NSW strata report red flags: what to look for before you buy

When you buy an apartment or townhouse in NSW, you also buy a share of the whole building: its savings, its debts, its repairs and its disputes. A strata report (sometimes called a strata inspection report or strata search) summarises the owners corporation's records so you can see what you're walking into.

Strata reports are often 50 to 300 pages, and the important parts are rarely on page one. These are the red flags property experts look for first.

1. Money problems

Special levies, raised or coming

A special levy is an extra charge on top of normal strata fees, usually for major repairs. Check the minutes of the last two or three meetings for levies that have been raised, discussed or deferred, and work out your share from your lot's unit entitlement. A levy discussed at the last meeting but not yet raised is often the one that surprises a new owner.

A capital works fund that's too low

Every NSW strata scheme must have a capital works fund and a 10-year plan for major repairs, reviewed at least every five years. Compare the fund balance with what the plan says will be spent in the next few years. A fund well below the plan, or a plan that's out of date, often means special levies later.

An administrative fund in deficit

The administrative fund pays day-to-day costs such as insurance, cleaning and the strata manager. If it's negative on the latest balance sheet, levies may need to rise. Make sure you're reading the newest balance sheet: reports often include several years side by side.

Strata loans

Owners corporations can borrow to fund repairs. A loan means higher levies for years, and repayments pass to you when you buy. Look for loan resolutions in the minutes and loan repayments in the budget.

2. Building problems

• Defect reports and repair quotes: concrete cancer (spalling), water leaks and waterproofing failures, roof and balcony problems. Check how much of the repair work has actually been done and paid for.
• Building defects bonds: for newer buildings of four or more storeys, the developer lodges a bond to cover defects. Look for the interim and final defect reports and whether claims have been made.
• Combustible cladding: any mention of cladding, fire engineering or rectification orders.
• Fire safety: the annual fire safety statement, and any fire orders or upgrade notices from council or Fire and Rescue NSW.
• Orders and notices: from council, the Building Commission NSW or other authorities.

3. Disputes and legal action

Look for proceedings in the NSW Civil and Administrative Tribunal (NCAT) or the courts, disputes with the builder or developer, and long-running arguments between owners. Legal action can be expensive, and a building in dispute can be hard to manage and slow to fix.

4. Insurance gaps

The owners corporation must insure the building for its full replacement value and hold public liability cover. Check the policy is current, the sum insured looks realistic for the building, the excess isn't unusually high, and there's no pattern of claims (especially water damage) that could push premiums up.

5. By-laws that affect how you live

By-laws are the building's rules. Read them for anything that affects your plans: renovations (and which need approval at a general meeting), pets (since 2021, NSW by-laws can't unreasonably ban animals), short-term letting, parking and storage, and special by-laws that give one owner exclusive use of common property or make them responsible for repairs.

6. Things about your lot

• Arrears: unpaid levies on the lot you're buying should be cleared at settlement, but check.
• Unit entitlement: your share of every building cost. A higher share means a bigger slice of every levy.
• Your car space and storage: confirm they're part of your lot or covered by an exclusive use by-law, not just used by habit.
• Unapproved work: past renovations to your lot that the owners corporation never approved.

How WIBI reads a strata report

Upload the strata report and WIBI reads every page, then shows a six-part scorecard (finances, levies, building, insurance, compliance and by-laws), the items to resolve first, and your share of any cost in dollars. Every finding shows the page it came from. WIBI also reads the strata report together with the contract, so it can tell you when a contract clause makes a coming levy yours.

Questions

Is a strata report the same as a section 184 certificate?

No. A strata information certificate under section 184 of the Strata Schemes Management Act 2015 is a short official summary from the owners corporation, mainly levies and some key details. A strata inspection report is a much fuller review of the records: minutes, finances, defects, insurance and by-laws.

Who pays a special levy if I buy?

It depends on when the levy was raised and what the contract says. Special conditions in NSW contracts often shift levies to the buyer, so have your solicitor or conveyancer check the contract alongside the strata report.

Does a strata report cover everything?

No. The inspector can only report on the records they were shown on the day. Missing minutes, financial statements or defect reports are themselves worth asking about.

Keep reading

• Special conditions in a NSW contract for sale: what to look for
• The NSW Low and Mid-Rise Housing rules: what they mean for buyers
• What a building and pest report doesn't tell you

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