A special levy can turn an otherwise straightforward apartment purchase or sale into a costly point of negotiation. So, who pays strata special levies when a property changes hands? In NSW, the practical answer is: it depends on when the levy was raised, when it falls due, and, most importantly, what the contract says.
For buyers and sellers, this is not a detail to leave until the week before settlement. A special levy may run into thousands, or even tens of thousands, of dollars where major building works are involved. Getting clear advice before you exchange contracts protects your budget and helps prevent an unwelcome dispute later.
What is a strata special levy?
A special levy is an additional contribution raised by an owners corporation when the existing administrative or capital works funds will not cover a particular expense. It is separate from the regular strata levies owners pay quarterly.
Special levies are commonly raised for significant or unexpected works, such as concrete repairs, roof replacement, waterproofing, lift upgrades, fire safety compliance, insurance shortfalls or legal costs. In some buildings, they are planned as part of a long-term maintenance program. In others, they arise quickly after a defect report, engineering assessment or urgent repair.
The amount each owner pays is generally based on their unit entitlement. The owners corporation's resolution should state the total levy, each lot's share and the dates the instalments are due.
Who pays strata special levies in NSW?
There is no single rule that every sale follows. Under NSW strata law, levies are contributions owed by lot owners to the owners corporation. But when a lot is being sold, the sale contract determines how the cost is allocated between the outgoing owner and the purchaser.
As a general commercial expectation, a seller will usually be asked to cover a special levy that was formally raised before contracts were exchanged, even if one or more instalments are due after settlement. A buyer, on the other hand, will generally expect to pay levies raised after they become the owner.
However, special levies do not always fit neatly into those categories. A levy may be discussed at an annual general meeting before a property is listed, approved after exchange but before settlement, or raised in instalments over a lengthy construction program. That is why the wording of the contract and its special conditions matters far more than assumptions based on timing alone.
Levies raised before exchange
If the owners corporation has already passed a resolution for a special levy before the contract date, it should be disclosed to a prospective buyer. In many transactions, the seller pays it or provides an adjustment at settlement, particularly where the levy relates to work approved before the buyer committed to the purchase.
This is also the cleanest outcome from a negotiation perspective. The buyer knows the true cost of owning the property, and the seller avoids a last-minute request for a price reduction or an argument about undisclosed expenses.
Levies raised after exchange but before settlement
This is where advice becomes essential. If a special levy is struck after exchange, the contract should be checked carefully to establish who bears the cost. The result may depend on the contract's adjustment provisions, any agreed special condition, the levy due date and the circumstances in which the levy was raised.
For example, an urgent levy for a safety issue identified during the settlement period may be treated differently from a levy arising from a building upgrade that had been openly foreshadowed before the sale. There is no benefit in either party relying on a verbal understanding. Any agreement about the levy should be recorded clearly in writing.
Levies raised after settlement
Once settlement has occurred, the buyer becomes the registered owner and will normally be responsible for strata contributions subsequently raised. This includes a special levy approved after settlement, even if the issue behind it existed earlier.
That can feel frustrating for a buyer who discovers, shortly after moving in, that the building requires expensive remediation. Yet unless the seller had a disclosure obligation, made a misleading representation or agreed contractually to contribute, the new owner may carry the liability. Proper pre-purchase enquiries are therefore critical.
Why the due date is not the whole story
A common misconception is that whoever owns the property on the instalment due date automatically pays the levy. While the due date is relevant, it is not always decisive in a sale.
A special levy might be approved before a contract is signed but structured in four quarterly instalments, with the final instalment due well after settlement. If the contract says the vendor is responsible for special levies struck before exchange, the seller may still need to meet that final instalment or compensate the buyer at settlement.
Conversely, a levy that is only proposed before exchange is not necessarily a levy that has been formally raised. Minutes may refer to possible works, quotes or a forthcoming motion, but until the owners corporation resolves to raise the contribution, the precise liability may not exist. That distinction can be important in negotiations and legal advice.
Documents buyers should review before exchange
A strata report is valuable, but buyers should also ensure their conveyancer reviews the contract and strata records. The aim is to understand not just the current quarterly levy, but the building's likely future costs.
Pay particular attention to these documents and questions:
- The Section 184 strata information certificate, which records levies, arrears and amounts payable for the lot.
- Recent annual general meeting and extraordinary general meeting minutes, including motions about works, loans and special levies.
- The capital works fund forecast, building reports and any engineer, waterproofing or defect reports available.
- The sale contract's special conditions, especially any clause dealing with levies raised before or after exchange and settlement.
Minutes can reveal a great deal. Repeated discussion of water ingress, façade repairs, combustible cladding, balcony deterioration or insurance excesses may indicate costs ahead, even where no special levy has yet been passed. A low quarterly levy is not always a sign of an inexpensive building to own.
What sellers should disclose and prepare
For sellers, transparency is usually the best strategy. If a special levy has been raised, make sure your agent and conveyancer have the correct notices, meeting minutes and payment schedule. A buyer who learns about a levy late in the process may lose confidence, seek a price adjustment or walk away before exchange.
If major works are anticipated but not yet approved, obtain advice on what should be disclosed in the contract documents. Sellers should not make casual assurances that there are "no upcoming costs" unless they are certain. An owners corporation may have extensive discussion underway that a prudent buyer is entitled to investigate.
It is also sensible to keep regular strata levy payments up to date. Overdue contributions can attract interest and recovery costs, and they complicate settlement. Your conveyancer can arrange the appropriate settlement adjustments, but accurate information from the strata manager is needed early.
Can a buyer negotiate the price instead?
Yes. A known special levy is often a legitimate part of price negotiation. A buyer may offer less to reflect an upcoming $15,000 contribution, while a seller may agree to pay the levy in full before settlement to preserve the agreed purchase price.
Neither approach is automatically better. Paying the levy before settlement can be simpler and gives the buyer certainty. Reducing the purchase price may suit a seller who prefers not to make an immediate payment, but it does not remove the need for the contract to state clearly who remains liable to the owners corporation.
For investors, the decision also has tax and cash-flow implications that warrant advice from an accountant. For owner-occupiers, the focus is often affordability: can you comfortably fund the purchase, stamp duty, moving costs and a large building contribution within the same period?
A practical approach before signing
If you are buying into strata, ask early whether any special levies are current, proposed or being considered. Do not stop at a yes-or-no answer. Ask for the amount, purpose, due dates, supporting reports and the exact contract treatment.
If you are selling, address the issue before marketing rather than hoping it will not arise. Clear disclosure and well-drafted contract conditions give buyers confidence and keep the transaction moving.
Strata special levies are not necessarily a reason to avoid a property. Sometimes they fund work that improves safety, protects the building and supports long-term value. The key is knowing the cost before you commit, understanding who is responsible for it, and having the agreement documented properly.
