A strata scheme may collectively own property worth hundreds of millions of dollars, collect substantial levies every year and have access to the financial capacity of hundreds of owners, yet still behave as though money is perpetually scarce.
Maintenance is deferred. Reserve funds seem inadequate. Special levies remain a recurring concern.
Why?
The answer is unlikely to be found in the bank balance alone. It lies in something more fundamental: the way strata systems measure, govern and ultimately transform economic value itself.
[a 8:25 minute read, with 1939 words]
One of the more intriguing features of strata ownership is that it frequently appears to contradict our normal understanding of financial strength.
Imagine a residential strata building containing one hundred apartments.
If each apartment is worth approximately one million dollars, the collective value of the scheme approaches one hundred million dollars. In many Australian cities, particularly in larger developments, that figure would be considerably higher.
Viewed from the outside, such a community appears economically powerful. It collectively owns valuable property, raises substantial annual levies, often maintains reserve funds measured in hundreds of thousands or even millions of dollars, and possesses the legal ability to raise additional contributions from its owners whenever necessary.
Yet spend enough time attending annual general meetings and a very different picture emerges.
Projects are postponed because there is insufficient money.
Maintenance is deferred until funds become available.
Reserve funds are said to be inadequate.
Special levies become necessary.
Owners are asked to contribute more.
Across buildings of different ages, sizes and locations, the language is remarkably consistent. There is never quite enough money.
This presents an interesting puzzle.
How can a community responsible for assets worth one hundred million dollars repeatedly find itself behaving as though it is financially constrained?
The obvious answer is that assets are not cash. But that answer, while true, turns out to explain surprisingly little.
Before trying to answer this vexed question, it is worth asking another.
What do we actually mean when we describe a strata scheme as financially healthy?
Most people instinctively reach for numbers that are easy to see.
How much money is in the bank?
How much is held in the capital works fund?
How much levy income was collected this year?
These are sensible questions. But they are also incomplete.
Financial health is rarely determined by a single visible number.
Indeed, every system of measurement reveals some things while concealing others.
Profit tells us something about a business, but not everything.
A share price tells us something about a company, but not everything.
A household’s net worth tells us something about its financial circumstances, but not everything.
The same is true of strata schemes, and the difficulty is not simply that important information is hidden.
Perhaps it is also that the measures we routinely rely upon were never designed to describe the scheme’s underlying economic position.
The distinction between assets and cash is familiar in many other settings.
A retiree may own a home worth several million dollars while living on a modest retirement income.
A farmer may possess valuable land while experiencing ongoing cash flow pressures.
A successful business may own substantial equipment and property yet struggle to meet short-term obligations.
None of these examples is unusual because assets and liquidity measure different things.
Owning something of great value does not necessarily mean having money readily available to spend.
The same is true in strata.
The market value of a strata building may increase significantly over time. Apartment owners may become wealthier as property prices rise. Yet none of that automatically places additional money into the owners corporation’s bank account.
The building has become more valuable. Its immediate financial capacity may remain largely unchanged.
That observation is important. But it does not fully explain why so many strata schemes continue to experience financial stress.
The puzzle becomes even more interesting when viewed more broadly.
A strata scheme possesses far more than a valuable building.
It also brings together a community of owners with significant collective financial capacity.
Together they represent substantial income, savings, equity, borrowing capacity and expertise. Unlike many organisations, a strata scheme also possesses established legal mechanisms through which additional financial contributions can generally be raised when required.
Taken together, these appear to be substantial resources.
Many organisations would envy such a combination of valuable assets, predictable income and access to additional capital usually only available to public companies and enterprises.
So why do strata schemes so often behave as though those resources are insufficient?
Why do substantial resources so often fail to translate into economic confidence?
That question begins moving us beyond money and towards something deeper.
Part of the answer lies in the unusual nature of strata assets themselves.
Most valuable assets exist to produce value.
Businesses invest in equipment that generates revenue.
Investment funds acquire assets expected to appreciate or produce returns.
Even a family home provides accommodation while often increasing in value over time.
A strata building is different.
It is not simply an asset. It is also a set of continuing obligations.
