Beware parties, pets and parking, goes the adage. But there is more to the semi-communal life of a strata-scheme property. Beware sinking funds that have sunk, dictatorial neighbours, dodgy insurance and concrete cancer. Beware GST, firetraps and dysfunctional owners' corporations.

Beware neighbours who won't pay levies and neighbours who can't. But be assured, say the experts, most of the time strata schemes work out just fine.

In buying into a strata scheme, home owners take on responsibility for the maintenance of private and communal property, and the value of their asset depends on the maintenance of the entire property. Normally this is provided for by two funds that owners contribute to on a quarterly basis: an administrative fund, which covers routine expenses such as cleaning, gardening and lighting; and the sinking fund, which covers major renovations and repairs, like the resurfacing of a pool or replacement of a roof.

Jerry Tyrrell, co-director of Tyrrells Property Inspections NSW, says these outlays should not be viewed as an economic drain but as contributions to an overall asset. "A healthy sinking fund actually adds to the resale value of a strata property," Tyrrell says.

In purchasing a strata property the responsible buyer will pay to have a professional strata search done. This will include an analysis of the strata scheme's financial records, as well as the minutes from the owners' corporation meetings. (The lingo of strata changed with the Strata Schemes Management Act, 1996: the body corporate became the owners' corporation, etc.)

Tyrrell says a search revealing a history of ad hoc maintenance or a poor sinking fund devalues a property. "If someone's looking into buying a property that might need a new roof in the next couple of years, and there's not much in the sinking fund, they're not going to want to buy in.

"I often see lunacy in the way money is not spent. For the sake of $2,000, money is not spent on things that could raise the value of the property, or cost the owners much more later."

John McIntyre, a member of the Law Society of NSW, says that while there is often resistance to buying into older buildings because of potentially higher maintenance costs, as long as buyers make themselves aware of what they are in for there is no reason to avoid older properties.

"It's like buying a house - the older it is the more you have to spend on maintenance, but you get the charms of an older building," McIntyre says.

"It's the same thing if your building has lifts or a swimming pool or a big garden - of course your levies will be higher."

New buildings can be even more problematic, McIntyre says. Without minutes from meetings to study, it can be harder to detect possible problems.

"There's a new building in the Pyrmont/Ultimo area where people moved in and found the water on the bathroom floors does not run to the waste pipes, so their carpets were soaked if they had any water spills from the shower or bath," McIntyre says. "The noise insulation was bad so they could hear their neighbours and the ceilings were lower than they expected."

The golden rule is to have a professional strata inspection report carried out by a lawyer or building inspection service, but tips from the Strataman Web site are also helpful.

The GST

Under the new tax, strata schemes are considered enterprises, so they require an ABN and must be registered for GST if their annual levies exceed $50,000. Registration is optional if their income is less. Be aware that a special levy invoked to cover a particular expense may push income over the threshold. The schemes will recoup money they spend on GST in the purchase of services if registered. Interest earned by funds is taxable from the first dollar.

Buying into a strata scheme