How to Read a Strata Report: A Complete Guide for Australian Buyers

If you are buying a unit, apartment, or townhouse in Australia, a strata report is one of the most important documents you will review before committing to the purchase. Unlike a building inspection that examines the physical condition of the property, a strata report reveals the financial health, management quality, and legal standing of the entire owners corporation (body corporate). A problematic strata scheme can cost you tens of thousands of dollars in unexpected levies — or trap you in a building with unresolved defects and bitter disputes.

This guide explains exactly what a strata report contains, the key sections to review, the red flags that should make you think twice, and how to order one at the right time.

What Is a Strata Report?

A strata report (also called a strata inspection report or body corporate search) is a professional review of the records maintained by the owners corporation of a strata-titled property. It is prepared by a strata search company that physically inspects the strata records — including financial statements, meeting minutes, by-laws, insurance certificates, and correspondence — and produces a written report summarising the key findings.

The report does not assess the physical condition of the building. That is the role of a building inspection. Instead, a strata report tells you how well the building is managed, whether it is financially healthy, and whether there are any legal or structural issues that the owners corporation is dealing with.

Key Sections of a Strata Report

A comprehensive strata report covers the following areas:

1. Financial Statements

The financial statements show the owners corporation's income and expenses, current bank balances, and any outstanding debts. You want to see that the scheme is operating within its budget, collecting levies on time, and not running a deficit. A scheme that is consistently spending more than it collects is heading for trouble — usually in the form of levy increases or special levies.

2. Administration Fund and Sinking Fund (Capital Works Fund)

Strata schemes maintain two main funds:

• Administration fund: Covers day-to-day operating expenses such as insurance, cleaning, gardening, building management, and minor repairs.
• Sinking fund (capital works fund): A reserve fund for major capital works such as roof replacement, lift refurbishment, repainting, waterproofing repairs, and plumbing upgrades.

The sinking fund balance is one of the most critical numbers in the report. A well-managed scheme will have a sinking fund that is adequately funded according to a 10-year capital works plan. If the sinking fund is underfunded, the owners corporation will need to raise a special levy to cover upcoming works — and as a new owner, you will be required to contribute.

3. Meeting Minutes

The minutes from Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs) reveal what issues have been discussed, what decisions have been made, and what disputes or complaints have been raised. Pay close attention to recurring topics — if the same maintenance issue appears in meeting after meeting without resolution, it suggests poor management or insufficient funding.

4. By-Laws

By-laws are the rules that govern life in the strata scheme. They cover matters such as noise, pets, parking, renovations, short-term letting (such as Airbnb), and use of common property. Review the by-laws carefully to ensure they align with how you intend to use the property. For example, if you plan to rent the property on Airbnb, check whether the by-laws restrict or prohibit short-term letting.

5. Insurance

The owners corporation is required to hold building insurance for the common property and the building structure. The strata report should include a copy of the current insurance certificate showing the insurer, sum insured, and policy expiry date. Verify that the sum insured is adequate for the replacement cost of the building — underinsurance is more common than most buyers realise.

6. Building Defect Reports and Rectification

For newer buildings (typically under 10 years old), check whether any defect reports have been lodged against the builder or developer. Many newer strata buildings in Australia have experienced significant defect issues including waterproofing failures, cracking, fire safety non-compliance, and cladding problems. The report should disclose any ongoing defect claims, rectification works in progress, or outstanding builder warranties.

7. Special Levies

A special levy is an additional one-off payment imposed on all lot owners to fund a specific expense that the administration or sinking fund cannot cover. Special levies can range from a few hundred dollars for minor works to $20,000 or more per lot for major structural repairs. The strata report will disclose any pending, proposed, or recently passed special levies.

8. Disputes and Litigation

The report should disclose any current or pending legal disputes involving the owners corporation — whether with individual lot owners, the building manager, contractors, or the original developer. Active litigation is a significant red flag as it can be expensive, protracted, and disruptive.

Red Flags to Watch For

The following issues in a strata report should prompt serious caution:

How to Get a Strata Report

You do not order a strata report from the owners corporation directly. Instead, you engage a strata search company — a specialist firm that inspects the strata records and prepares the report for you.

Your conveyancer can recommend a strata search company and arrange the report as part of their due diligence process. Some conveyancers include the strata search in their standard service; others charge it as a disbursement.

When to Order a Strata Report

Ideally, you should order the strata report before exchanging contracts. This allows you to factor any findings into your purchase decision and negotiating position without being bound by the contract. If that is not possible (for example, at auction), order the report as early in the process as you can — during the cooling-off period at the latest.

For auction purchases, where there is no cooling-off period, obtaining the strata report before auction day is essential. The cost of a strata report is a small price to pay compared to the risk of discovering a $15,000 special levy after you have already committed to the purchase.

Strata Report vs Building Inspection

These two reports serve different purposes and you should get both when buying a strata property:

• Strata report: Reviews the financial, legal, and management records of the owners corporation. Tells you about the scheme's health.
• Building inspection: Physically inspects the property for structural defects, moisture, pest damage, and maintenance issues. Tells you about the unit's condition.

A building inspection of a unit will typically be limited to the interior of your lot and any accessible common areas. It will not reveal financial or management issues — that is what the strata report is for.

Related Resources

• Property Due Diligence Checklist — Everything to check before buying
• Contract Red Flags Guide — Warning signs in property contracts

This guide is for general information only and does not constitute legal or financial advice. Strata laws and terminology vary by state. Always consult your conveyancer or solicitor for advice specific to your situation.