A strata capital works fund is underfunded when the current balance is low relative to major upcoming works in the 10-year plan, or when the plan shows the fund balance turning negative before large expenditures are due. Check the current balances, the 10-year plan trajectory, whether contributions have kept pace with the building's age, and any special levy history in the past two to three years.
Core Findings
- The capital works fund covers long-term major works like lift replacement, roof repairs, and waterproofing; the admin fund covers day-to-day operational costs
- A low fund balance is not automatically a red flag; the 10-year plan trajectory and upcoming works are more meaningful indicators than the current balance alone
- From 1 April 2026, new multi-storey buildings in NSW must have initial levy estimates certified by an independent quantity surveyor (certified under AIQS or chartered under RICS)
- Special levies in buildings with chronic underfunding can reach $30,000 per lot or more; as a buyer, you generally pay any special levy voted on after your settlement date
- Flat capital works contributions in a building over 15 years old often mean the fund has not kept pace with the building's aging, and are worth investigating
The question we keep seeing in forums is some version of: "Strata funds seem very low. Is this normal?" Sometimes it is. Sometimes it is a warning sign. Telling the difference requires knowing what the numbers in a strata report are showing.
Two Funds, One Building
Every strata scheme in NSW runs two separate funds.
The admin fund covers the day-to-day costs of running the building: cleaning, insurance, management fees, small maintenance and repairs, utilities for common areas. Think of it as the building's operating account.
The capital works fund (often still called the sinking fund in older documents) covers long-term major works: lift replacement, roof repairs, waterproofing, facade works, fire safety upgrades. This is the building's savings account for big-ticket items that do not happen every year but cost a lot when they do.
Both funds are financed through levies paid by owners each quarter. Your strata report will show the current balance of each, along with contribution rates and (usually) a 10-year capital works fund plan projecting what comes in and goes out over the next decade.
What to Look at in the Strata Report
The current fund balances. Look for the balance sheet or financial statements in the strata report. These show how much cash is currently in each fund. A low balance by itself is not necessarily alarming. Context matters.
The 10-year capital works plan. This is the more important document. It outlines the major works the committee has identified over the next 10 years and the contributions needed to fund them. If the plan shows the fund balance staying positive across the full 10 years, that is a healthier sign than a plan where the balance drops into deficit before major works arrive.
The contribution trajectory. Look at how levies have moved over the last two or three years. A scheme that has been increasing capital works contributions modestly and consistently is typically more stable than one that has kept contributions flat for years. Flat contributions in a building over 15 years old often mean the fund has not kept pace with the building's aging.
The special levy history. Strata reports typically include records of any special levies raised in the past few years. A building that required a large special levy is worth investigating: what caused it, was it a one-off defect, or is it a symptom of chronic underfunding?
When Low Actually Means Something
A capital works fund that is low relative to known upcoming works is worth treating as a risk factor, not just a data point.
The questions to ask:
Is there a major work identified in the 10-year plan within the next two to three years? If the plan shows $500,000 of roof works needed in year two and the current fund balance is $80,000, the gap has to come from somewhere. That is either elevated levies, a strata loan, or a special levy.
Is the plan realistic? Since 1 April 2026, any new or revised 10-year capital works plan must use the NSW Government's prescribed standard form, which requires more granular cost estimates. Plans using the older, less detailed format may be underestimating future costs. If the plan looks optimistic, the real position may be worse than it appears.
Are there deferred items? Meeting minutes sometimes show that the committee has identified works but voted to defer them to a later year. Deferred maintenance does not disappear. It typically becomes more expensive.
What a Special Levy Means for You
A special levy is a one-off levy raised on all owners to fund an unexpected or large cost that the existing funds cannot cover. In buildings where capital works funds have run low, they can be significant. Special levies for waterproofing or cladding remediation can reach $30,000 per lot or more in major rectification cases, and more serious defect repairs can go considerably higher.
