Strata Report Red Flags: 10 Warning Signs Every NSW Buyer Should Know

A strata report is one of the most practical tools a NSW apartment buyer can use before committing to a purchase. The NSW Government advises that a strata search report should reveal a scheme’s finances, insurance, building defects, planned works, safety requirements, legal matters, and meeting notes that show how the building is governed. Before buying, it is wise to obtain both a strata report and a building inspection report, read the by-laws, and consider the reputation of the developer, builder, and strata manager. Buyers can also request a section 184 certificate to confirm levies payable, outstanding contributions, proposals for funding the 10-year capital works plan, and whether a strata renewal committee exists.

Not every finding in a strata report is a reason to walk away. Some signals simply mean you should ask more questions. The ten warning signs below are grouped into financial, physical, and governance categories to help you move through the document with purpose.

Financial Warning Signs

Is the Capital Works Fund Supported by a Current 10-Year Plan?

A strata scheme without an up-to-date 10-year capital works plan may struggle to pay for major repairs, leaving owners exposed to sudden fee increases. Under the Strata Schemes Management Act 2015 (NSW), an owners corporation must establish a capital works fund (section 74) and prepare a 10-year plan of anticipated major expenditure from the first AGM, reviewed at least every five years (section 80). At each AGM, the corporation must estimate how much to credit to the fund, taking the plan into account (section 79). If the report shows no plan, or if the projected costs for roof replacement, lift refurbishment, or facade repairs have no funding behind them, this signals poor forward planning. A well-run scheme will have realistic estimates and a balance that is growing toward those targets. You can read more about how these funds work in our guide to capital works funds versus special levies in NSW.

Are There Repeated Special Levies or Unrealistically Low Regular Levies?

Regular levies that seem unusually low often mean steep future increases, while repeated special levies suggest the scheme is not saving enough for foreseeable expenses. Special levies may be needed when there is not enough money for large capital works or unforeseen expenses. Under section 81(4) of the Strata Schemes Management Act 2015 (NSW), if expenses cannot be met from the administrative or capital works fund, the owners corporation must levy a contribution at a general meeting. When special levies appear year after year, it usually points to inadequate routine planning rather than one-off surprises. Buyers comparing buildings should check whether the quoted levies are sustainable. Our article on how to compare strata levies before you buy explains what normal looks like in different building types.

Does the Scheme Have Unpaid Levies and Weak Financial Controls?

Significant arrears and a lack of spending oversight can indicate poor administration and future cash flow problems. Unpaid contributions bear simple interest at 10% per year unless paid within one month (section 85). For large strata schemes — or any scheme with a budget exceeding $250,000 — accounts must be audited before presentation at the AGM (section 95). There are also spending controls: for large strata schemes, the owners corporation cannot spend more than the estimates approved at the AGM plus 10% without a general meeting resolution, and at least two independent quotes are required for work valued at more than $30,000 (section 102 and Regulation clause 25). A report that shows high arrears alongside unapproved spending is a signal that financial discipline may be lacking.

Are Initial Levy Estimates in New Buildings Realistic?

From 1 April 2026, developers of new multi-storey schemes must engage an independent surveyor to certify that initial levy estimates meet expected expenditure. Penalties for non-compliance reach up to $11,000 for individuals and $55,000 for corporations. Buyers in new developments should verify that this certification exists in the strata records. A developer who sets initial levies too low to make the property attractive can leave the owners corporation with a funding gap once the building is handed over. Checking this early can save buyers from a sharp adjustment in the first year of ownership.

Building Condition and Compliance Risks

Are There Unresolved Building Defects or Neglected Common Property?

Persistent defects such as water ingress or concrete cancer indicate the owners corporation may not be meeting its maintenance obligations, which can lead to escalating repair costs. Section 106 of the Strata Schemes Management Act 2015 (NSW) requires the owners corporation to properly maintain common property and keep it in good repair. Common defects seen in NSW strata buildings include water penetration, concrete cancer, incorrect waterproofing, and leaching from building surfaces, according to Redchip Strata Law. A strata report that notes the same leak or crack across multiple sets of minutes, with no resolution or budget allocated, suggests either a funding shortfall or a failure to act.

Are Fire Safety Records Complete and Compliant?

