Many strata schemes, for a variety of reasons, may find themselves in the position where money is urgently needed to pay for essential repairs or renovations but the bank account is ‘bare’. When this situation occurs, there are a couple of options open to the owners’ corporation including:
- Don’t do anything and wait until enough money has been raised from future levies (not recommended).
- Raise a special levy so the works can be completed (not very popular).
- Raise the money via a strata finance loan.
While the idea of taking out a loan may seem abhorrent to many, it might just be the best (and sometimes ONLY) solution to ensure the work is actually completed before the problem gets any worse and more than likely results in a cost blowout. A loan avoids the dreaded special levy and ensures necessary works are completed and your building is compliant. Most importantly, everyone is safe from harm.
What is strata financing?
- It is finance provided directly to the body corporate and provides funding for capital works, insurance premiums, or building upgrades.
- It provides a vehicle for the body corporate to commence improvement works on the building without the need to raise special levies or wait for those special levies to be raised.
- As an owner, strata financing is also a far better use of your funds, rather than have them sit in a low interest bearing sinking fund account.
- Strata financing means you can attend to your building works now.
Who benefits from strata finance?
- The body corporate, as they’re able to make decisions quickly.
- The owners, as there is no need to raise significant special levies.
- The building, as works essential or non-essential are completed immediately.
- Owners benefit, as it protects the integrity and value of one of their most significant investments.
What can it be used for?
- Essential and non-essential building works
- Insurance premium funding
- Emergency repairs
- Litigation (within building insurance time frame)
- Defects liability
Why should I use it?
- Increases the speed at which building works can begin and therefore reduces the cost of those works, as well as the chance the problem becomes worse and more costly.
- Provides immediate benefit for you and the property.
- Reduces the need to fund significant special levies for building works.
- Unlike a special levy, the debt is transferable and remains with the body corporate and therefore an upgraded or improved building can be enjoyed by future owners who will proportionately pay for it via their body corporate fees.