For the uninitiated, buying an apartment can be a bit like navigating through a minefield, with issues such as leaky buildings, seismic strengthening and leasehold titles all posing potential pitfalls for the novice investor or owner-occupier.
The range of issues potential buyers need to consider was evident at one of the main apartment auctions in Auckland over the last week, where just one of the five properties on offer was sold and the other four all had issues which potential buyers would have needed to pay particular attention to when undertaking their due diligence.
Of the four apartments that were passed in, one attracted multiple bids, another attracted just a single bid and there were no bids on the last two.
A quick glance at the auction documents for all four properties highlighted some of the issues buyers need to get their heads around before committing to a purchase.
First up was a 33 square metre studio in The Whitaker building on Whitaker Place.
Located on the leafy, city side of Grafton Gully, the apartment had reasonable views down the gully and out across the Hauraki Gulf to Rangitoto.
There were two bidders for the property but both were cautious and it was passed in with a top bid of $202,000.
The were a couple of items in the Pre-Contract Disclosure Statement that could have caused potential purchasers to pause for thought.
"One of the lifts in the complex (the goods lift) is currently out of order. As the service contract for the remaining lift is now expired, the [Body Corporate] Committee is considering quotes for the repair or replacement of either lift, along with ongoing maintenance," it said.
The Disclosure Statement went on to say:
"In 2016 a roof condition report was obtained from Castlebridge Surveys. This was distributed to all owners.
"Currently the Committee is considering a project manager with a view to either full remediation of the roof or repairs, based on the outcome of expected future tenders."
Next up was an apartment in the Scene Three complex on Beach Rd, just along from the historic former Central Railway Station building.
This was a spacious 62 square metre, one bedroom apartment with an undercover car park, a large balcony and good views of the cityscape.
Normally an apartment like this might sell for more than $500,000, but the units in the Scene Three complex are on leasehold titles.
The effect that leasehold titles have on a property's value was not well understood when many projects such as Scene Three were developed.
Consequently many of the original buyers in such buildings paid too much for their apartments and have since suffered a substantial fall in value as ground rent payments started to kick in.
The ground rent on the apartment being auctioned was $6187 a year, but could increase significantly in the next couple of years.
The ground rents on the Scene Three are reviewed every seven years and the next review is due in 2018.
While it's not yet known how much the rent will go up by, the increase is likely to have a close relationship with the movement in Auckland CBD land value over the last seven years.
So potential buyers for this unit should have been asking themselves what has happened to land values in the area over the last seven years, and factoring that into their estimates of how much the ground rent could increase by.
It's not likely to be pretty, and its something that Scene Three's Body Corporate Committee is already preparing for.
The Body Corporate's minutes show that it is already looking to raise $300,000 from apartment owners in the building to fight the next increase in ground rent, as in the process of engaging lawyers, even though the next review is still some time off.
There was a single bid of $100,000 for the apartment before it was passed in.
Next up was a 40 square metre studio in The Lofts building in Lorne St, right in the heart of the city between Queen St and Albert Park.
The Lofts is a character building built in the late 1800s and converted to apartments in 1996.
Apartments in The Lofts have been popular but a note in the sale documents disclosed that the building's Body Corporate would be raising funds from Body Corporate levies for the next 10 years to put into a Seismic Retrofit Fund.
There were no bids on the unit and it was passed in.
The final unit on offer was in the Bianco building on White St, just off the top end of Queen St and two to three minutes walk to either Myers Park, Karangahape Rd or Symonds St.
This was a spacious 81 square metre unit with two bedrooms, two balconies and a car park, in a modern building.
But a warning note was sounded in the sale documents: "The property may not be weather tight or structurally sound."
Body Corporate minutes for the building show an Extraordinary General Meeting was held on 21 June this year to consider issues relating to weathertightness in the complex's roofs, balconies and car parks and also issues relating to its structure, fire protection and hydraulic services.
The meeting was told the only way to recover money relating to the issues was through litigation, which could take two years.
It was not known at the time of the meeting if residents would need to vacate their apartments while remediation work was carried out.
It was resolved at the meeting to strike special levies totaling $500,000 to cover further detailed investigations of the issues and legal costs.
At the auction there were no bids for the unit and it was passed in.
While the issues highlighted in the above examples are not insurmountable and do not mean that a unit passed in at auction would not subsequently be sold by negotiation, they do indicate the care that potential buyers need to take when considering purchasing apartments and deciding on an appropriate price.
In some cases that may not be a process for the faint hearted.
You can can check out the results of recent apartment and other residential property auctions on our Residential Auction Results page.
If you are interested in commercial property, check out our Commercial Property Sales page.
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