What is a reasonable capital works fund balance?
There's no fixed legal minimum, but a healthy capital works fund should hold enough to cover the scheme's known major works over the next 10 years without needing a special levy straight after settlement. As a guide, check the fund balance against the scheme's 10-year capital works plan, not just the raw dollar figure. A fund sitting near zero, combined with an ageing building or known upcoming works, is the real warning sign.
The Fuller Picture
The capital works fund (previously called the sinking fund) is the pool of money an owners corporation sets aside for major, non-recurring items on common property — things like roof replacement, lift overhauls, repainting, waterproofing and structural repairs. It's separate from the administrative fund, which covers day-to-day running costs like insurance, gardening and building management. Under NSW strata law, every scheme is required to maintain a 10-year capital works fund plan that estimates future works and how much needs to be collected in levies to pay for them.
Where it gets more complicated is that a fund balance on its own doesn't tell you much. A newer building might have a small fund simply because nothing major is due yet. An older building might have recently spent most of its fund on a big job, like re-roofing, and look temporarily low even though it's being managed well. The number that actually matters is the fund balance measured against the scheme's own 10-year plan — is it tracking close to what the plan says it should be, or falling well behind?
The Strata Schemes Management Act 2015 requires schemes to have and periodically review a 10-year capital works fund plan, and this plan should be included in the strata report you order before buying. A section 184 certificate, obtained by the vendor's solicitor or conveyancer, will also disclose the current fund balance and any special levies that have been raised or are being considered.
What This Means for Your Purchase
Before you commit to a strata property, request the strata report and read the capital works fund section alongside the 10-year plan, not just the headline balance. If the plan flags a major item — a roof, lift or waterproofing job — due within the next few years and the fund doesn't come close to covering it, that's a cost you should factor into your decision even though it isn't yet a bill.
A low fund relative to known upcoming works is a genuine negotiation point. You can factor the likely special levy into your offer, ask the vendor to address it before settlement, or simply walk away if the numbers don't work for your budget. It's far easier to negotiate this before you exchange than to discover it in an AGM notice six months after settling.
Financially, a special levy raised after you settle is your responsibility, not the previous owner's, even if the decision to raise it was made before you bought. These levies can run from a few hundred to several thousand dollars per lot depending on the scope of works, so an underfunded scheme with a big job on the horizon is effectively an unbudgeted cost sitting just outside the purchase price.
How This Shows Up in the Illawarra
The Illawarra has a lot of older strata stock — 1970s and 1980s walk-up unit blocks in areas like Wollongong, Fairy Meadow, Corrimal and Warrawong — sitting alongside newer developments in Wollongong CBD, Shellharbour and Warilla. The older blocks are more likely to have thin capital works funds relative to the work they actually need, particularly around balcony waterproofing, external painting and roof condition, where coastal salt air tends to accelerate wear compared with inland buildings.
For buyers looking at entry-level units in these older buildings, a strata report showing a modest fund balance isn't automatically a problem, but it's worth cross-checking against the building's age and any visible deferred maintenance. Newer coastal developments generally have healthier funds simply because major works aren't due yet, but it's still worth confirming the 10-year plan has been prepared and isn't sitting well behind schedule.
Frequently Asked Questions
Is there a minimum capital works fund balance required by law in NSW?
No. NSW law requires schemes to maintain and review a 10-year capital works fund plan, but it doesn't set a minimum dollar balance — what matters is whether the fund is tracking against that plan.
What's the difference between the capital works fund and the administrative fund?
The administrative fund pays for day-to-day running costs like insurance and gardening. The capital works fund is for major, non-recurring items like roofs, lifts and waterproofing, and is the one to scrutinise for future special levy risk.
Should first home buyers avoid strata properties with low capital works funds?
Not necessarily — a low fund can be fine in a newer building with nothing major due. First home buyers should focus on whether the fund matches the 10-year plan and budget for any gap rather than ruling out strata altogether.
When should I check the capital works fund during the buying process?
Ideally before you make an offer, by ordering the strata report early. If you're bidding at auction, order the report during the campaign so you have the figures before auction day.
Can I use a low capital works fund to negotiate the price?
Yes. If the fund is well behind the 10-year plan and a major item is due soon, that's a reasonable basis to negotiate the price down or ask the vendor to address it before settlement.
Does a buyers agent check this kind of thing for me?
Yes — reviewing strata reports and capital works funding is a standard part of due diligence a buyers agent carries out before you commit to a property.
Reading a capital works fund balance in context takes a bit of judgement. If you'd like a second pair of eyes on a strata report before you commit, get in touch.
