What is a Strata Report? What You Should Know Before Buying a Strata Property

Buying a property in Australia can be confusing and overwhelming. So many documents and processes are involved, and it can feel like you’re buried under a mountain of paperwork. But if you’re buying a strata-titled property – such as an apartment, townhouse, or unit – there’s one document you shouldn’t overlook: a strata report. 

A strata report is a detailed document that provides a behind-the-scenes look at the property’s financial health, legal standing, and maintenance history so you know what you’re getting into before you sign on the dotted line.

In this article, we’ll explore everything you need to know about strata reports, including what they cover, how to obtain one, and what to look for when reviewing them.

If you’d like a shortcut, conveyancers can often order a strata report. Check out the top 10 list of local conveyancers for strata schemes in your area:

• Best Conveyancer Sydney
• Best Conveyancer Melbourne
• Best Conveyancer Brisbane

In the meantime, here’s everything you need to know.

What is a Strata Property?

Before diving into strata reports, let’s look at a strata property. The word strata comes from the Latin word ‘stratum’, which basically means to lay something down. Today, we say “strata” when talking about layers of ownership.

A strata property has layers of ownership because it’s a type where you own an individual lot, such as an apartment, unit or townhouse, within a larger property. You also own part of the property’s shared areas, like the hallways, stairwells, roof, swimming pool, gym, or lobby. This gives you a second ‘layer’ of ownership, so we refer to these as strata properties.

Unlike standalone homes, a strata property has a shared financial responsibility to maintain the common areas. Owners pay fees (strata fees or strata levies) to the owner’s corporation (also known as owners corporations or body corporations in some states). The owner’s corporation or body corporate uses the money to keep the building and shared areas. They ensure the property is in good condition for all owners and residents.

What is a Strata Report?

To maintain the property, the owner’s corporation meets regularly and keeps records of its operations. They discuss topics such as:

• Financial health: For example, the current strata fees for owners and whether these fees are sufficient for property management or should be raised.
• Maintenance history: Including resolved and unresolved building defects or upkeep.
• By-laws governing the property.
• Records of disputes, meetings, and other management correspondence.

A strata report is a complete form of a full review of the strata records kept by the owner’s corporation. It gives you an inside look at the property’s overall health and governance and uncovers any red flags that aren’t obvious on the surface. Checking a strata report is vital to due diligence when buying a strata property.

Buyer’s tip: To better understand the details and legal processes involved in buying property, read our article “What Does a Conveyancer Do?“

Components of a Strata Report

A well-prepared strata report should give you information on a range of topics, including:

Financial Health

• Quarterly Levies: Also known as strata fees, levies are the regular fees you’ll pay as an owner to cover maintenance and management of the property’s shared areas.
• Sinking Fund Balances: The property’s savings account for big repairs or upgrades.
• Special Levies: Extra fees charged to owners for unexpected repairs or urgent work.

Building Information

• Maintenance Records: A detailed history of past repairs and any work planned for the future.
• Building Defects: Any unresolved defects will likely mean future costs or legal issues for owners.

Legal and Compliance Matters

• Disputes: Any conflicts between lot owners, management, or external parties.
• By-laws: Rules that govern the community’s lifestyle, including restrictions on pets or renovations.

Governance and Correspondence

• Owners Corporation Meetings: Meeting minutes reveal what the corporation has discussed and provide insights into their decision-making.

Insurance Details

• Insurance Coverage: Details on whether the building has adequate emergency insurance coverage.

The report includes critical components of the property’s health and how well it is being managed. This way, you

can spot warning signs that could cost you a lot of money if you buy into the property.

Why Obtain a Strata Report?

A strata report is like asking a mechanic to look at the engine when buying a car. It gives you transparency about whether the strata communities the property is right for you.

If you’re a first-time homebuyer looking for a place to live, unexpected costs such as special levies can blow out your budget. If you’re buying an investment property, a better understanding of the property’s health and management helps you maximise rental yield and return on investment.

To give you a better understanding of how a strata report will help you, let’s take a look at a hypothetical case study example.

Case Study: What Can Go Wrong If You Skip the Strata Report

Damian bought a Sydney apartment without getting a strata report. He planned to renovate the kitchen by knocking down the kitchen wall and putting in a breakfast bar. However, once he moved in, he discovered there were restrictions on renovations that prevented him from altering the apartment’s structure. Worse still, he had to pay a $10,000 special levy for structural repairs to the building in the building inspection’s first six months.

If Damian had obtained a strata report, he would have known the building needed structural repairs and understood the renovation restrictions. He could have negotiated the property price or avoided it altogether.

Buyer’s tip: A pre-settlement building inspection report and a strata report can help you avoid nasty surprises when you move in. Discover why you need a pre-settlement inspection in our Complete Guide for Homebuyers.

How to Obtain a Strata Report

Getting a strata report is a pretty straightforward process. You can do it in two ways:

Get a Professional To Do It

This is the easiest and most common way of buying a strata report. You hire a professional strata searcher, or a company title conveyancer who can obtain the strata report for you. The main points to consider when hiring a professional are:

• Cost: Costs vary, but you can expect to pay between $300 and $500.
• Convenience: Professionals handle the review of strata records and provide a detailed, completed report.
• Experience: A professional gives you peace of mind if you’ve never read a strata report and need help figuring out what to look for.
• Timeframe: Reports are often available immediately (you can download them), especially if the property has been previously inspected.

