A Checklist for Reviewing a Strata Report

Buying into a unit, townhouse or apartment means buying into the shared scheme as a whole, not just the four walls of your own lot. A strata report pulls together the records of the owners corporation or body corporate, and reading it properly tells you far more about a property than a walk-through inspection ever could. NSW Fair Trading's own guide to buying a strata property makes the same point, noting that low levies today can mean a steep rise in future fees if the scheme is not properly funded. Skipping this step, or skimming it, is one of the most common regrets among unit buyers once problems surface after settlement.

Start With the Financial Statements

Look at the scheme's income and expenditure over at least the last two to three years, not just the current budget. Check whether the administrative fund, which covers day-to-day running costs, and the capital works fund, which covers major repairs, are both being maintained at a reasonable level relative to the size and age of the building. A scheme that consistently spends more than it collects, or that has drawn down its reserves without replenishing them, may be heading towards a special levy in the near future.

Compare the current budget against actual spending from previous years to see whether the committee routinely underestimates costs such as insurance, common area electricity or building management fees. A pattern of large variances between what was budgeted and what was actually spent can be a sign the scheme's financial planning needs improvement, which may eventually flow through to higher levies or an unplanned special contribution from owners.

Read the Minutes, Not Just the Summary

• Go back at least two years of annual general meeting and committee minutes, looking for recurring complaints or unresolved maintenance items.
• Note any mention of building defects, water ingress, cladding issues or structural concerns raised by owners or a building manager.
• Check for disputes between owners or with the managing agent that could indicate a dysfunctional committee.
• Look for any special levies proposed, voted on or already collected, and understand what they were for.
• Check whether any legal proceedings involving the owners corporation are mentioned, even briefly.

Understand the By-Laws

By-laws govern what you can and cannot do with your lot, from keeping pets to renovating, running a short-term rental or parking a second vehicle. Read them in full rather than assuming they will be standard, since some schemes have unusually restrictive rules around noise, flooring, balconies or renovations that could affect how you intend to use the property. If you plan to rent the property out, confirm there are no by-laws restricting short-term letting or requiring committee approval for tenants.

Also check whether any by-laws have been added or amended recently, since a newly passed by-law can sometimes be more restrictive than what existed when a previous owner bought into the scheme. If a particular use is important to you, such as owning a pet or installing hard flooring, do not rely on what a real estate agent tells you verbally about the rules. Confirm it directly against the registered by-laws included in the strata report.

Check the Building's Maintenance and Defect History

Look for any building manager's reports, maintenance schedules or defect registers included with the strata report. Buildings less than ten years old should still be within a statutory warranty period in most states for certain defects, which is worth checking if the report flags anything unresolved. Older buildings should show evidence of a sinking fund forecast or capital works plan that realistically accounts for lifts, roofing, waterproofing and common area upgrades over the coming years.

Confirm Insurance Is Current and Adequate

The strata report should include a certificate of currency for the building's insurance policy. Confirm the sum insured reflects a recent valuation rather than an outdated figure, since under-insurance in a total loss scenario can leave owners facing a large special levy to make up the shortfall. Also check whether the policy covers common property defects or only standard risks like fire and storm damage.

Ask when the building was last independently valued for insurance purposes, since a scheme relying on an outdated valuation from several years ago may be significantly under-insured relative to current rebuilding costs. It is also worth checking whether the policy has any unusual exclusions specific to the building's construction type or age, particularly for older buildings that may have non-standard materials or wiring.

Look at the Levies in Context

Quarterly levies vary enormously depending on the age of the building, the number of lots, and the amenities included, such as lifts, pools or concierge services. Rather than comparing the figure in isolation, weigh it against what the capital works fund and maintenance history suggest about the building's future costs. A lower levy attached to a poorly funded capital works plan can end up costing more over time than a higher levy backed by a well-managed reserve.

Get Professional Help Interpreting the Report

Strata reports run to dozens or sometimes hundreds of pages, and it is easy to miss something significant buried in an old set of minutes. Your conveyancer can review the report alongside the residential purchase contract and flag anything that needs further investigation before you proceed, including whether a special condition should be added to protect you if a material issue is later discovered. This is general information rather than legal advice specific to your purchase, so raise anything that concerns you directly with your conveyancer or solicitor before exchanging contracts.