Every lift ages.
Every roof deteriorates.
Every waterproofing system slowly approaches replacement.
Every façade, pipe, fire system and driveway continues its quiet progression towards repair or renewal.
The strata building therefore performs two functions simultaneously.
1. It represents accumulated wealth.
2. It continuously consumes resources simply to preserve that wealth.
The larger and more complex the strata building becomes, the more demanding that ongoing obligation often becomes.
This is where the discussion begins to move beyond financial literacy and into the design of the strata system itself.
Owners naturally look at what they can see.
Current bank balances.
Current levies.
Reserve funds.
Annual expenditure.
These are all useful indicators. None, however, necessarily describes the scheme’s overall economic position.
Imagine two strata schemes, each holding reserve funds of $800,000. On paper they appear financially similar.
Yet one building has recently completed its major renewal works and faces relatively modest expenditure over the next decade. The other unknowingly carries widespread waterproofing failures behind its façade. Engineering investigations eventually reveal rectification costs exceeding $2 million.
For years both schemes appeared equally healthy. They never were.
The difference was not sitting in the bank account.
It already existed within the economic reality of the buildings themselves.
A bank balance is not the same thing as an economic position.
This also helps explain why owners often feel blindsided by major special levies.
The levy rarely creates the underlying problem. More often, it reveals an economic position that already existed but had not yet become visible.
This is also why many familiar financial decisions in strata deserve closer examination.
Consider a committee that decides to postpone replacing an ageing roof in order to avoid increasing levies.
At first glance, the decision appears financially prudent.
Cash is preserved.
Owners avoid higher contributions.
The bank balance remains healthier than it otherwise would have been.
And, the roof continues working without immediate issues.
But has the strata building actually become wealthier? Not necessarily.
The roof continues to deteriorate.
The future repair becomes more expensive.
Water ingress becomes more likely.
Property damage becomes a growing possibility.
Rent losses may be suffered.
The apparent saving has not eliminated the economic cost. It has simply changed its form.
What appeared to be a decision about preserving strata scheme cash may also have increased future liabilities and financial risk.
Inside strata scheme systems, economic costs are often transformed rather than removed.
Recognising those transformations may prove just as important as understanding the movement of the money itself.
At this point another possibility begins to emerge.
Perhaps this recurring pattern in strata schemes is not primarily the result of careless committees, inattentive owners or poor financial literacy.
Perhaps it reflects something more fundamental about the way strata systems themselves operate.
The strata governance structure determines who receives information, who makes decisions, who bears the consequences of those decisions and how economic conditions become visible over time.
Participants frequently make decisions using the information immediately available to them, while important obligations, risks and future costs remain only partially visible, if at all.
The consequence is not simply imperfect decision-making.
The system itself may make the true economic position of the scheme difficult to perceive.
If that is so, then the recurring financial pressures experienced by many strata schemes may be less about individual failure than about the way the strata system organises, reports and governs economic realities.
We began with a simple question.
How can a building worth one hundred million dollars feel poor?
The answer is no longer simply that assets are not cash.
Nor is it merely that some liabilities remain hidden.
The deeper question is why strata systems so often create a gap between the economic position participants believe they are managing and the economic position that actually exists.
That gap cannot be explained by budgeting, accounting or financial literacy alone.
It appears to arise from the way strata governance structures shape the visibility of information, the allocation of responsibility, the timing of economic consequences and the interpretation of financial reality itself.
If that analysis is correct, then many familiar strata problems are not isolated financial events.
They are symptoms of a broader structural phenomenon.
Over the next series of GoStrata articles, we’ll examine how liabilities become economically significant long before they become visible, how economic costs are frequently transformed rather than eliminated, why reported financial positions can differ markedly from underlying economic reality, and why many special levies merely expose financial conditions that already existed.
Together, those ideas form the foundation of GoStrata’s next doctrine, Capital Distortion: the proposition that strata governance systems do not simply manage capital - they reshape how economic value, liabilities, risks and financial consequences are perceived, allocated, transformed and ultimately experienced in strata systems.
June 30, 2026
Francesco Andreone
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