bright & Duggan, Strata Professionals, sets down his top tips to navigating this often misunderstood and daunting first meeting of the owners.

 

Meet your managerFind out who is managing your building and introduce yourself. The first meeting is often run by a senior manager of your strata management company. Make sure you have an understanding of who your allocated strata manager is for day-to-day contact, and find out their support resources plus the size and complexity of their current portfolio.

Review budgets Ensure that the levy estimates and proposed budget have been properly considered and based on quotes wherever possible. Large schemes (over 100 units) require two quotes for all expenditure over $30,000.

Beware of low levies. This situation will lead to long-term pain for the owners and depreciation of asset value.

Be mindful of incomplete budgets that ratchet up in year two. Ask if all maintenance costs have been accounted for.

Ensure the sinking fund is properly funded (although the sinking fund forecast will not be required until after the first meeting)

Ask questions And ensure you receive the right answers. There are no silly questions as most people will have never attended a first strata meeting. You will be able to determine just how much your strata manager knows about your building and the strata laws by simply asking questions. The first meeting has a set agenda, so make sure the motions as required by the legislation, are included for discussion.

Talk defects  You should have a conversation about building defects early on. Most buildings have issues of some type and there should be a good system for reporting them. A good developer will stand by their product and return to fix any defects. Others may attempt make repairs (but not well) or simply disappear. Know your rights, know your legal recourse and act early.

Developer control Developer rights are restricted at the first meeting if they still own more than 50% of the units. Be wary of developers seeking to exert control through the use of proxies.

Plans and documents Make sure that the developer and builder hands over all documents, plans and certificates in relation to your building. You will typically have one opportunity to secure this information and it’s important to receive a full handover list of documents.

Find the right strata managerThe most important element in this process is to ensure you have the right strata management company on hand. Your strata manager should be a member of Strata Community Australia (NSW) and produce an owner friendly strata management agreement.

Think twice about long term lock-in contracts. Owners can become overwhelmed at the first meeting and may agree to long term contracts for the strata management of their building. We suggest two to three year contracts, allowing managers enough time to properly establish the scheme and to ensure good procedures are developed.

Beware of low management fees with high additional charges. Every business has a price point at which the delivery of good services becomes un-economical. On the flip side, watch for excessive management fees that are outside of market rates.

If your building is a part of a more complex site like a building management committee or community association, you’ll need a more experienced manager with direct knowledge and company experience of how these complex interactions operate on a practical level.

Buying or investing in strata doesn’t have to be a challenge. Ensure your strata manager has the right experience, the right support and the right attitude.

For further information and advice about the first annual general meeting, contact Chris Duggan, Bright and Duggan, Strata Professionals on 9902 7167 or email [email protected]

 

By Chris Duggan

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