Special levies in NSW: find them before you buy

A special levy is an extra charge the owners corporation raises on top of normal strata fees, usually to pay for major repairs. The best way to find one before you buy is to read the last two or three years of strata meeting minutes and the capital works plan, then work out your share using the lot's unit entitlement.

Special levies are the most common nasty surprise for apartment buyers in NSW. They can run to tens of thousands of dollars per owner, and the warning signs are almost always in the strata report, just not on page one.

What a special levy is

Every NSW strata scheme collects regular levies into two funds. The administrative fund pays day-to-day costs like insurance, cleaning and the strata manager. The capital works fund saves for big-ticket items such as roofs, lifts, facades and waterproofing.

When a repair costs more than the capital works fund holds, the owners vote at a general meeting to raise a special levy. Each owner pays a share based on their unit entitlement, the number in the strata plan that sets each lot's share of costs. It can be one lump sum or split into instalments over months or years.

Where special levies hide in a strata report

A strata report (sometimes called a strata inspection report) summarises the owners corporation's records. Look in these places:

The minutes of the last few meetings

Read the annual general meeting (AGM) and any extraordinary general meeting minutes from the last two or three years. You're looking for:

• Motions to "raise a special levy" or "make a special contribution", and whether they passed
• Repair quotes that were tabled but not yet approved
• Works that were deferred to a later meeting. A levy discussed and put off is often the one that lands on a new owner
• Engineer or building reports that were ordered or received

The capital works plan and fund balance

NSW strata schemes must have a 10-year capital works plan, reviewed at least every five years. Compare what the plan says will be spent in the next few years with the money actually in the capital works fund. A large gap, or a plan that's out of date, usually means a special levy later.

Defect reports and quotes

Concrete cancer (spalling), water leaks, failed waterproofing, balcony and roof problems and fire safety upgrades are the usual causes of big levies. If a defect report lists serious items, check how many have been fixed and paid for.

Strata loans

An owners corporation can borrow instead of raising a levy. A loan spreads the cost over years through higher regular levies, and the repayments pass to you when you buy.

How to work out your share

Your share is the total levy multiplied by your lot's unit entitlement, divided by the total unit entitlement of the scheme.

For example, if the building raises a $400,000 levy and your lot has 45 out of 1,000 units of entitlement, your share is 45 ÷ 1,000 × $400,000 = $18,000.

The unit entitlement for each lot is in the strata plan and is usually shown in the strata report. Bigger and higher-value units usually carry more entitlement.

Who pays: you or the seller?

Under the standard NSW Contract for the Sale and Purchase of Land (2022 edition), the general rule for a contribution that isn't a regular levy and isn't disclosed in the contract is:

• The seller pays if the owners corporation determined it on or before the contract date, even if it's payable in instalments after settlement.
• You pay if it's determined after the contract date.

That makes timing important. A levy that's proposed but not yet voted on when you exchange will usually become your bill if it's approved before or after settlement.

The standard contract also lets a buyer cancel in some cases, for example if the building's special expenses work out to more than 1% of the price on a unit entitlement basis. But many contracts include special conditions that change or remove these protections. Always have your solicitor or conveyancer check the strata clauses and special conditions before you exchange. See our guide to contract special conditions in NSW.

Questions to ask before you exchange

• Are any special levies raised, approved or proposed for this lot, and how much is still owing?
• Is any major work planned in the next five years that the capital works fund won't cover?
• When was the capital works plan last reviewed, and does it include the defects in the latest reports?
• Are there any loans, legal disputes or insurance claims that could lead to a levy?
• Has the owners corporation received any orders or notices from council or the Building Commission?

Ask the selling agent first, then the strata manager. You can also ask for a section 184 strata information certificate, which states the levies payable for the lot and any amounts owing.

The warning signs at a glance

• Repair quotes in the minutes with no matching money in the capital works fund
• Works deferred from one meeting to the next
• A capital works plan more than five years old
• An administrative fund running in deficit on the latest balance sheet
• Defect, leak or waterproofing items that keep coming back
• New buildings with open defect claims against the builder

Questions

How much is a typical special levy in NSW?

There's no typical figure. Small buildings might raise a few thousand dollars per owner for a roof repair, while large remediation projects can cost each owner tens of thousands. Work out your share from the total and your unit entitlement.

Can I negotiate the price if a special levy is coming?

Often, yes. A levy that's proposed but not yet raised is a real cost, and many buyers use it to negotiate the price or ask the seller to pay. Your solicitor can advise on how to write that into the contract.

Does a strata report show every special levy?

It shows what's in the owners corporation's records on the day of the inspection. Anything decided after that date, or discussed informally, won't appear. Ask the strata manager for anything newer before you exchange.

Is a special levy tax deductible?

For investors, it depends on what the money is spent on. Repairs and capital works are treated differently, so ask your accountant.

What if the building has a big capital works fund?

That's a good sign, but compare it with the 10-year plan. A large fund can still fall short if major work is due soon.

Keep reading

• How much does a strata report cost in NSW?
• Is a low capital works fund a red flag?
• Should you buy an apartment with a special levy?
• Can ChatGPT review a strata report?

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