Whether you have ever bought or sold a property, the settlement process can be stressful and even confusing.
When the property in question is a part of an Owners Corporation, this can be doubly true.
Strata Plan fields plenty of questions from new property owners who are unsure about costs they may have paid at settlement, whether as the person selling the property or purchasing it.
Outside of the agreed price of the sale, there are a number of other accounts which need to be settled at settlement. These costs include council rates, land tax and Owners Corporation fees.
These costs are typically called adjustments.
As a part of the settlement process, the representatives of both the vendor and the purchaser – usually a conveyancer or solicitor – will need to conduct a number of checks and searches to ensure adjustments are accurate and accounted for at settlement.
This is to ensure that the outgoing owner pays all accounts up to the date of settlement and that the new owner pays for any costs associated with the property for any period after that date.
One of the critical aspects of these calculations is the Owners Corporation Certificate, which is usually issued by the Owners Corporation manager.
However, an Owners Corporation certificate is only valid for the day it is issued, meaning updates are crucial to ensuring the accuracy of these adjustments prior to settlement.
We spoke to experienced conveyancer Martin Galea from Tickbox Conveyancing to help you get a better understanding of the process and the expectations you should have of your representatives as settlement approaches – particularly where Owners Corporations are concerned.
How are the adjustments calculated?
The key elements that make up adjustments are:
The data is entered, and a calculation is made to determine each party’s share of the outgoings.
Do all these responsibilities lie on the purchaser’s conveyancer? What should the vendor’s conveyancer do approaching settlement?
The purchaser’s conveyancer is responsible for preparation of the adjustments on behalf of the purchaser and the vendor’s conveyancer is responsible for checking the adjustments on behalf of the vendor.
How does the Owners Corporation certificate impact the adjustments? Should the purchaser’s conveyancer seek an update prior to settlement?
No different to all statutory searches it is key to making the adjustments required under the contract and in anticipation of settlement.
Updates are essential to ensure the information supplied remains current.
To ensure accuracy, we would seek an update on the lot’s financial position three days prior to settlement and update our calculations accordingly.
What is the customer paying for when settling on a lot in a brand new development in terms of Owners Corporation fees?
Registration of the plan of subdivision for a new development causes an Owners Corporation to be.
The Owners Corporation budgets for the first 12 months of its operation in its duty to manage the common property, taking out insurance and other duties.
The answer, in our view, is that fees paid at settlement in brand new developments are payable to cover the costs of services and insurance budgeted for benefit of each member/owner of the new Owners Corporation.
The information and guidance in this article are general in nature. If you are purchasing and/or selling a property, seek professional, personalised advice from a conveyancer, solicitor or other qualified professional.
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