Strata real estate developments are those established under the Registration (Strata Titles) Act (the “Act”), and are similar to what persons know as “condominiums” overseas. They have become a popular real estate option in Jamaica, offering individuals an affordable, community-oriented lifestyle with shared amenities. However, purchasing a unit in a Strata is not without risks. There are several critical factors that potential buyers must consider before pursuing this type of purchase. 

One of the most important, yet often overlooked aspects of buying into a Strata, is verifying the financial and administrative status of the Strata Corporation. Specifically, ensuring that the Strata Corporation is up-to-date with its annual fees and annual return filings with the Commission of Strata Corporations (The “Commission”), which is the public body charged with monitoring, regulating, and supervising the operations of Stratas in Jamaica. This step is crucial in safeguarding your investment through ensuring the proper management of the property.

Understanding the role of the Strata Corporation in Jamaica

In Jamaica, strata properties are governed by the Act, which outlines the duties and responsibilities of the Strata Corporation. The Strata Corporation is a legal entity that is automatically formed on the creation of the Strata to manage the affairs of the Strata, including common areas, maintenance, financial management, and compliance with regulations. Each unit owner contributes to the operation and upkeep of the property through maintenance fees, which the Strata Corporation is responsible for collecting.

The Strata Corporation is also required to submit annual returns to the Commission within 120 days of the end of each financial year.  This includes minutes of Annual General Meetings (“AGMs”) and Extraordinary General Meetings (“EGMs”) held during the filing period, names and addresses of the current executive committee members elected during the filing period, certificate of insurance (or copy of unanimous resolution not to insure the property), and audited financial statements, or statement done in accordance with generally accepted accounting principles. These annual returns are critical as they provide transparency, and ensure the Strata Corporation’s compliance with the law.

Why verifying annual fees and returns is critical

Verifying whether a Strata Corporation is current with its annual fees and returns filings with the Commission is essential for a number of reasons.

Firstly, it signals financial health and good governance. A Strata Corporation that is up-to-date in its fees and returns, is likely to have proper financial management in place, which means it can adequately maintain common areas and address repair issues without having to impose unexpected levies on unit owners. On the other hand, if a Strata Corporation is behind on its filings or fees, this could indicate financial mismanagement or worse, insolvency.

Secondly, timely filing of annual returns ensures legal compliance. The Commission holds Strata Corporations accountable for their financial and administrative practices, and failure to comply with annual return requirements can result in penalties or legal action. Unit owners in such situations could find themselves facing unexpected financial burdens that could jeopardize the property’s value. 

How to protect yourself as a buyer

To mitigate risk, buyers should conduct thorough due diligence before purchasing a Strata unit. 

1. 1. Check the Strata Corporation’s compliance with the Commission

Start by making checks with the Commission to verify whether the Strata Corporation you are considering buying into, is up-to-date in its filings and fees. The Commission keeps detailed records of all registered Strata Corporations, including whether they are compliant with their legal obligations. Your attorney-at-law can assist you with this.

2. 2. Read the by-laws in their entirety

The by-laws of a Strata Corporation detail the various rules regarding the administration, governance, and management of the Strata Corporation. It will also speak to rules such as the use of Strata units and common areas in the Strata. Before purchasing into a Strata, you should ensure you are in agreement with what is contained in the by-laws, and you should be satisfied that the by-laws are drafted to ensure the preservation of the value of the property. 

3. 3. Request financial statements and meeting minutes

As part of your due diligence, request the Strata Corporation’s financial statements, proof of up-to-date insurance, as well as meeting minutes from the Strata’s AGMs and EGMs, which can provide valuable insight into how the Strata Corporation is run, including upcoming projects or issues that could affect owners.

4. 4. Understand special costs and upcoming fees

Ask whether there are any pending special costs, or large projects that could require additional financial contributions from unit owners. If a major maintenance or renovation project is planned, you may be responsible for a share of the cost.

5. 5. Consult current unit owners

It is a good idea to speak with current owners or residents in the Strata to get a sense of the community’s atmosphere, and any challenges that may not be reflected in official documents. Owners are often candid about the quality of management, and any ongoing issues that might affect your decision to buy.

6. 6. Seek legal representation

Real estate transactions can be complex, and even more so where it is a Strata purchase. It is advisable for buyers to seek legal advice when embarking on such a purchase. A real estate attorney can assist with conducting due diligence and offer valuable advice on making a Strata purchase.

Conclusion

In conclusion, performing due diligence before purchasing into a Strata property is crucial. By verifying the Strata Corporation’s financial standing and compliance with the Commission, you can avoid the pitfalls of poorly managed Strata Corporations, and make a confident and informed decision.