As the property market comes to a grinding halt, developers yet again find themselves holding unsold apartment stock.
Developers are like farmers who tend to engage in commerce on the basis that they pay their bills when they sell their crop. This presents problems for other less hardened members of strata entities.
With a developer holding in some cases up to 40% of unsold stock, the pressure on remaining owners to pay 100% of the bills with only 60% of the income is excruciating.
In these situations there are few alternatives other than to flog the willing by striking special levies to finance the developer’s default.
While it is true that so long as the unit is sold one day, the fees will get paid, there is collateral damage for the newly formed owners group.
The developer’s levy payment default will coincide with that time when building defects will need to be remedied. Sinking fund surpluses should be squirreled away during these formative years but this won’t happen if the paying purchasers are being stretched. In these circumstances unit owners will be quick to conclude inactive strata managers are in the developer’s pocket.
Unit owners will need to take swift action against developers in these times. A winding up notice may be the best solution in order to force the developer’s bank to meet the market and sell some stock to pay the outstanding levies.
Buying off the plan is full of risks not properly understood by purchasers and this is just another of those.