Strata reports are to apartments what building reports are to houses. However, strata reports are so much more. Why?

Building reports are focused on one particular asset (the house) and provide a subjective opinion as to the quality of the building. A building report is typically 30-50 pages and written in layman's terms. Typically they compare the specific house to others of a similar age/style. Plus, when you buy a house, you have control over what you do with the property going forward.

Strata reports are objective and are a set of facts about a whole building. Strata reports average 200-300 pages, although in inner Sydney it is not uncommon to have strata reports that are 1,000-2,000 pages.

Strata reports cover the whole block of apartments/units and include:

• Pages of financial statements and balance sheets

• Details of engineer's reports or findings relating to building defects 

• Details of by-laws that owners and residents are required to adhere to e.g. Pets, process for renovation approvals

• Insurance information 

• Details of current or pending litigation 

• Correspondence with the specific lot for sale and any specific issues or defects with that lot 

• Compliance with the local council including fire safety and combustible cladding regulations 

• Meeting minutes for the last 5+ years 

From this information, you then form your own opinion about:

• The likely future financial outcomes and what this would mean for you

• The level of risk that exists e.g. unknown defects and/or known defects that are not yet quantified

When you buy an apartment, you are not directly in control of the future strata outcomes as you are one of many owners. This makes it even more critical to fully understand the risks and potential financial outcomes.

Strata reports contain so much information that it is hard to know what you are even looking for. Especially if you've only ever read one or two.

Just to add to the complexity, every company that produces strata reports does so in a different format.

Some common mishaps that you can make if you're not sure what you are looking for include:

• Not realising the strata insurance will lapse before the settlement date and later finding out your bank requires a valid strata insurance certificate to provide your loan. This can lead to a buyer being in default of the contract and unable to settle risking their 10% deposit. 

• Not understanding the impact of unit entitlements and how one person may have a controlling vote that would prevent you from doing specific renovations in the future. Imagine you found out later one owner has all the power to prevent you from renovating your bathroom.

I could talk about this for hours, but I appreciate it is a relatively dry topic. I have written a comprehensive guide covering exactly this to help prospective apartment buyers. The guide is written with my combination of experience in property law, mortgages, and working with buyers every day.