Units and townhouses now account for roughly one in three residential property transactions in Australia's major cities. Affordability pressure has pushed more first home buyers toward attached dwellings, and downsizers are trading large lots for low-maintenance living. What many buyers discover too late is that the advertised price does not reflect the true cost of ownership. Strata obligations, building defects, and underfunded reserves can add tens of thousands of dollars to what you actually pay in the first few years.

The checks below are not optional extras. They are the difference between a sound purchase and an expensive surprise.

## What Body Corporate Records Actually Tell You

Every strata scheme in Australia is governed by a body corporate (called an owners corporation in Victoria and New South Wales). The body corporate manages shared property, arranges insurance, and collects levies from lot owners. Before you exchange contracts, you are entitled to request a body corporate records search, sometimes called a strata inspection report.

A thorough search covers meeting minutes from the past two to three years, financial statements, levy notices, insurance certificates, maintenance schedules, and any correspondence about disputes or defects. Reading these documents carefully tells you far more than the real estate agent's brochure ever will.

Look for patterns in the minutes. Repeated agenda items about the same roof leak, lift malfunction, or waterproofing failure indicate unresolved problems. Contentious AGMs, proxy battles over spending decisions, and long-running disputes between lot owners signal a scheme that will cost you time and stress beyond money.

## Sinking Funds: The Reserve That Protects You or Doesn't

The sinking fund (called a capital works fund in New South Wales) is the body corporate's savings account for major future expenditure. Roof replacements, facade repairs, lift refurbishments, driveway resurfacing, and pool equipment all come from this fund.

A well-managed scheme commissions a sinking fund forecast every five to ten years. This independent report projects the expected life of building components and calculates how much the fund should hold at any given point. When you review the body corporate financials, compare the current fund balance against the most recent forecast.

A fund sitting at 30 to 40 percent of its projected target is a warning sign. It means either levies have been kept artificially low to attract buyers or the scheme has deferred maintenance for years. Both outcomes eventually produce the same result: a special levy.

## Special Levies and What They Signal

A special levy is a one-off charge raised when the sinking fund cannot cover an unexpected or urgent expense. They are legal, they are common, and they can arrive with very little notice.

Special levies in larger complexes have ranged from a few thousand dollars per lot to well over $50,000 in cases involving cladding remediation or structural repairs. The body corporate records search will show any levies that have already been struck. What it cannot always tell you is whether a levy is being discussed but not yet formally resolved.

This is why reading the minutes matters. If the committee has been discussing a major repair for twelve months without resolution, a special levy is likely being deferred until after the AGM, or until after the current owners sell. Ask the body corporate manager directly whether any expenditure is under consideration that has not yet been voted on.

## Building Defects in Newer Complexes

Counter-intuitively, newer buildings often carry higher defect risk than older ones. A 2021 survey by the Owners Corporation Network found that more than 70 percent of strata owners in buildings constructed after 2000 reported defects, with waterproofing and fire safety systems the most frequently cited categories.

In New South Wales, the Residential Apartment Buildings Act 2020 gives the Secretary of the Department of Customer Service powers to order developers to rectify defects before an occupation certificate is issued. Queensland introduced similar reforms under the Building Industry Fairness Act. Despite these frameworks, defects still emerge after handover, and the cost of pursuing a developer through the tribunal or courts falls on the body corporate.

For buildings under ten years old, ask whether any defect proceedings have been commenced, whether the developer is still solvent, and whether a building bond was lodged. In New South Wales, a two percent building bond is mandatory for residential apartment buildings over three storeys, held in trust for two years and released only after an independent inspector confirms defects have been rectified.

## Cladding: Still a Live Issue

The Grenfell Tower fire in 2017 prompted audits of combustible cladding across Australia. By 2026, remediation is well advanced in Victoria and New South Wales, but it is not complete. Buildings still on state government cladding registers carry real financial and insurance risk.

Before purchasing any unit in a building constructed or refurbished between 1990 and 2015, check the relevant state register. Victoria maintains the Cladding Safety Victoria register. New South Wales runs the Cladding Product Safety Panel. Queensland has the Safer Buildings program. If a building appears on a register and remediation has not been completed, insurance premiums will be elevated and resale will be constrained until the work is done.

