When you're buying an apartment, unit, or townhouse in Victoria, the Owner's Corporation (OC) certificate in the Section 32 is one of the most valuable documents you'll receive. It reveals the financial health of the building, upcoming costs, and potential problems that no physical inspection can uncover. Here are ten warning signs that experienced property investors check first.
1. Low or zero maintenance fund balance
The maintenance fund (sometimes called the administration fund) covers day-to-day running costs. If the balance is consistently low or in deficit, it suggests the OC is not collecting enough in levies to cover expenses. This often leads to deferred maintenance — and eventually, large catch-up costs.
2. Inadequate sinking fund
The sinking fund is the long-term reserve for major repairs and replacements (roof, lifts, painting, waterproofing). A building that is 15 years old with only $20,000 in the sinking fund is a red flag. For a medium-sized apartment building, a healthy sinking fund should be $200,000 to $500,000 or more, depending on the age and size of the building.
3. Proposed or recently passed special levies
A special levy is a one-off charge to all owners to fund major works that the sinking fund cannot cover. Check the OC meeting minutes for any discussion of special levies. If one has been proposed or passed but not yet invoiced, you could inherit a bill of $10,000, $50,000, or even more on settlement day.
4. Building defect disputes or litigation
Review the meeting minutes for any references to legal action, building defect claims, or disputes with the developer. Cladding remediation, waterproofing failures, and structural defects can cost millions to fix. If the OC is involved in litigation, the outcome and costs are uncertain.
5. Rising levies without clear explanation
Some increase in OC levies over time is normal. But if levies have jumped significantly (more than 10 to 15% in a single year), find out why. Common causes include insurance premium increases, catch-up contributions to an underfunded sinking fund, or unexpected repairs.
6. Building insurance issues
Check the OC certificate for the building insurance details. Is the sum insured adequate for the replacement cost of the building? Has the insurer imposed any exclusions or conditions? Buildings with prior claims (especially water damage or fire) may face higher premiums or limited coverage.
7. Poor attendance at OC meetings
If meeting minutes show that very few lot owners attend meetings or vote on resolutions, it suggests apathy among owners. This can lead to poor decision-making, delayed maintenance, and a small group of owners making decisions that affect everyone.
8. Deferred maintenance items
Look for repeated references to the same maintenance issues across multiple sets of minutes. If the OC has been discussing a leaking roof for two years without action, it suggests either a lack of funds or a dysfunctional committee. Deferred maintenance always costs more to fix later.
9. High number of owner-occupiers vs investors
A building dominated by investors (rental properties) can be harder to manage. Investors may be less willing to approve spending on improvements and more focused on keeping levies low. A healthy mix of owner-occupiers and investors typically leads to better building maintenance.
10. Active compliance notices or orders
Check whether the OC has received any notices from local council, the Victorian Building Authority, or other authorities. Compliance notices relating to fire safety, cladding, or building standards can require expensive rectification works.
Where to find this information
All of the above should be available in the OC certificate and attached meeting minutes, which the vendor must include in the Section 32. If the OC certificate is missing or outdated, that is itself a red flag — and may give you rescission rights under the Sale of Land Act.
Ready to check your contract? Upload your Section 32 or Contract of Sale at precontractreview.com for a pre-contract check — typically in just a few minutes.