Do a test run on inner-city life
Q. My partner and I are planning to put our home on the market this year and we’re quite keen to downsize and buy an apartment in the city. We’ve got friends living in apartments and they rave about it. They’ve sold us on the idea of being able to walk everywhere and being liberated from spending our weekends on house and garden maintenance. However, we’ve also heard horror stories about apartment owners having to spend huge sums on earthquake strengthening or fixing leaky building issues. We definitely don’t want to sign up for that kind of hassle and my partner reckons we’d be better off staying in our old wooden house in the ’burbs. I don’t want to give up the dream, but how do we tell if an apartment is a good buy?
A. There’s no such thing as the perfect property, no matter what advertising or your friends may tell you. Apartments may be becoming the choice of a greater number of people in New Zealand, but that doesn’t mean they suit everybody. Nor does it mean that buying one is a piece of cake.
When you buy a standalone property, you need to consider its certificate of title, its physical state and geographical location and any issues presented by nearby properties or plans for the area. Those issues are magnified when you’re buying a property that’s legally and physically linked to its neighbours. Apartments, units and townhouses in New Zealand are usually unit title properties. This means that when you buy the apartment or unit (and any accessory units such as garages, car parks, private courtyards and storage areas included in the record of title) you’re also buying an undivided share of the ownership of the common property – lifts, laundries, lobby areas, driveways and gardens.
There are lots of upsides to apartment life, as your friends will attest. Like any property purchase though, it pays to do your homework. As the owner of a unit title property you automatically become a member of the body corporate (all the unit owners acting as a group).
You and your fellow members pay annual fees to the body corporate and it in turn looks after the management and maintenance of the property. So, on one hand you may never have to worry about mowing the lawns or painting the fence ever again. On the other hand, you’ll have to pay for costs like insurance and management expenses, plus any services that the body corporate arranges like rubbish collection and gardening or cleaning of common spaces. You’ll also have to contribute to a long-term maintenance fund (LTMF).
Now, if a lift in a multi-unit property needs replacing or repairs, most people would agree that all the members of the body corporate should contribute (through the LTMF) to make this happen.
Where it gets tricky is when there’s a problem in an apartment (that belongs to an individual) rather than a defect in a common or shared area. A recent Court of Appeal decision about a 12-storey Mt Maunganui apartment complex found that the repair works to several units affected the overall weathertightness of the whole building. The court found that some of the costs should be shared between all the owners, because they related to an ‘‘interlinked and indivisible’’ weathertightness issue. In other words, if you’re looking to buy Apartment A, but Apartment Z has some issues that could affect the whole building, Apartment Z’s woes may be your problems, too.
Of course, when you’re looking at apartments you’re unlikely to have the will (or even the opportunity) to knock on the doors of would-be neighbours and ask if their places are sound. But you can ask the real estate agent if the building has any weather-tightness issues and about its current earthquake rating. If the answers to either (or both) of those questions are vague, or unsettling, dig deeper.
In any case, you should ask the real estate agent or the seller to give you copies of the complex’s long-term maintenance plan, and at least the last 12 months’ worth of body corporate meeting minutes. You can also request a copy of the complex’s contingency plan (which will show you if there are other costs on top of the body corporate fees). Remember to ask for a copy of the building’s insurance policy, too.
Get your lawyer to check through all these documents and identify any potential issues or concerns. Getting as much information as you can about a property before you make an offer on it will set you up for much better decision-making.
If you’re concerned about whether apartment living will suit you, ask your apartment-dwelling friends if you can borrow their place when they’re next on holiday. If you’re used to living in the suburbs when the nearest neighbour is over the fence, it can be a bit confronting to hear them through the wall. Rubbish trucks clearing bottle skips at 5am, emergency sirens and construction noise can also shatter the idyll that you might be imagining.
Ask for at least the last 12 months’ worth of body corporate meeting minutes.
Kevin Lampen-Smith is the chief executive of the Real Estate Authority (REA), the independent government agency that regulates the New Zealand real estate industry. If you have a question about buying or selling property, send it to susan.edmunds@stuff.co.nz For independent guidance and information on buying or selling, check out settled.govt.nz.