Question: Does NSW strata legislation require the owners corporation to have all funds on hand before starting major works?
We own an apartment in Dee Why, Sydney. The building is about 35 years old, and the owners corporation plans major common property works, including the replacement of the roof membrane. There are 21 lots, and the cost is about $25,000 per owner.
According to our strata manager, the owners corporation must have the entire amount collected and available in the capital works fund before works can begin. Does NSW strata legislation require the owners corporation to have all funds on hand before starting major works? Are there any situations where the scheme can proceed without first collecting the full amount? An example could be either staged payments or financing.
Answer: The strata manager’s advice that the money needs to be in place before works begin is sound.
Does all the money need to be in the bank before major strata works can start in NSW?
Great question, and it comes up more often than you’d think, especially for older buildings facing significant capital works like roof membrane replacements, waterproofing, or façade repairs.
The short answer is: yes, in practice, the funds need to be secured before the owners corporation can responsibly enter into a contract with a builder.
This isn’t actually a specific provision of the Strata Schemes Management Act 2015, it’s a fundamental principle of contract law. Entering into a binding contract without the means to meet your payment obligations can expose the owners corporation and those who authorised the contract to serious legal consequences. In the most serious cases, contracting without secured funds can amount to fraudulent misrepresentation. It represents to a contractor that you have the funds to pay when you do not.
The scenario that illustrates the risk
Imagine the owners corporation raises a special levy to fund the works, signs a contract with a builder, and work begins. Then some owners don’t pay their levy. The owners corporation now has a contractual obligation it cannot meet. The builder has done the work, or part of it, and the path to resolution involves expensive, time-consuming legal action to recover unpaid levies, with no guarantee that the contractor will be paid on time or in full. The committee members who approved the contract may also find themselves personally exposed.
A resolved but unpaid special levy creates a debt owed by owners, but it does not put money in the bank. Those are two very different things.
So what does “having the money” actually mean?
Before signing any contract for major works, the owners corporation must have the funds genuinely secured. In practice, that means one of the following must be in place:
- The full amount is physically held in the capital works fund, or
- A confirmed loan facility is in place, meaning a lender has approved the loan and the funds are available to draw down, or
- A combination of existing fund reserves and a confirmed loan that together cover the full contracted amount.
The good news is that the Strata Schemes Management Act 2015 (the Act) does give owners corporations the power to borrow money. Section 100 of the Act expressly permits this, provided a resolution approving the loan is passed at a general meeting first. Strata loans are increasingly common for exactly this kind of situation, and they allow works to proceed without every owner having to produce a large lump sum upfront. Instead, the loan is repaid through levies, over time.
What this means for your building
With 21 lots and approximately $25,000 per owner, the total project budget is around $525,000. That’s a significant sum. The strata manager’s advice that the money needs to be in place before works begin is sound. The question worth asking is how the owners corporation intends to secure those funds. Will this be through a special levy collected in full before contracts are signed, a strata loan, or a combination of both?
If a special levy is raised, you and the other owners should be clear on when payment is due, what happens if some owners don’t pay, and whether a loan is in place to bridge any shortfall. These are entirely reasonable questions to put to the strata committee or strata manager in writing.
For more information on how strata finances work, NSW Fair Trading has a range of plain-English guides available at fairtrading.nsw.gov.au. The full text of the Strata Schemes Management Act 2015 is available at legislation.nsw.gov.au.
This response is general information only and does not constitute legal advice. For advice specific to your situation, we recommend speaking with a strata lawyer or licensed strata manager.
This post appears in the May 2026 edition of The NSW Strata Magazine.
Tim Sara
Sara Strata
E: tim@sarastrata.com.au
P: 04 8500 7960
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