The Strata Report Decoded: 10 Red Flags to Look for Before Buying an Apartment
When you buy a house, a building inspection is standard. When you buy an apartment, the equivalent — and arguably even more important — document is the strata report. Also known as a Section 184 Certificate (in NSW) or a strata inspection report, this document reveals the financial health, legal standing, and maintenance history of the entire building.
Yet many buyers either skip the strata report entirely, or receive it and have no idea what they're looking at. This is a mistake that can cost you tens of thousands of dollars. Here are the ten red flags that should make you pause — or walk away.
What's in a Strata Report?
A comprehensive strata report typically includes the last two years of financial statements and budgets, the current balance of the administrative fund (operating account) and capital works fund (sinking fund), the 10-year capital works fund plan, minutes from the last two years of general meetings and committee meetings, any outstanding or pending legal proceedings, current insurance details including the building sum insured, registered by-laws, details of any special levies or expected special levies, and building maintenance and defect history.
From April 2026 in NSW, strata information certificates will also need to include information about embedded utility networks (embedded networks) — giving buyers additional transparency about how electricity and other utilities are supplied in the building.
Red Flag 1: Insufficient Capital Works Fund
The capital works fund (formerly called the sinking fund) is the building's savings account for major repairs and replacements — things like roof replacement, lift overhaul, painting, waterproofing and plumbing upgrades. A healthy capital works fund should be aligned to the building's 10-year capital works fund plan.
| Building Size | Healthy Capital Works Fund Balance | Danger Zone |
|---|---|---|
| Small (10–20 lots, low-rise) | $100,000–,000 | Under $50,000 |
| Medium (30–60 lots) | $300,000–,000 | Under $150,000 |
| Large (80+ lots, high-rise) | $800,000–,000,000+ | Under $400,000 |
If the capital works fund is underfunded relative to the 10-year plan, it means one thing: a special levy is coming. You'll be asked to pay a lump sum — potentially ,000, ,000, or even ,000+ per lot — to cover deferred maintenance. This is the single most expensive surprise for apartment buyers.
Red Flag 2: No 10-Year Capital Works Plan (Or an Outdated One)
Every owners corporation in NSW is required to have a 10-year capital works fund plan. From April 2026, new plans must use a standardised form. If the strata report reveals no plan, or a plan that hasn't been reviewed in years, it signals poor governance and a high risk of unexpected costs.
Red Flag 3: Recurring Special Levies
One special levy might be a reasonable response to an unexpected event. A pattern of special levies — year after year — suggests the building is chronically underfunded and the committee is using special levies as a substitute for adequate regular contributions. Check whether annual levy increases have kept pace with the building's actual maintenance needs.
Red Flag 4: Outstanding Litigation
Check whether the owners corporation is involved in any legal proceedings — as plaintiff or defendant. Common scenarios include defect claims against the developer or builder (which can take years and cost hundreds of thousands in legal fees), disputes between lot owners and the owners corporation, insurance claims, and debt recovery action against owners with unpaid levies.
Active litigation doesn't necessarily mean you shouldn't buy, but you need to understand the nature of the claim, the potential financial exposure, and how legal costs are being funded.
Red Flag 5: High Outstanding Levies
If a significant number of owners are behind on their levies, it's a warning sign. High levy arrears mean the owners corporation has less cash to fund maintenance and operations, the building may be deferring essential maintenance because of cash flow problems, and owners who aren't paying their levies may also be disengaged from building governance.
Look at the total levy arrears as a percentage of the annual budget. Under 5% is typical. Over 10% is concerning. Over 20% is a serious red flag.
Red Flag 6: Insurance Deficiencies
Review the building's insurance policy carefully. Key things to check include whether the building sum insured reflects the full replacement cost (not just the market value), whether the policy includes all necessary covers (building, common contents, public liability, office bearers' liability, workers' compensation if applicable), the level of excesses — particularly for water damage, fire and cladding-related claims, and whether the building has any exclusions or special conditions related to known defects or cladding.
Red Flag 7: Combustible Cladding or Known Defects
Check meeting minutes and any building reports for references to combustible cladding, waterproofing failures, structural issues or fire safety non-compliance. Buildings with known defects face higher insurance premiums, potential special levies for rectification, and reduced resale values. If cladding is mentioned, find out the current status of any rectification program and the estimated cost per lot.
Red Flag 8: Contentious Meeting Minutes
Read the meeting minutes carefully. They reveal the culture and governance quality of the building. Warning signs include repeated heated debates about the same unresolved issues, motions to replace the strata manager (suggesting dissatisfaction with management), high committee turnover, disputes between committee members, and low attendance at general meetings (suggesting owner disengagement).
Red Flag 9: Building Manager Agreements
Some buildings have building manager (caretaker) agreements that were set by the original developer and contain terms that are unfavourable to the owners corporation — long contract terms, high fees, automatic renewal clauses, or broad exclusivity provisions. The 2025 NSW reforms introduced new duties and disclosure requirements for building managers, and require that only formally appointed managers are recognised. Check the terms of any building management agreement carefully.
Red Flag 10: By-Laws That Don't Fit Your Lifestyle
Read the by-laws. They govern what you can and can't do in your apartment and in common areas. Common surprises include pet restrictions (though blanket bans are now invalid in NSW), renovation approval requirements that are more restrictive than expected, parking rules that limit how you can use your space, and short-term rental restrictions that may affect your plans to Airbnb the apartment.
How to Get a Strata Report
In NSW, you can order a Section 184 Certificate (strata information certificate) through the strata managing agent. The cost is capped at a maximum prescribed fee (currently around – depending on the type). Most strata report services add their own review and commentary for an additional fee. This professional analysis is well worth the cost — typically – — as it translates the raw data into plain-English observations and warnings.
How UnitBuddy Helps
UnitBuddy's building wellness assessment evaluates many of the same indicators that appear in a strata report — financial health, maintenance adequacy, insurance coverage, and governance quality. By providing a comparative score against similar buildings, UnitBuddy helps buyers quickly assess whether a building is well-managed or hiding expensive problems beneath the surface.
A strata report is the closest thing to an X-ray of your future building. Reading it carefully before you buy is the single best investment you can make in protecting yourself from costly surprises. If in doubt, have it professionally reviewed — a few hundred dollars of analysis can save you tens of thousands in unexpected costs.