Wellington, June 25, 2018
Apartments are springing up everywhere.
In the year ended March 31, 2018, building consents for new apartments rose nearly 28% A majority of first home buyers may still prefer houses (research by CoreLogic earlier this year found that about 10% of apartments were sold to people buying their first home), this number may rise as the housing landscape changes.
City Centre Scene
Buying an apartment or townhouse can be an affordable way to live close to a city centre or other popular areas where standalone houses can be expensive.
Recent research by the Real Estate Institute of New Zealand (REINZ) found that apartments presented a more economical option if you want to live in sought-after areas like Parnell or Epsom in Auckland, or Mount Victoria and Thorndon in Wellington.
Apartments may seem like a low-maintenance choice – no exterior walls to paint or lawns to mow – but they come with their own particular set of issues to consider.
In most cases, apartments are held in unit title ownership.
This means you own the apartment or unit and any ‘accessory units,’ like garages, car parks, private courtyards and storage areas contained in the record of title.
Do not assume that a car park is included unless it is specifically included – if there is one it may have a separate title and need to be purchased separately.
You also own an undivided share of the ownership of the common property (eg lifts, laundries, lobby areas, driveways and gardens).
Becoming a unit title holder means you automatically become a member of the body corporate, which consists of all the unit owners acting as a group.
The Body Corporate Concept
The body corporate handles the management and upkeep of the building and property, in return for all the members paying annual fees.
These fees will probably include budgeted costs like insurance and management expenses, contributing to a long-term maintenance fund (LTMF) and any services the body corporate arranges for its members (such as rubbish collection and cleaning communal areas). Body corporate costs that have not been included in the budget are also payable by the unit owners, usually by way of a special levy.
We strongly recommend asking a lawyer to help you understand the body corporate rules which set out your obligations and what you can or cannot do with your apartment.
When you are looking at properties, ask the real estate agent to give you copies of the long-term maintenance plan (LTMP) and the building fund, along with copies of the body corporate meeting minutes from the past 12 months to understand the key issues and concerns.
For example, is there enough money to pay to upgrade the lifts or repaint the complex? These can cost from tens to hundreds of thousands of dollars.
Ask too about the building’s contingency plan, as there may be additional costs in addition to the building levies.
Accounts and Insurance
Check that all the owners’ levies are up to date and that the accounts are audited.
Read the details of the insurance policy. Is the body corporate involved in any proceedings against a third party, and are there any weather-tightness issues with the building? Check if an apartment or townhouse comes with a parking spot, or whether you will need to purchase this on a separate title.
Body corporate rules are also likely to specify how an apartment is used and who can live in it, which may have an impact on any future plans you have for the apartment.
Some body corporate rules extend to visitors to the property, such as the hours they can be on site and where they can park.
While many apartment complexes develop into tightly-knit communities, living so close to others is not for everyone.
Consider the amount of sound proofing the apartment has and find out what sort of people live there. If you play the drums in a thrash metal band on the weekends, a complex filled with retirees may not be the best choice.
Lucy Corry is Media Communications Manager at the Real Estate Agents Authority based in Wellington. For independent advice, please visit www.settled.govt.nz
Photo by Connor Brubaker on Unsplash