Capital works fund explained — reading a NSW strata scheme’s repair savings before you buy

The short version

The capital works fund — many people still call it the sinking fund — is the money a NSW strata scheme sets aside for the big, occasional jobs: repainting, replacing a lift or the guttering, waterproofing, façade or roof repairs. It's separate from the everyday running costs, and it's meant to grow over time so those large bills don't all land at once. When the fund is healthy, a major repair comes out of savings. When it's thin, the owners get a special levy instead — and if you've just bought in, that bill can be yours. Reading the fund is how you tell which situation you're walking into.

Where the fund sits in the scheme's finances

Under section 74 of the Strata Schemes Management Act 2015 (NSW), the owners corporation keeps the capital works fund separate from the administrative fund, which covers the day-to-day costs — cleaning, insurance premiums, the strata manager's fees, minor repairs. Your quarterly levies feed both, but only the capital works fund is building towards the expensive, once-in-a-decade jobs. It's the part of the balance sheet that decides whether the next big repair is already paid for or still to be found.

The 10-year plan is the thing to read

Section 80 of the Act requires the owners corporation to prepare and maintain a 10-year capital works fund plan — a forecast of the major expenses coming up over the next decade and how the fund will pay for them. A good plan is specific: it names the works, estimates their cost, and sets contributions high enough to have the money ready in time. A weak plan is a copy-paste that hasn't been updated in years, or one that lists big works with no realistic funding behind them.

This is why the plan matters more than the headline balance. A fund can look reassuringly full today and still be inadequate if a lift replacement or a re-roof is due next year and the plan never provided for it. Read the fund against the works ahead, not on its own.

How to tell whether the fund is healthy

There's no legislated minimum balance a NSW capital works fund has to hold, so "healthy" is a judgement, not a single number. What you're looking for is a fund sized to the building it serves. A few practical signals:

• The balance against the plan. Compare the current fund balance with the works the 10-year plan forecasts for the near term. If the plan expects a large job soon and the fund can't cover it, a special levy is the likely gap-filler.
• The age and type of building. An older block, a high-rise with lifts, or a building with a pool, basement or extensive common property will burn through a capital works fund faster than a small, simple scheme.
• The direction of travel. A fund being steadily topped up through regular contributions is a better sign than one being run down to keep levies artificially low — low levies today can simply mean a bigger levy tomorrow.
• Deferred works in the minutes. Repairs that keep getting quoted and put off are future capital works fund spending that hasn't been provided for yet.

When a thin fund becomes your bill

If a cost arrives that the capital works fund can't cover, the owners corporation can vote to raise a special levy from all owners, split by unit entitlement. Liability for an unpaid levy generally runs with the lot, so a levy struck before settlement but still outstanding can land on you shortly after you move in — for work decided before you owned the place. A near-empty fund in an ageing or defect-prone building is the clearest early warning that one may be coming. Our strata levies guide explains how special levies are raised, and unit entitlements decide the share you'd pay.

What to check before you sign

1. The current capital works fund balance. Get the figure from the contract or the section 184 certificate — and read it against the works the scheme has ahead, not in isolation.
2. The 10-year plan. Ask to see it. A specific, recently updated plan with realistic funding is one of the surest signs of a well-run scheme.
3. Any special levy — struck or looming. Confirm whether one has been raised or is under discussion, and who's liable for an unpaid amount at settlement.
4. Recent minutes for deferred works. Major repairs quoted and put off are costs the fund will have to meet soon.
5. How the levies are trending. Suspiciously low levies can mean the fund is being starved to keep the sale price attractive.

Common questions

Is the capital works fund the same as the sinking fund?

Yes — "sinking fund" is the older name for the same thing. NSW law now calls it the capital works fund, but the two terms mean the same pot of money set aside for major repairs.

Is there a minimum the fund must hold?

No. NSW doesn't set a minimum balance, which is why the 10-year plan matters so much — adequacy is measured against the works the building actually faces, not a fixed figure. The best way to read the fund in full is a strata records inspection, which goes through the plan, the accounts and the minutes behind the headline balance.

Should I worry more about the fund in a new building?

A brand-new scheme starts its capital works fund from zero and won't have built much up yet, which can make early levies look cheap — but defects in newer strata are a known risk, and rectifying them can drive special levies. If you're buying into a recently built scheme, our building defects guide and the off-the-plan NSW guide cover the extra checks that apply. Very small schemes — a two-lot block, say — can even agree not to keep a capital works fund at all, which means shared repairs are handled between owners directly.