Investigation of Strata Scheme proves problematic

Published in the Coffs Coast News Of The Area on 28 March 2025.

Christine has a relatively small budget, but as a first home buyer, she is looking to enter the real estate market.

She finds a unit for sale in a strata scheme and negotiates a purchase price with the real estate agent, which is within her budget in light of her pre-approved finance.

The real estate agent forwards a “sales advice” to Christine’s solicitor, who advises her to obtain a strata report before signing the contract for the purchase of the property.

The strata report is prepared by an independent inspector who, with the vendor’s consent, accesses the strata scheme’s records held by the strata manager.

The strata records are inspected and a report is provided to Christine shortly thereafter.

Unfortunately, the report reveals a number of problems.

Firstly, the financial affairs of the strata scheme are concerning. The “administration fund”, which holds strata levies, paid by the unit owners, is alarmingly low. This means that some owners of the units have not paid their strata levies. There are therefore insufficient funds available to pay the upcoming home insurance premiums for the unit complex.

Secondly, the strata records indicate that there have been no recent pest treatments and there are also quotes for repairs to the roof and guttering that have not been actioned. An examination of the “sinking fund”, which holds a portion of the strata levies to pay for the maintenance of the units, indicates that there are also insufficient funds available.

Given the financial state of the “owners corporation”, Christine is concerned that these issues regarding insurance and the maintenance of the units may continue to be problematic in the future.

Christine decides to “keep shopping” for the right investment for her.

When considering whether to buy-into a strata scheme it is also important to investigate whether the “10 year capital works plan” has been implemented and whether there are any specific “by-laws” which may affect your use of the property, as well as to obtain legal advice generally regarding the terms of the proposed sale contract.

This fictional column is not legal advice.