If the body corporate has already completed remediation, confirm it was done under a proper building permit with a licensed contractor, not a cosmetic fix that will not satisfy insurers.

## Waterproofing Failures

Waterproofing is the single most common defect category in Australian strata buildings. Basement car parks, balconies, bathrooms, and rooftop terraces all rely on membrane systems that degrade over time. A failed membrane in a basement can cause concrete spalling, steel corrosion, and lift pit flooding. A failed balcony membrane causes water ingress into the unit below.

Repairs are expensive. Basement waterproofing in a mid-size complex can cost $200,000 to $500,000 depending on the extent of damage. Balcony remediation typically runs $15,000 to $40,000 per balcony when structural repairs are included.

During your inspection, look for efflorescence (white salt deposits on concrete), rust staining, peeling paint on ceilings below wet areas, and any musty odour in basement levels. These are not cosmetic issues. Commission an independent building inspection from a qualified building inspector, not just a pest and building inspection focused on individual lots.

## Insurance: What the Policy Actually Covers

Body corporate insurance covers the building structure and common property. It does not cover your furniture, personal contents, or improvements you make to the lot. More importantly, the adequacy of the sum insured matters.

Request a copy of the current insurance certificate of currency and check the sum insured against the replacement cost of the building. Underinsurance is common in strata schemes where levies have been kept low. If the building is destroyed and the sum insured is 60 percent of replacement cost, every lot owner bears a proportional shortfall.

Also check the insurer. Some body corporates have shifted to second-tier insurers following premium increases after weather events. Check that the insurer is APRA-regulated and that the policy covers strata title specifically, not just a generic commercial property policy adapted for the purpose.

## Pet Rules and Short-Term Letting Limits

These two issues generate more post-purchase disputes than almost any other strata matter.

Pet rules vary by scheme. Some body corporates have blanket prohibitions. Others allow pets by application with conditions. High Court decisions in recent years have limited the ability of body corporates to impose blanket bans in some states, but the practical reality is that an unfriendly committee can make pet ownership difficult even where it is technically permitted. Read the by-laws before you buy, not after.

Short-term letting through platforms like Airbnb is regulated at both state and scheme level. New South Wales introduced a statewide framework in 2021 allowing short-term letting but permitting body corporates to pass by-laws restricting it in buildings where the host is not present. Queensland has no statewide cap but allows body corporates to restrict letting in their by-laws. Victoria allows body corporates to ban short-term letting entirely by special resolution.

If you are purchasing as an investor and intend to short-term let, verify the current by-laws and the sentiment of the committee. A by-law change requires a special resolution (75 percent of votes in most states), but sentiment can shift quickly in a scheme where owner-occupiers outnumber investors.

## Planned Works and Their Levy Impact

The body corporate records search should include any approved or proposed capital works. Approved works are funded and contracted. Proposed works are still in the planning stage but will require levy contributions once approved.

Ask for the most recent sinking fund forecast and compare the projected levy schedule against your budget. A forecast showing levies increasing by 15 to 20 percent per year for the next five years is not unusual in an older building with deferred maintenance. Factor those increases into your borrowing capacity assessment, not just the current levy amount.

For buildings over twenty years old, a pre-purchase building condition report from a structural engineer is worth the $800 to $1,500 cost. It identifies latent defects that the body corporate may not yet have formally acknowledged.

## Putting the Numbers Together

The advertised price of a unit or townhouse is the starting point, not the full picture. Current levies, the sinking fund balance relative to its forecast, pending or likely special levies, insurance adequacy, and the cost trajectory of any identified defects all affect what you will actually spend over the first five years of ownership.

PropertyLens analyses suburb-level data including days on market, supply pipeline, and comparable sales to give buyers a grounded view of price positioning before they make an offer. Understanding the strata obligations attached to a specific lot is a separate layer of due diligence that sits alongside market analysis, not instead of it.

For any strata purchase, engage a solicitor or conveyancer experienced in strata law for your state, commission an independent strata records search from a specialist firm (not the selling agent's recommended provider), and obtain a building inspection report that covers common property as well as the individual lot. These steps typically cost $1,500 to $3,000 in total. The cost of skipping them can be measured in five or six figures.

Visit [propertylens.au](https://propertylens.au) to analyse comparable sales and suburb trends before you make an offer on a strata property.