{"id":6629,"date":"2015-12-28T08:00:13","date_gmt":"2015-12-27T21:00:13","guid":{"rendered":"http:\/\/www.realestatetalk.com.au\/?p=6629"},"modified":"2015-12-28T08:00:13","modified_gmt":"2015-12-27T21:00:13","slug":"how-to-legally-renovate-a-unit","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/how-to-legally-renovate-a-unit\/","title":{"rendered":"How to legally renovate a unit"},"content":{"rendered":"

When it comes to renovating units, sometimes the \u201cstrata monster\u201d can come out to play, and if you don\u2019t know the rules, it can bite you where it\u2019s likely to hurt the most \u2013 your hip pocket.
\n<\/strong>Dinah Lewis Boucher\u00a0 [@DinahBoucher]
\nTelevision renovation shows are all the rage these days. With a little bit of this, a sprinkling of that and a whole lot of elbow grease, you\u2019ve suddenly whipped up a flurry of equity. But that\u2019s when renovating goes to plan, of course.
\nIf you\u2019re looking for a starter project, a unit, being much smaller in project scope and costs, holds less perceived risk, right?
\nOften investors or renovators forget about the ramifications or restrictions that strata wields over what\u2019s actually yours as the owner (lot property) and what\u2019s not (common property). It\u2019s these strata regulations that\u2019ll be sure to stop any power tools dead in their tracks should blissfully unaware renovators be meddling outside their legal scope.
\nThe legalities<\/b>
\nAllison Benson, lawyer and director of Kerin Benson Lawyers, says this happens all the time. One recent example involved a couple that had just purchased their apartment specifically to renovate and then rent it out upon completion.
\n\u201cThey were told by their builder that their wall wasn\u2019t a structural wall and it was their lot property,\u201d Benson says.
\nEager to get to it, the couple removed the wall and completely gutted the unit in line with their builder\u2019s advice that \u201cit wasn\u2019t common property\u201d. But actually it was. It wasn\u2019t until they mistakenly punched three core holes through the common property floor slab (into the downstairs unit\u2019s bathroom) that the owners corporation clued on to what was going on in their top floor apartment \u2013 an unauthorised renovation!
\n\u201cWhile they innocently didn\u2019t realise what they were doing was wrong, they accepted responsibility once we told them,\u201d Benson says.
\nAnd the result of the couple\u2019s hard-learned lesson? Benson says they ended up having to pay about $25,000 in compensation to the owners corporation for an exclusive-use bylaw to retrospectively authorise the work.
\n\u201cWith the compensation, along with their own legal fees incurred and the fact they had to stop work on the property for five months until they got approval to commence, plus lost rental income, I\u2019d hate to think how much money they lost,\u201d she says.
\n\"thestratastruggle\"The moral of the story?\u00a0<\/b>
\nBefore any renovation work commences, check and understand what you own and what\u2019s common property. This comes back to reading and understanding the strata plan (although Benson points out that in the ACT this is referred to as a \u201cunit plan\u201d).
\nFor interstate investors, be aware there are different rules and regulations in each state and territory when it comes to strata.
\n\u201cSo, you\u2019ll have to look at the strata plan and then also look at the legislation. Although, sometimes this isn\u2019t as simple as people think,\u201d she says.
\nWhile this may be enough to change your mind on buying that entry-level unit with renovation potential, Benson says understanding what you do and don\u2019t own is the key.
\n\u201cIf you have any confusion reading your strata plan, get legal advice,\u201d she says.
\n\u201cLots of people say \u2018speak to your strata manager\u2019, but there have been quite a few times I\u2019ve been told something is common property and then when I\u2019ve had a look at it, I\u2019ve said \u2018no, it\u2019s not\u2019 and vice versa.
\n\u201cDespite some really good strata managers out there, there are a lot that haven\u2019t had a heck of a lot of training, quite frankly. And they may not understand it themselves.
\n\u201cIf you think something is common property or you\u2019re unsure if something is your lot property, double-check it and get legal advice.\u201d
\nWhile this may cost you $500 or so for a legal professional to have a quick look at the plans, bylaws and registration, the outlay may save you thousands, if not more, down the track if it ever goes to a dispute.