Missing or outdated fire safety maintenance records are a compliance risk and may mean the building does not meet current mandatory standards. From 13 February 2026, AS 1851-2012 became mandatory for the inspection, testing, and maintenance of essential fire safety measures in class 2 buildings and other prescribed building classes in NSW, according to the NSW Building Commission. Essential systems covered by the standard include fire alarms, sprinklers, hydrants, extinguishers, and pumps. Records must be kept for seven years. A buyer reviewing a report for an older building should look for annual fire safety statements and maintenance logs; their absence could indicate the scheme is unaware of the new requirements or has been deferring critical upkeep.

Is the Building Adequately Insured for Its Value and Legal Exposure?

Insurance cover that falls short of the building’s replacement value or legal risk exposure can leave owners personally liable after a major incident. Sections 160 and 161 of the Strata Schemes Management Act 2015 (NSW) require the owners corporation to insure the building for at least the amount determined under regulations, covering fire, lightning, and explosion. Public liability insurance of at least $20,000,000 per event is mandatory under section 164.

The financial gap between penalties and cover can be severe. In the 2024 NSW District Court case SafeWork NSW v The Owners Strata Plan No 93899, the owners corporation was fined $225,000 plus $40,000 in costs for a work health and safety breach. At the time, the scheme’s total assets were only $13,296.92, and it was operating at a deficit of $8,356.66. The building was valued at $1,955,000 for insurance purposes. Bannermans Lawyers described the common $50,000 legal defence insurance cover as “woefully inadequate” in strata WHS matters, noting that the maximum penalty for an owners corporation breach is $1,731,500. For a deeper look at how to assess cover, see our article on strata insurance adequacy and buyer risk.

Governance and Legal Warning Signs

Are Annual General Meetings Held Regularly and Properly Noticed?

Missing or irregular AGMs suggest weak governance and may mean important decisions are being made without proper owner oversight. The NSW Government states that an AGM must be held every year, with at least 14 days’ notice given to owners. An owner is not eligible to vote if their levies are unpaid. A report that shows the last AGM was held 18 months ago, or that minutes are missing for the current financial year, raises practical questions about whether the committee is operating lawfully.

Are There Active Disputes, NCAT Proceedings, or Committee Instability?

Ongoing tribunal proceedings or frequent changes in committee membership can signal deep governance problems that affect the whole building. The Strata Schemes Management Act 2015 (NSW) gives the Tribunal power to remove strata committee members (section 238). Mediation is compulsory for most disputes before the matter reaches NCAT. A strata report revealing multiple applications in a short period — whether about by-law enforcement, committee removal, or levy disputes — suggests a fractious environment that may take years to stabilise and can drain the scheme’s administrative resources.

Have Recent By-Law Changes Been Properly Registered?

By-law changes that were never registered, or were passed without the required resolution, may be unenforceable and create confusion for owners. The NSW Government advises that changes to by-laws must be registered within six months and require a special resolution — meaning no more than 25% of votes are cast against the motion. Buyers should check that any recent changes appear on the section 184 certificate and in the strata report. A scheme that passed a short-term letting by-law eight months ago but has not registered it leaves buyers uncertain about whether those restrictions actually apply.

Frequently Asked Questions

What is a strata report and why do I need one?

A strata report is a compiled record of a scheme’s financial, legal, and administrative history. The NSW Government advises buyers to obtain one before purchase to understand finances, insurance, building defects, planned works, safety requirements, legal matters, and governance. It complements a building inspection report, which looks at the physical structure of the lot itself.

Can I buy an apartment with unresolved strata defects?

Yes, but buyers should understand the scope, estimated cost, and timeline for repairs. Some defects are manageable if priced into the offer; others may indicate systemic problems. A strata report helps buyers assess whether the owners corporation has the funds and the intent to act. It is not necessarily a reason to panic, but it is information worth weighing carefully before proceeding.

How long does it take to get a strata report in NSW?

Most strata reports can be ordered and delivered within a few business days, though timing varies by provider. Buyers during a cooling-off period or before auction should allow at least three to five business days to receive and review the document.

Should I walk away if I see multiple red flags?

Not necessarily. Multiple warning signs mean buyers should ask more questions and seek professional advice. Some issues are resolved with better governance or a revised levy schedule; others require significant capital. The goal of due diligence is to enter a purchase with open eyes, not to eliminate every risk. For a broader view of the pre-purchase process, see our apartment buying checklist for NSW.

Buying an apartment is one of the biggest financial decisions most people make. Understanding what a strata report contains — and which warning signs deserve closer attention — helps buyers move from confusion to confidence. StrataClear analyses your strata report and turns complex documents into clear, structured summaries, so you can spot risks faster and make more informed decisions. It is a tool for due diligence, not a replacement for professional legal or financial advice.