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Body Corporate Financial Health Check Before Selling Your Unit

Buyers and their solicitors look at the body corporate before they look at the unit. A scheme with weak finances will cost you on price and time on market. Here is how to audit yours and what to address before going live.

Selling a unit in Brisbane's inner east is a different exercise to selling a house. Buyers are not just buying your unit, they are buying into a scheme. The financial position of that scheme affects every offer you receive, and a single line in the disclosure statement can drop your selling price by tens of thousands or stop a sale entirely.

The good news is that most of what buyers and their solicitors look at is straightforward to assess in advance. Walking through the body corporate's position before listing means you can present the scheme honestly, fix what is fixable, and price accordingly for what is not.

What documents you need

Start by requesting the following from the body corporate committee, the building manager, or your strata manager:

The latest annual financial statements. These show income (levies collected, interest, other), expenses (insurance, repairs, services, management fees), and the closing balances of the administrative fund and the sinking fund.

The current sinking fund forecast. A professional 10-year forecast that lists the major works expected and what each will cost. This is the document that tells you whether the sinking fund is appropriately funded.

Minutes of the last two AGMs and any extraordinary general meetings. These reveal what the committee has been discussing, what has been voted on, and any disputes or unresolved issues.

A list of unpaid levies (the levy arrears report). Names are usually redacted but the totals and ageing of arrears matter.

A copy of the current insurance certificate of currency. This shows whether the building is covered, by whom, for what amount, and the excess and exclusions.

Any disclosure statement from the body corporate manager. A standard form summary used in the sale process that bundles much of the above.

The sinking fund: the single biggest signal

The sinking fund is where the long-term health of the scheme is most visible. A well-funded sinking fund means the building is on track to pay for its expected major works without needing to hit owners with special levies. A poorly funded sinking fund means future special levies are not just possible, they are essentially planned for.

Compare the current sinking fund balance against the 10-year forecast. If the forecast says the building needs to be at $400,000 by year five and the current balance is $80,000, that gap is going to be funded somehow. Either the regular contributions will rise, the works will be deferred (often making them more expensive when finally done), or owners will face a special levy.

Buyers' solicitors flag this immediately. A buyer who sees a sinking fund running 60 percent below forecast will either pull out, renegotiate the price down, or proceed knowing they have factored a special levy into their offer. None of these are good outcomes for the seller.

Levy arrears: the second biggest signal

A small amount of arrears is normal in any scheme. Even well-run buildings have one or two owners who pay late. What buyers' solicitors look for is the pattern.

If 5 percent or less of total levies are outstanding, and most of those are within 90 days, the scheme is being well managed. If 15 percent or more is outstanding, with significant amounts more than 12 months old, the scheme has a collection problem. The administrative fund cannot do its job (paying for ongoing services) if levies are not coming in.

This matters to the buyer because schemes with chronic collection problems often run thin on cash, defer maintenance, and then face emergency works that hit owners as special levies.

Special levies: history and pending

Look back through the AGM minutes for the past three years. Have any special levies been raised? For what purpose? How were they apportioned? Were there owner objections or disputes?

Then look forward. Has the committee discussed any major works that have not yet been funded? Roof replacement, lift refurbishment, façade repair, painting? If a project has been talked about but no funding mechanism has been resolved, a special levy is almost always coming.

If a special levy has been called or is being discussed, you have a disclosure obligation. The contract will need to make this clear, and the price expectation needs to reflect the likely impact on the new owner.

Insurance and pending claims

Two questions about insurance: is the building adequately insured (the certificate of currency tells you the sum insured), and are there any current or recent claims?

Underinsurance is a common problem in Brisbane buildings, particularly older buildings where the sum insured has not been updated for years. A building insured for $4 million when the rebuild cost is closer to $7 million has a hidden risk that any prudent buyer factors in.

Open insurance claims, particularly for water damage, structural issues, or significant common property repair, also need to be disclosed. Buyers will want to know what the claim is for, what the insurer's position is, and whether the scheme is exposed to any uninsured cost.

Building defects and ongoing repair issues

Inner east unit buildings range from 1980s walk-ups to recent contemporary towers. Many have known defect issues that have been the subject of body corporate discussion, builder warranty claims, or owner-funded repair programs.

Common defect categories include water ingress around windows or balconies, render or paint failure, waterproofing issues in shared areas (lift wells, basements, common bathrooms), and façade attachment problems. Any of these that have been formally reported, investigated, or are awaiting works will need to be disclosed.

Hiding a known defect is not a strategy. The buyer's solicitor will request the AGM minutes, the disclosure statement, and any committee correspondence available. If a defect is in those records and was not disclosed, it becomes a contract problem after settlement, not a successful sale.

By-laws that affect saleability

Some by-laws can narrow the buyer pool more than owners realise. The most common ones to check before listing:

Pet policies. A no-pets by-law eliminates a meaningful slice of owner-occupier buyers. A "subject to committee approval" policy is workable but introduces friction.

Short-term letting (Airbnb / Stayz) restrictions. Buildings that prohibit short stays are unattractive to investors targeting the short-stay market and attractive to owner-occupiers who want a quieter building. This cuts both ways.

Renovation restrictions. Some by-laws require committee approval for any internal works, restrict floor coverings (no hard floors above ground floor), or prevent changes to balconies and external windows. Buyers who plan to renovate will want to know.

Parking and storage allocations. Confirm exactly which car space and which storage cage belong to your unit on the title and survey. Misalignment between actual use and registered allocation causes contract delays.

What to fix before listing, what to disclose, what to price for

Fix: arrears on your own unit, missing documents in your records, a stale insurance certificate, anything within your control to bring up to date.

Disclose: pending special levies, open insurance claims, known defects, restrictive by-laws. Clear, upfront disclosure protects the contract and the price.

Price for: systemic issues you cannot fix from a single unit (under-funded sinking fund, building-wide defect, restrictive by-laws). Pricing realistically here is faster than holding for an unrealistic number.

Get the assessment done before the campaign starts

The most expensive position to be in is to discover a body corporate problem during the buyer's due diligence, after offers have been made. The buyer either walks (and now you have a stale listing) or renegotiates from a position of strength.

Doing the body corporate assessment two to four weeks before listing means any issues are addressed in your campaign positioning, not raised as objections after a contract has been signed.