\n\u201cI know when you\u2019re renovating you want to try and flip the property as fast as you can, or get tenants as quickly as possible, but it\u2019s worthwhile to spend the money and plan it properly,\u201d Benson says.
\n\"table\"
\nDue diligence checklist<\/b>
\nAustralia\u2019s renovating queen and API columnist Cherie Barber says strata can be a prickly issue for many unsuspecting or would-be renovators. When it comes to the management side of things, just like a box of chocolates, you never know what you\u2019re going to get.
\n\u201cStrata\u2019s like a lottery or like gambling at a casino. Sometimes it really depends on how the strata manager feels on the day,\u201d Barber says.
\n\u201cOne of the due diligence tasks you should look at before buying an apartment is how active the strata body is. Obviously the more active they are, the more they may oppose your ideas or the more difficult it may be to get approval.\u201d
\nAnother box to tick on the strata due diligence list is to check the sinking fund to find out how much is in the piggy bank for external building repairs and the like.
\nKitchens and bathrooms are typically the first place one would look at when adding value to a property. But these are also the areas where many lot owners get caught out due to uncertainty on where their lot property ends and where common property begins.
\nBenson says in most strata schemes you generally only own the air space within your lot, so most reno work will require owners corporation approval.
\n\u201cThis means any plans to strip and re-fit a bathroom will generally affect the scheme\u2019s common property and require permission. If it\u2019s going to affect the waterproof membrane, bathrooms are pretty much always going to be common property. It would be the rare property that this isn\u2019t the case,\u201d Benson says.
\nAnd if you\u2019re on the lower levels of an apartment block, forget about taking out walls.
\n\u201cObviously the load walls in an apartment are supporting one another and if you take out a wall it can cause structural damage and cracking in the apartments above.
\n\u201cAs a renovator you\u2019re very limited with the changes you can do internally, and there are very limited external changes you can make as a renovator also,\u201d Barber says.
\nEven seasoned renovating pros such as Paul Eslick, of Reno Kings, have been stung by a strata surprise.
\n\u201cI fell into this trap, too,\u201d Eslick says.
\nWhen his tenants asked for air conditioning to be installed, Eslick says he jumped at the request.
\n\u201cThey were happy to pay $15 extra a week, so it\u2019s a win\/ win,\u201d he says.
\n\u201cBut after I did this I got a long letter from the body corporate saying \u2018please explain. You need permission to do so\u2019. And I thought, \u2018Oh God.\u2019\u201d
\nEslick says they eventually allowed the air conditioning unit to stay.
\n\u201cBut they could\u2019ve asked me to dismantle and get rid of it. In the end, the only way I beat the body corporate, well, I became the chairman,\u201d Eslick says with a laugh.
\nKnow thy numbers<\/b>
\n\u201cI own units because I built them,\u201d Eslick says.
\n\u201cUnits are a good starting-off point but if you\u2019re going to get into mainstream renovating to make a profit, you have to be very careful of what you do, where you go and how you go about buying your unit.
\n\u201cSometimes I\u2019d rather go further out to buy a house on a block of land and own the whole title. You\u2019d be smarter doing that.\u201d
\nThe only way to come out on top when it comes to strata and renovation is to understand what you can and can\u2019t do, understand your strata plan, and have your budget worked out to the very last decimal spot.
\n\u201cYou have to be very confident with your numbers when you\u2019re buying and selling as a renovator because largely most of the value will be added internally due to limited external works,\u201d Barber says.
\n\u201cApartment renovations can be done quickly and very cost effectively as most of the changes are purely cosmetic.\u201d
\nBarber\u2019s tip is when it comes to apartment renovations they\u2019re great if you\u2019re strategy is to buy, renovate and hold. This will not only add value to your property but, if done right, it will also increase your rental yield.
\n<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

When it comes to renovating units, sometimes the \u201cstrata monster\u201d can come out to play, and if you don\u2019t know the rules, it can bite you where it\u2019s likely to hurt the most \u2013 your hip pocket. <\/p>\n","protected":false},"author":176692471,"featured_media":6631,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[34,17,25,29],"tags":[70],"class_list":["post-6629","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-property-investment","category-sponsored-channels","category-video","tag-featured"],"yoast_head":"\nHow to legally renovate a unit - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/how-to-legally-renovate-a-unit\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to legally renovate a unit - 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