As a buyer, you inherit the building's financial position on settlement. A special levy voted on before your settlement date may be payable by the vendor; one voted on after settlement becomes yours to pay. That boundary is negotiable in contracts. Under strata law, the levy obligation generally attaches to the owner at the time the levy is raised, but contract terms vary and this should be reviewed with your solicitor or conveyancer before you exchange.
This is one of the reasons the strata report matters. It will not tell you a special levy is definitely coming. But it can show you the conditions that make one more or less likely.
What Changed for New Buildings in 2026
One thing that has shifted for buyers looking at new apartments: from 1 April 2026, developers of new multi-storey strata schemes in NSW must engage an independent quantity surveyor (certified under the AIQS or chartered under RICS) to verify that the initial levy estimates are sufficient to cover expected year-one expenditure.
The certification requirement does not eliminate special levy risk. A building can still encounter unexpected costs in year one or two. But it does mean the initial levy estimates are independently verified before the scheme is registered.
For buyers looking at older buildings, the new standard form for capital works plans (also in effect from 1 April 2026 for any plan that is revised or replaced) requires more granular cost categories than older plans. If the building you are looking at has a capital works plan that looks vague, it may have been prepared before the new form took effect and may be worth treating with additional caution.
What Clarity Surfaces
Clarity by BRXiQ extracts and summarises the financial health section of a strata report: current fund balances, levy trajectory, special levy history, and highlights from the capital works plan. It does not replace a professional review, and it cannot predict whether a future special levy will be called. What it does is surface the financial patterns that are most relevant to a buyer's decision, without requiring a background in strata accounting to follow them.
If the numbers in your strata report look unusual and you are not sure how to read them, your solicitor or conveyancer is the right person to walk through the financials with you before you exchange.
This is informational only. Not financial, legal, or investment advice. Fund structures and reporting requirements vary by state. The NSW information in this post reflects the Strata Schemes Management Act 2015, as amended by the Strata Schemes Legislation Amendment Act 2025. Consult a qualified professional for advice specific to your situation or building.
Common Questions
What is the difference between the admin fund and the capital works fund in strata?
The admin fund covers day-to-day running costs: insurance, cleaning, management fees, minor repairs. The capital works fund covers long-term major works: lifts, roofs, waterproofing, structural repairs. Both are funded through quarterly levies. A healthy scheme keeps both in positive balance and has a 10-year plan showing the capital works fund staying funded ahead of major expenditure.
Does a low capital works fund mean I will face a special levy after I buy?
Not necessarily, but it raises the risk. The key question is whether the fund is low relative to major works the building needs in the next few years. If the 10-year plan shows a significant gap between the current balance and upcoming major costs, that gap has to come from somewhere: elevated ongoing levies, a strata loan, or a special levy. A single low balance number is less meaningful than the plan's trajectory.
What changed for new strata buildings from 1 April 2026?
From 1 April 2026, developers of new multi-storey strata schemes in NSW must engage an independent quantity surveyor (certified under AIQS or chartered under RICS) to verify that initial levy estimates are sufficient to cover expected year-one expenditure. The building cannot be registered without this certification.
Sources
- NSW Government - Guide to strata law changes for strata committees and owners - Official NSW Government guide to the 2025-2026 strata law changes, including the independent quantity surveyor requirement for new buildings and the prescribed standard form for capital works plans
- Strata Schemes Management Act 2015 (NSW) - Sections 74 and 80 - NSW legislation governing the capital works fund (s.74) and the obligation to prepare a 10-year capital works fund plan (s.80)
- Strata Schemes Legislation Amendment Regulation 2025 - The regulation prescribing the new standard form for 10-year capital works plans, required from 1 April 2026
- LookUpStrata - NSW Special Levies: What You Need to Know - LookUpStrata Q&A on special levies in NSW strata, covering when they arise, how they are calculated, and typical scenarios including waterproofing and defect rectification