[Author – Tim ODwyer]
When buying a unit or apartment it is vital to inspect the body corporate records. These can sometimes reveal disturbing details about the state of the building, its finances and its management which sellers and agents won’t willingly disclose to starry-eyed buyers. If you are not happy with what you find, there is not always an easy way out of the contract – unless your solicitor added a “satisfactory body corporate records inspection” clause before you signed.
Occasionally it turns out that a body corporate is poorly managed, there are on-going and disruptive disputes (between owners and management, management and tenants, and/or between the body corporate and the original builder/developer), levies haven’t been paid, finances are in disarray or – worst of all – the building has structural problems.
Recently I acted for a young man buying a unit in a block of four. What turned up in my search agent’s report on the body corporate records was no surprise to me. I’d seen this sort of thing too often before, which is why I always order this report as soon as a unit contract lands on my desk. My client, however, was shattered to read that less than two years earlier the body corporate managers had called in structural engineers to inspect and advise on cracks not only in the internal walls of one unit but also in the external walls of the whole building.
The engineers identified foundation and footing settlement at one corner of the building. The most likely cause was drying of the clay foundation materials after the recent removal of a large tree from near this corner.
According to the engineers it was possible to underpin the corner, but this would be expensive and unwarranted given the minimal degree of damage suffered by the building. Accordingly they recommended that no structural repairs be carried out, but that soil conditions be allowed to stabilize for at least 12 months. It was possible, the report continued, that as the soil got moister there could be a reversal of the movement and cracking.
Some 20 months later the body corporate managers asked the engineers to see if the movement previously noted had changed significantly. The engineers duly reported that the cracking had not appreciably altered, there was no apparent reversal of the soil movement but the situation had “stabilized satisfactorily”.
The engineers’ second report consequently recommended cosmetic repairs only be made to the brickwork and internal walls: “Given the age and general condition, we see no real benefit in underpinning at this stage provided that the owners are happy to repair the visible defects that have occurred.”
In the course of his purchase of this unit, my client had made sure that his contract had a “satisfactory building inspection” clause. The building inspector was no slouch. His report noted: “Building walls – cracking to blockwork walls throughout. Albeit not of significance, it is strongly recommended to regularly monitor these cracks and any increased movement will require further investigation. A referral to the body corporate is recommended to obtain a clear disclosure of status and intended action/monitoring.”
I spent some time discussing with my client all the pros and cons of what had come to light. I made it clear that he could safely pull out under the building inspection condition.
My client went away to have a long think. He returned next day to instruct me to proceed with his purchase.
Trouble was, if my client had canned the contract, he would have been out of pocket over $2,000.00 for my costs and searches and for his building inspection. Needless to say, if the engineers’ reports had been disclosed up front by the seller’s agent, my client may have negotiated a lower purchase price. Or more likely, he would have found another property to buy – through a different agent. That shows why the property industry abhors full disclosure and truth-in-selling.
Meanwhile governments, who should be legislating such basic consumer protections, sit on their hands for fear of upsetting the real estate lobby. When will the politicians realize that “buyer beware” is no longer good enough?