Booklet: Buying Property in NSW (Chapter 4 – Due diligence)

Booklet: Buying Property in NSW

Below is Chapter 4 of our ‘Buying Property in NSW’ booklet. To read the other chapters of our booklet, click the links below:

When buying property in NSW, conducting thorough due diligence is essential to ensure that you are making an informed investment. Due diligence involves a comprehensive review of various aspects of the property, including its structural condition, compliance with regulations, and financial obligations. This chapter will guide you through two critical components of due diligence: the strata report and the building and pest inspection report. 

By thoroughly reviewing the strata report or obtaining a comprehensive building and pest inspection report, you can make an informed decision about your potential property purchase. These steps are vital in identifying any issues that may affect the value, safety, and overall suitability of the property for your needs. Engaging professionals to assist with these inspections can provide additional assurance and expert insights, ensuring a well-informed investment.

Strata report

If you are considering purchasing a strata-titled property, such as an apartment, it is important to obtain a detailed strata report. The owners corporation, which owns the building, land, and common areas, maintains these records. A full review of these records will provide valuable insights into the management and condition of the property.  

The key elements to examine are:

  • Current property ownership and voting rights: Understand who currently owns the property and how voting rights are allocated amongst owners. This information can influence your decision, especially regarding participation in owners corporation meetings and decision-making processes. 
  • Structural or building defects: Check for any existing structural or building defects noted in the records. This information is necessary for assessing potential repair costs and the overall safety of the property. 
  • Planned or previous major works: Review any planned or previously completed major works. Knowing about upcoming projects can help you anticipate future levies and disruptions, while past projects can indicate the property’s maintenance history. 
  • Quarterly levies and proposed special levies: Examine the quarterly levies and any proposed special levies. These fees contribute to the maintenance and repair of common areas and facilities. Understanding these costs is vital for budgeting purposes. 
  • Capital works fund forecast: The capital works fund forecast outlines future expenditures for replacement, maintenance, and repair of the building’s components, shared facilities, and assets. This forecast helps you gauge the long-term financial health and maintenance planning of the owners corporation. 
  • Strata scheme insurance: Ensure that the strata scheme has adequate insurance coverage, including building and liability insurance. Adequate insurance is essential for protecting your investment. 
  • By-laws and pet policies: Review the by-laws and pet policies to ensure they align with your lifestyle. Often these contain restrictions that will affect your use of the building and the unit. 
  • Compliance documentation: Check for compliance documentation such as annual fire safety statements. Compliance with safety regulations is critical for ensuring the property’s safety and legality. 
  • Disputes or breaches of by-laws: Investigate any ongoing disputes or breaches of by-laws. Frequent disputes can indicate management issues or problematic neighbours. 
  • Minutes from AGMs: Reading the minutes from annual general meetings provides insight into the governance of the owners corporation, including past decisions, current issues, and future plans.

Building and pest inspection report

A building and pest inspection report is essential for identifying potential issues with the property. This report assesses the condition of the building and checks for pest infestations, which can significantly impact the property’s value and safety.  

The inspection should cover:

  • Major safety hazards: Identify any major safety hazards, including structural issues and the presence of asbestos. These hazards need immediate attention and can be costly to rectify. 
  • Minor defects: Note minor defects, which are generally expected in property maintenance. While less urgent, these defects can still impact your decision and budget. 
  • Presence and workings of termites or timber pests: Determine if termites or timber pests are present and if they have caused any damage. Termites can severely damage the structural integrity of the property, making this a major aspect of the inspection. 
  • Present conditions that may attract or assist termite or timber pest infestation: Identify any current conditions that may attract or assist termite or timber pest infestations. Addressing these conditions can prevent future infestations and preserve the property’s condition.

This inspection should include:  

  • The interior of the building; 
  • The exterior of the building; 
  • The roof; 
  • The roof space; 
  • Any under-floor space; 
  • The services connections and appliances; and 
  • The site generally.

To download a PDF of our booklet, enter your email below.

 

The information contained in this post is current at the date of editing – 21 August 2024.

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​​Caveats are not security interests​

​​Caveats are not security interests​

You have loaned someone money in relation to a property, and in return the borrower has agreed to give you an interest in the property. You lodge a caveat, but you are worried about whether you are properly protected if the borrow does not repay you.

Caveats are a protective mechanism that play an important role in property law. However, a caveat is not a ‘security interest’ in the traditional sense, and it is important to consider whether a caveat is the appropriate tool to safeguard your interest.

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