Buying an apartment in NSW? The strata inspection report is one of the most important documents you’ll review during due diligence — and one of the easiest to skim past. A strata report can run to hundreds of pages of meeting minutes, financial statements, and correspondence, and buried in those pages are signals that could save you from a very expensive mistake.

Here are five red flags to watch for.

1. Large Special Levies or Upcoming Capital Works

A special levy is a one-off charge to owners on top of regular strata fees, typically raised to fund major repairs or upgrades — think roof replacements, facade remediation, or lift upgrades. These can run into tens of thousands of dollars per lot.

Check the minutes of recent general meetings and committee meetings for any discussion of upcoming capital works, proposed special levies, or engineering reports. If the building needs major work and the capital works fund can’t cover it, you’ll be contributing as a new owner.

What to look for: References to building defect reports, engineering assessments, quotes for major works, or motions to raise special levies. Also check whether a 10-year capital works fund plan exists — under the Strata Schemes Management Act 2015 (NSW), owners corporations are required to prepare one.

2. Litigation History or Ongoing Disputes

Strata schemes can be involved in litigation — against builders for defects, against individual owners for by-law breaches, or disputes with neighbouring properties. Ongoing litigation is expensive, unpredictable, and the costs are shared across all owners.

Review the meeting minutes and correspondence for references to legal proceedings, NCAT (NSW Civil and Administrative Tribunal) applications, mediations, or solicitor correspondence. Pay particular attention to defect claims against developers — these can drag on for years.

What to look for: Solicitor invoices in the financial statements, references to court orders or tribunal decisions, and any motions about commencing or settling legal proceedings.

3. Low Capital Works Fund Balance

The capital works fund (formerly called the sinking fund) is the pool of money set aside for long-term maintenance and major repairs. Every building ages, and eventually needs significant work — waterproofing, pipe replacement, painting, structural repairs.

A low fund balance relative to the building’s age and condition is a warning sign. A 30-year-old building with $50,000 in its capital works fund is almost certainly underfunded. When the inevitable major repair arrives, it’ll be funded by special levies — potentially large ones.

What to look for: Compare the capital works fund balance (in the financial statements) against the 10-year capital works fund plan. If expenditure projections significantly exceed the current balance and projected contributions, the scheme is underfunded. Buildings over 15 years old with small fund balances deserve extra scrutiny.

4. High or Rapidly Increasing Insurance Premiums

Building insurance is one of the largest expenses for an owners corporation, and premiums have been rising sharply across the industry. But if a particular building’s premiums are increasing faster than the market average, or are unusually high for its size, that’s often a signal of underlying issues.

High premiums can indicate a history of claims (water damage, fire, liability), known building defects that increase risk, or materials that insurers consider high-risk. Some buildings with combustible cladding, for example, have seen their premiums multiply several times over.

What to look for: Insurance costs in the financial statements over the past 3-5 years. Look at the trend, not just the current number. Also check meeting minutes for any discussion about difficulty obtaining insurance coverage or excess amounts increasing.

5. Outstanding Compliance Orders or Building Defects

Local councils and fire safety authorities can issue orders requiring buildings to carry out specific works — fire safety upgrades, structural repairs, or compliance with current building standards. These orders are legally binding and the costs fall on the owners corporation.

Similarly, look for any unresolved building defect claims. If the building is within the statutory defect warranty period, the developer may still be liable. But if that period has passed and defects remain unresolved, the repair costs fall on current owners.

What to look for: Any correspondence from local council, Fire and Rescue NSW, or other authorities. Check meeting minutes for discussion of fire safety statements, compliance orders, or building defect reports. Look at whether the owners corporation has taken action or if issues have been left unaddressed.

How to Make Sense of It All

A typical strata report can be overwhelming — hundreds of pages of minutes, financial statements, insurance schedules, by-laws, and correspondence. The red flags above aren’t always obvious. They’re scattered across different documents, sometimes buried in the language of routine meeting minutes.

If you’re buying an apartment in NSW and want to understand what’s actually in a strata report, StrataChecks can help. It analyses strata inspection reports and highlights the key issues — financial health, litigation risk, upcoming works, and more — so you can make an informed decision without reading every page yourself.

The Bottom Line

A strata report isn’t just a formality. It’s a window into the financial health and governance of the building you’re about to buy into. Taking the time to look for these red flags — or using a tool that does it for you — can save you from surprises that cost thousands.

The cheapest time to discover a problem with a strata scheme is before you sign the contract.