What happens if a strata building has major defects?
If a strata building has major defects — like water ingress, structural cracking, or combustible cladding — the owners corporation is legally required to fix them, usually funded through the capital works fund or a special levy on all owners. Buyers should treat major defects as a serious cost and negotiation factor, not just a maintenance note, because the bill can run into tens of thousands of dollars per lot. Always read the strata report and any engineer's assessment before exchanging.
The Fuller Picture
Strata defects fall into two broad categories: things the owners corporation has always been responsible for fixing (common property, like the roof, external walls, plumbing risers and structural elements), and things that sit with individual lot owners. When a defect is major — the kind that affects the safety, structural integrity, or waterproofing of the building — it becomes the owners corporation's problem to fix, and by extension, every owner's problem to fund. This is different from a single lot having a leaking tap or a cracked tile inside an apartment, which the individual owner usually covers.
The complication is timing and cost certainty. A defect might be known and quoted (the strata committee has an engineer's report and a fix scheduled), suspected but unconfirmed (there's a crack or a stain but no formal assessment yet), or completely undisclosed because nobody has looked. Buyers often assume a clean-looking building has no issues, but visible condition and structural condition are not the same thing — cladding, waterproofing membranes and structural steel can be seriously compromised while the building still looks fine from the street or in photos.
In NSW, the Strata Schemes Management Act 2015 requires owners corporations to keep a 10-year capital works plan and maintain a capital works fund to cover known future costs, including major defects. For buildings completed after 2017, the Design and Building Practitioners Act 2020 and the Strata Building Bond and Inspections Scheme also apply, requiring a bond to be held against defects in new-build strata for the first two years. None of this guarantees a defect-free building — it means there's a paper trail buyers can and should ask to see.
What This Means for Your Purchase
A confirmed major defect changes how you should approach the purchase — it's not necessarily a reason to walk away, but it is a reason to slow down. Ask for the engineer's report, the quoted repair cost, and whether a special levy has already been raised or is being discussed. If the fund doesn't cover the repair, that shortfall becomes a bill you inherit as the new owner, regardless of when the damage actually occurred.
Financially, a major defect can affect your finance approval as well as your ongoing costs. Lenders sometimes decline or reduce valuations on buildings with known structural or cladding issues, and if a special levy is imminent, you may need to budget for it on top of your deposit and settlement costs. It's worth asking your conveyancer to specifically flag any disclosed defects, special levies, or building bond claims in the section 184 certificate and strata records before you're locked into an unconditional contract.
Where a defect is known and costed, it can also be a genuine negotiation lever — a buyer with clear evidence of an upcoming levy has a reasonable basis to ask for a price adjustment or to make the purchase conditional on satisfactory building reports. What buyers should avoid is proceeding on assumption alone, either that the defect is minor or that someone else will absorb the cost.
How This Shows Up in the Illawarra
Coastal apartment buildings across Wollongong, Thirroul, and Shellharbour face particular exposure to water ingress and render or cladding failure, given salt air and direct weather exposure on many beachside blocks. Older strata buildings from the 1970s–1990s, common around the Wollongong CBD and along the escarpment suburbs, are also more likely to be approaching major works on roofs, balconies and plumbing simply due to age, even without an acute defect.
Entry-level strata units in the Illawarra often sit in older, smaller blocks without a full-time strata manager or a well-funded capital works reserve, which makes the strata report and AGM minutes especially important reading — not just the by-laws. Buyers moving from Sydney sometimes underestimate how thin some of these funds are compared to larger metro strata schemes, so a defect that would be a minor line item in a big city building can mean a meaningful special levy in a smaller Illawarra block.
Frequently Asked Questions
Who pays to fix major defects in a strata building?
The owners corporation is responsible for common property defects, funded through the capital works fund or a special levy charged to all owners, including any new owner who buys in after the defect is identified.
What's the difference between a defect and normal wear and tear?
Wear and tear is expected deterioration covered by routine maintenance, while a defect is something not performing as it should — such as a waterproofing failure or structural crack — that usually requires a dedicated repair project and specific funding.
Should a first home buyer avoid strata buildings with known defects?
Not necessarily — a known, costed, and funded defect can be lower risk than an unknown one, since the cost and timeline are already clear rather than a future surprise.
When should I check for defects in the buying process?
Before making an unconditional offer — ideally during your due diligence period, so you have time to review the strata report and get advice before you're contractually committed.
Can I negotiate the price if a building has major defects?
Yes, a documented defect with a quoted repair cost or upcoming special levy is a reasonable basis to ask for a price reduction or to make your offer conditional on satisfactory building reports.
Does a buyers agent help with assessing strata defect risk?
A buyers agent can help you read strata reports critically, know what questions to ask the agent or strata manager, and factor defect risk into your offer strategy, though the legal review still sits with your conveyancer.
If you're weighing up a strata property with known defects, we can help you read the reports and understand the real cost before you commit. Reach out if you'd like a second set of eyes on the numbers.
