When purchasing strata property in Sydney, it is important to understand not only the appeal of location, lifestyle and immediate liveability, but also the financial obligations that ownership entails. Among these considerations are special levies. While routine strata levies (covering administrative costs and capital works expenses) cover the maintenance and day-to-day running of the building, special levies are different: they are additional, often significant, contributions that owners are required to make when unexpected or larger-scale expenses arise. For property buyers, these can alter the financial equation substantially. In this article, we examine what special levies are, how to approach them as a buyer, and why careful investigation is essential before committing to a purchase.
What are Special Levies?
In New South Wales, the management of strata buildings is governed by the Strata Schemes Management Act 2015. Each strata scheme operates a capital works fund and an administrative fund. Regular strata levies, paid quarterly by lot owners, are used to ensure that both funds remain sufficiently resourced to cover predictable costs over the medium and long term.
Special levies represent items outside the ordinary budget. They are imposed when the existing funds are inadequate to cover urgent or essential building works, remediation or capital expenditure. Examples might include:
- Structural repairs such as concrete cancer or subsidence.
- Remedial works relating to water ingress or roof replacement.
- Fire safety compliance upgrades demanded by council.
- Remediation of non-compliant cladding following regulatory changes.
The size of these levies can vary widely, from a few thousand dollars per lot to six-figure contributions in some extreme cases. For many buyers, the difference between an attractive purchase and a financial burden lies in the ability to identify special levies early.
Can You Simply Budget for Them and Reduce the Purchase Price Accordingly?
On the surface, one might consider subtracting the cost of the anticipated special levy from the purchase price, thereby treating the special levy as an offsetting expense. In practice, this approach is problematic. Sydney’s property market, particularly in sought-after suburbs in areas such as the Inner West, Eastern Suburbs and Lower North Shore, is competitive. Vendors rarely adjust their price expectations in direct correlation with future levies, particularly when multiple buyers are competing. Indeed, it will not be a level playing field with some buyers more bullish about the special levy implications than others.
Furthermore, the presence of a special levy often signals more than a simple financial obligation. It may raise question marks about the underlying integrity of the building.
Implications for Building Integrity and Future Levies
The existence of a special levy should serve as a red flag, prompting closer scrutiny of the property’s condition. While standard levies represent a building’s proactive approach to long-term capital works planning, special levies usually arise from chronic underfunding of the strata scheme or deferred maintenance.
Key questions that buyers should raise include:
- What is the root cause of the special levy? Is it preventative, or is it addressing a fundamental issue that has been neglected?
- Could further special levies follow? For instance, rectifying water damage without identifying the source of the ingress may result in repeated cycles of cost.
- Does the works program address compliance or safety concerns? Items such as cladding, asbestos removal or fire safety are not negotiable, and owners must comply irrespective of cost.
In our experience, levies for high-cost remediation works often signal that more special levies may follow.
Investigating Special Levies in More Detail
When examining the presence of special levies, Sydney buyers should consider not only the immediate cost but the strategic decision-making of the strata committee:
- Quality of the proposed solution: Has the strata committee chosen the best long-term method of remediation, or opted for the cheapest short-term fix to keep contributions lower?
- Selection of contractors: Was a competitive tender process conducted, or has the strata engaged the lowest-cost contractor without rigorous vetting of their credentials?
- Standards and guarantees: Will the works be delivered to industry standards, and is there a warranty or guarantee in place, particularly important in cases such as waterproofing, facade cladding or major structural works?
- Impact on liveability: Even if the works are necessary and the contract is sound, one must consider the lifestyle consequences of living through major remedial works. The dust, noise, restricted access and inconvenience may undermine the reason for buying in the first place, particularly in apartments intended for immediate occupation.
These questions determine whether paying the levy is simply a cost of responsible building ownership, or an indicator that the property may not represent sound long-term value.
The Value of a Strata Report
We strongly recommend that every buyer of a Sydney strata property obtains a comprehensive strata report. In relation to investigating special levies, a strata report should reveal:
- The details of the special levies that have been struck including the purpose and exact amounts.
- The history of any past special levies and how the building committee responded.
- Minutes from strata meetings, showing whether issues were hotly contested or unanimously agreed upon.
- Whether building consultants were engaged to provide reports into any defects to be covered by the special levies and the contents of such reports.
- The adequacy of the sinking fund forecast and whether future special levies are anticipated.
Beyond any statements by the selling agent, this report is usually the first place where potential red flags around deferred maintenance, poor governance or lack of planning become apparent.
Independent Building Inspections
In addition to the strata report, we recommend commissioning an independent building inspection. Whilst strata records provide committee perspectives, an independent building consultant assesses the physical integrity of the property. Such inspections may reveal:
- Verification of the extent of the building’s problems.
- Whether proposed remediation works actually target the root issue.
- If the building suffers from additional risks not yet costed into future levies.
- Whether corner-cutting solutions may be compromising long-term safety.
This independent viewpoint can confirm whether the special levies represent prudent asset protection, or whether they suggest more systemic concerns.
Why Consider Engaging a Buyers’ Agent?
Navigating strata complexities, particularly surrounding special levies, is not straightforward for most property buyers. Buyers’ agents who specialise in the Sydney property market offer both the expertise and the impartiality to assess these issues accurately. At Buyer’s Domain, we routinely examine strata records and are well placed to assess what is to be expected and what should be avoided.
We also provide negotiation strategies where levies are imminent, helping buyers factor these costs into the decision-making process, while ensuring they are not blindsided by obligations that vendors have not fully disclosed. Crucially, buyers’ agents evaluate whether the property still represents a sound investment once the totality of ownership costs is known.
Engage, Accept or Avoid: Making the Right Choice
Ultimately, the decision of whether to proceed comes down to three pathways:
- Engage: Proceed with caution but engage with your solicitor, conduct full due diligence, and recognise the levy as a necessary cost of ensuring the building remains structurally sound and compliant. For any special levies already struck, obtain advice from your solicitor as to the extent of any special levies that will be paid by the vendor versus the extent of the special levies that will be your responsibility.
- Accept: Factor the levy into your budget and lifestyle plans. If the works are necessary, well-managed and guarantee long-term building integrity, acceptance can lead to a stronger and safer investment. Particularly in Sydney’s high stakes property market where sought after properties are hard to come by, it may not be so simple to walk away and find another similar property.
- Avoid: Walk away where the special levies signal deeper issues of neglect, poor governance, high costs, inadequate planning, or repeated short-term fixes. This is particularly prudent when there is evidence that current levies will not be the last.
In Sydney, where competition for property is fierce, buyers may feel pressured to overlook such red flags. However, in our experience the cost of ignoring levies can be substantial, both financially and in terms of liveability.
Conclusion
Special levies are more than just an extra line in the strata budget. For property buyers, the presence of such levies is neither an automatic disqualification nor a minor detail to dismiss. Instead, it is a signal to undertake detailed due diligence, balancing caution with opportunity.
Through comprehensive strata analysis, independent building inspections, and the guidance of experienced buyers’ agents, it is possible to make informed decisions. Whether you engage, accept, or avoid, the essential point is that you do so with clarity. In Sydney’s competitive property market, that clarity can make all the difference between a strategic investment and a costly mistake.
