When buying an Australian Strata Property, many buyers focus on the purchase price, location, financing costs and regular Strata Levy.
One issue that is easily overlooked, however, is that even if an apartment appears to have no problems when it is purchased, the buyer may suddenly receive a Special Levy for tens of thousands of Australian dollars after settlement.
For example, the building may be dealing with water leaks through the external walls, repairs to building defects, rectification of the fire safety system, lift replacement or other major maintenance of common facilities. If the existing maintenance funds are insufficient, the Owners Corporation may decide to charge all owners additional amounts.
More importantly, even if these problems existed before you purchased the property, you may still need to bear the related costs if the Special Levy is formally approved after you become an owner.
Why Might Buying One Apartment Make You Responsible for Repairs to the Entire Building?
After purchasing a Strata Property, every lot owner automatically becomes a member of the Owners Corporation.
The Owners Corporation manages common areas, arranges building repairs, maintains shared facilities and determines the related funding arrangements. An owner’s responsibilities are therefore not limited to problems inside their own apartment.
When the roof, external walls, common pipes, electrical wiring, lifts, underground car park or other common facilities require repairs, all owners will generally need to share the related costs.
The proportion payable by each apartment is generally calculated according to its Unit Entitlement. A property with a higher Unit Entitlement will generally need to bear a higher proportion of the Strata Levy and any Special Levy.
This is why buyers cannot focus only on the condition of the apartment itself; they must also understand the maintenance and financial position of the entire building.
Why Might the Regular Strata Levy Be Insufficient?
Many buyers ask:
“I already pay strata levies every month. Why might I be asked to pay an additional amount later?”
The reason is that Strata Levies are generally allocated between different funds, including the Administrative Fund and the Capital Works Fund.
The Administrative Fund is primarily used for day-to-day operations such as strata management, cleaning of common areas, insurance and general maintenance.
The Capital Works Fund is primarily used for long-term, substantial repair projects such as external wall repairs, roof maintenance, lift replacement and upgrades to shared facilities.
If a building has not adequately planned and funded future major repairs over the long term, the balance of the funds may be insufficient when substantial works arise. The Owners Corporation can then raise additional funds from all owners through a Special Levy.
For example, a building requires external wall and waterproofing works costing a total of AUD 2 million, but the Capital Works Fund currently holds only AUD 500,000. The remaining AUD 1.5 million may need to be borne collectively by all owners.
If the building contains 50 apartments, each owner may need to pay an additional amount approaching AUD 30,000.
A lower Strata Levy therefore does not necessarily mean a lower cost of ownership. Some buildings have lower management fees at the outset but, because they have not accumulated sufficient funds for repairs over time, may face higher Special Levies in the future.
How Can You Assess the Risk of a Special Levy Before Buying?
Many risks of a Special Levy can be identified through enquiries before the contract is signed.
When purchasing a Strata Property, a buyer should generally review the Strata Report, which may contain Owners Corporation meeting minutes, fund balances, maintenance plans, discussions of building defects and arrangements for future major works.
It is important to note that major repairs do not always appear as a Special Levy from the outset.
For example, a building may already have identified water leaks through the external walls but still be at the stage of:
- discussing repair options;
- obtaining quotations for the works;
- engaging an expert to inspect the building;
- assessing the repair costs.
Although no charge has yet been formally approved at that stage, this information will often already indicate the risk of future additional expenditure.
The NS Legal team can help buyers review the relevant property documents before purchasing an apartment and identify potential risks, including by analysing the Strata Report, reviewing repair records and considering possible responsibility for costs in light of the contract terms.
Section 184 Certificate: What Is Its Purpose?
A Section 184 Certificate is an important document when purchasing a Strata Property in NSW.
The certificate can generally show:
- the current strata levies;
- any Special Levies;
- whether the lot has any unpaid levies;
- the relevant financial arrangements.
It is important to note, however, that a Section 184 Certificate reflects the information available on the day it is issued.
It cannot guarantee that no new developments will arise afterwards.
For example, the building may have no Special Levy when the Certificate is issued, but the Owners Corporation may subsequently hold a meeting, decide to undertake major repairs and formally approve a new levy. That new Special Levy may still affect the vendor and buyer.
