Strata report red flags: 7 things to check before you buy a Sydney apartment

A strata report is the most boring document in property and the most expensive thing to skip.

I had a client recently who fell in love with an apartment. Beautiful, north-facing, river views. We pulled the strata report and found a $2 million loan sitting in the sinking fund. Spread across the lot owners, that was thousands per year on top of their levies, every year, for the next decade.

She didn't buy it. The agent never volunteered the number. Most buyers never ask.

Here are the seven things I check in every strata report before a client signs anything.

1. The capital works fund balance

Also called the sinking fund. This is the money the building has set aside for major repairs and replacements. If it's low, the building is one big repair away from a special levy.

What I want to see: a healthy balance relative to the building's age and size, plus a 10-year capital works plan that actually matches future works.

2. Outstanding loans

If the strata has borrowed money to fund repairs, you inherit a share of that loan when you buy. This is the number that caught my client out. Loans don't always show up where you'd expect, dig.

3. Recent and upcoming major works

Look for waterproofing, roof, lift, facade, balcony rectification, fire safety upgrades. Any of these can cost six figures per unit. If they're flagged as upcoming and there's no funding, you're walking into a special levy.

4. Active legal disputes

Litigation can drag on for years and eat into the strata's funds. Look for matters involving the developer, the builder, the strata manager, or fellow owners. A combative committee is a red flag of its own.

5. Unpaid levies and bad debts

If owners aren't paying their levies, the building can't fund maintenance. A high percentage of arrears tells you the scheme is struggling.

6. Levy history and trajectory

Levies that have jumped significantly year on year suggest the building is catching up on something it didn't fund earlier. Get the last three to five years and look at the curve.

7. By-laws and pets

Less financial, more lifestyle, but worth checking. Some buildings ban pets, some restrict short-term letting, some have rules around renovations. Read the by-laws so you know what you're buying into.

What buyers usually miss

Most buyers either skim the report or hand it to a friend and ask "looks ok?" Neither catches the things that matter.

What I do is read the report alongside the building's age, defect history, and the AGM minutes. The minutes are where the real story lives. Who's been complaining about what for how long. Whether the committee functions. Whether the building has a recurring leak problem dressed up as something else.

A new building isn't automatically safe. Some of the worst reports I've seen are buildings under 10 years old with construction defects no one's resolved.

Before you sign

If you're at the point of pulling a strata report, you're close to a decision. Don't make it on vibes. Pay for the report, read it properly, or have someone who reads them weekly read it for you.

If you'd like a second set of eyes on a report you're already holding, that's something I do. Send it through.