Do It Yourself

To save money, you can inspect the strata records yourself. Use the real estate agent selling the property to get the strata manager’s contact details or the owner’s corporation’s secretary. You’ll need the seller’s permission (the agent can ask on your behalf), and you must pay a fee to get other records from the owner’s corporation.

Here are a few points to consider before you go the DIY route:

• Cost: Accessing records directly is often cheaper, but you’ll still pay a fee in most cases.
• Effort: You’ll need to navigate and interpret the strata records, which will take time and knowledge.

Choosing between these two reporting methods depends on your budget and whether you feel comfortable reading and interpreting the report. We recommend using a professional for peace of mind if you’re unsure.

Key Elements to Look for in a Strata Report

Reviewing a strata report is all about understanding the property you’re buying into. Here are the key areas to focus on and why they matter:

• Sinking Fund Balances: Check for enough money for upcoming repairs, like fixing the roof or replacing lifts. You might be asked to pitch in extra through special levies if the fund runs low.
• Special Levies: Check for any planned or recently imposed levies. These indicate the building is under financial pressure, which will cost you money if you’re an owner.
• Maintenance Records: Look for repair delays or recurring issues that need to be fixed appropriately, like plumbing or structural defects. These reveal whether the property is being well cared for or neglected.
• By-laws: Make sure the by-laws align with your lifestyle (e.g., whether you want pets or plan to renovate). Otherwise, you’ll end up clashing with the owner’s corporation or your neighbours.
• Disputes and Legal Issues: Check for ongoing conflicts between owners or management. Constant disputes or legal proceedings mean poor management or a toxic living atmosphere.
• Insurance Coverage: Ensure the building is adequately insured in emergencies, like fires or floods.

This checklist will help you uncover any red flags before buying the property. It’ll give you a clearer picture of what it’s like to live there and help you avoid nasty surprises when you move in.

Conclusion

A strata report is a must-have if you’re thinking about buying a strata property, such as a unit, apartment or townhouse. It gives you a behind-the-scenes look at managing the property’s shared areas, like the roof, stairwells, and amenities. Given that you own part of these shared areas, it’s worth digging deeper before you commit to buying.

A strata report gives you a better understanding of the property’s financial health, maintenance history, and management structure. If you find a red flag, you can use this to negotiate the price or avoid the property altogether. The report might take time, effort and money, but it’s a small investment that could save you in the long run.

Check out the top 10 list of local conveyancers for your area:

• Best Conveyancer Sydney
• Best Conveyancer Melbourne
• Best Conveyancer Brisbane

Top 10 FAQs About Strata Reports

What is a strata report?

A strata report shows you the records of a strata scheme. It gives you insights into the property’s financial health, maintenance history, by-laws, and potential legal issues, making it a vital tool for buying a strata-titled property.

Why do I need a strata report before purchasing a property?

A strata report helps you identify potential risks, such as low sinking funds, unresolved building defects, or restrictive by-laws, so you can make an informed decision and avoid unexpected costs after you buy.

What information does a strata report include?

Key details include:

• Financial health: Quarterly levies, sinking fund balances, and special levies.
• Maintenance history: Records of past repairs and plans for future work.
• By-laws: Rules governing pets, renovations, parking, and more.
• Disputes: Any conflicts among owners or with management.
• Insurance coverage: Details on the building’s insurance policies.

How do I obtain a strata report?

You can hire a professional strata inspector for a detailed report or access the strata records through the owner’s corporation. Professional reports are more convenient, while DIY access can be more cost-effective.

What are sinking funds, and why are they important?

A sinking fund is a reserve of money collected through quarterly levies to cover significant repairs and long-term maintenance of common property. A healthy sinking fund reduces the risk of unexpected special levies.

What are common red flags to watch for in a strata report?

Be cautious of:

• Low fund balances.
• Unresolved building defects.
• Frequent disputes among residents.
• High turnover of strata managers.

Do strata reports differ between Australian states?

Yes, there are differences in strata management regulations across states. Terminology is also slightly different in each state. For example, the owner’s corporation in New South Wales is usually called body corporate in Queensland.

How much does a strata report cost?

A professional strata report typically costs between $300 and $500, depending on the provider and the complexity of the property. DIY access to records is cheaper but requires more effort and time.

Can I negotiate the property price based on the findings of the strata report?

Find building defects, upcoming special levies, or a low fund balance. You can use these as leverage to negotiate a lower purchase price or ask the seller to address issues before settlement.

What happens if I don’t get a strata report?

You risk buying a property with a hidden issue, such as financial instability, major upcoming repairs, or restrictive by-laws. These might cost you a lot of money or restrict your lifestyle once you’re an owner, leading to potential buyer regret. That’s why obtaining a strata report is always worth it before you buy a strata-titled property.

“When purchasing a strata property, a thorough review of the strata report is essential. It provides crucial insights into the property’s financial stability, maintenance history, and legal standing. As conveyancers, we often uncover issues like unresolved building defects, insufficient sinking funds, or restrictive by-laws that can significantly impact your investment. Getting a strata report early can help you negotiate better terms or avoid costly surprises down the track.”

— Jane Wilson, Licensed Conveyancer