Although a Section 184 Certificate is important, it therefore cannot fully replace a comprehensive review of the meeting minutes, maintenance plans and contract terms.
Why Should You Check Again Before Settlement If Enquiries Were Made Before Signing?
Several weeks or even longer may pass between signing the contract and completing settlement. During that period, the Owners Corporation may still hold a meeting, approve new repairs or decide to impose a new Special Levy.
A buyer therefore cannot rely solely on a report obtained when the contract was signed.
In an actual property transaction, a buyer obtained the Section 184 Certificate when the building did not yet have a Special Levy, but the Owners Corporation approved a new charge one week before settlement.
Promptly updating the relevant documents, reviewing the meeting minutes again and analysing the contract terms can help determine whether the vendor or the buyer is responsible for the charge and prevent the buyer from bearing unnecessary additional expenditure after settlement.
This also demonstrates that a property transaction involves more than confirming the price and condition of the property; it also requires attention to the allocation of responsibility before and after settlement.
Who Bears a Special Levy: the Vendor or the Buyer?
Many buyers ask:
“The repair issue clearly existed before I bought the property. Why might I have to pay after settlement?”
Responsibility for a Special Levy cannot be determined simply by when the repair issue arose or by when the payment notice was received.
It is generally necessary to consider:
- when the Special Levy was formally approved;
- when the amount falls due;
- what the contract for sale provides;
- how the settlement adjustment provisions apply.
If the Special Levy has already been formally approved, the buyer can require the vendor to bear it at the contracting stage, or negotiate a price adjustment or allocation of payment responsibility through the contract.
If the repair project is only under discussion and the Special Levy has not yet been formally approved, a charge approved in the future after the buyer completes settlement and becomes an owner may need to be borne by the buyer.
Advance enquiries and contract review are therefore very important when purchasing a Strata Property.
Can You Refuse to Pay a Special Levy Received After Settlement?
Generally, if the Special Levy has been passed in accordance with the applicable requirements and you have become an owner, it will be binding on you.
You cannot simply refuse to pay even if you did not know about the issue when purchasing the property or did not participate in earlier Owners Corporation meetings.
Late payment may result in additional interest, recovery costs or even further legal proceedings.
If it is difficult to pay the amount in one instalment, you can promptly contact the Strata Manager or Owners Corporation to ask whether instalment payments can be arranged.
A Reminder from NS Legal: Buying an Apartment Is About More Than the Apartment Itself
When purchasing an Australian apartment, buyers need to consider not only the purchase price, location, floor plan and regular strata costs, but also the long-term maintenance position of the entire building.
Understanding the Strata Report, meeting minutes, maintenance plans, fund balances and potential Special Levy risks in advance can help a buyer assess future ownership costs more comprehensively and avoid unexpected substantial expenses after settlement.
If you are considering purchasing an Australian apartment, the NS Legal team can assist with property-document analysis, contract-risk review and support throughout the transaction, helping you understand more clearly the responsibilities and risks that may arise when purchasing a Strata Property.
Frequently Asked Questions
1. The Agent Says There Is Currently No Special Levy. Why Do I Still Need to Review the Meeting Minutes?
Major repairs may already be under discussion even though a levy has not yet been formally approved. Meeting minutes can generally reveal potential future expenditure earlier than a levy notice.
2. The Building Problem Arose Before I Bought. Why Might I Have to Pay After Settlement?
The key issue is not only when the problem arose, but when the Special Levy was formally approved. If the levy is approved only after you become an owner, you may need to bear the related cost.
3. If I Discover That the Building Is Planning Repairs, Can I Ask the Vendor to Reduce the Price?
You can negotiate. If the parties reach agreement, the price adjustment or allocation of responsibility for costs should be stated clearly in the contract.
4. If the Strata Report Identifies Building Defects, Does That Mean I Definitely Should Not Buy?
Not necessarily. Before deciding whether to proceed, you should investigate the severity of the defects, estimated repair costs, fund balances, the proposed solution and whether a price adjustment could reduce the risk.
Disclaimer: This article provides general information only and does not constitute legal, property or investment advice for any person’s circumstances.
