What Are Strata Loans?

There are times a Body Corporate or Owners Corporation needs extra funds for emergency repairs or some unexpected major remedial works.
Ideally there will be enough money in the Sinking Fund (also known as a Capital Expenditure or Maintenance Fund) to cover the work, but what happens if there isn’t?
In that case, the Body Corporate or Owners Corporation may wish to consider obtaining a strata loan.

What is Strata Finance?

Strata Finance is a unique form of funding offered by specialist lenders who know and understand Body Corporate and Owners Corporation legislation.
Unlike other forms of lending, strata loans come with strict conditions on their establishment and use.
The loan period can be anywhere between one year to 10 years for residential schemes. Commercial or mixed-use properties may be limited to a five-year term. The interest rates may be fixed or variable.

How to Get A Strata Loan

Before applying to a lender, there are a number of things a strata community needs to do.
You may require the services of a project manager and suitable qualified service provider/trades person to determine the scope of works and provide costings.
A lender will want to see:

  • A scope of proposed works/project;
  • Details of number of lots and the number of different owners;
  • An aged debtor’s list; and
  • Financial statements going back at least two years.

Particular lenders may have additional requirements other than those listed above.

Obtaining Approval from the Body Corporate / Owners Corporation

The details of the works to be carried out need to be presented either an Annual General Meeting or an Extraordinary General Meeting for all owners to vote on.
The resolution should state:

  • What type of work is proposed to be carried out;
  • The amount of the loan and its term;
  • The name of the lender; and
  • How the loan is to be repaid.

Is There an Alternative?

The Body Corporate and Owners Corporation has a responsibility to keep common property in good order, so important works do need to be carried out.

An alternative to obtaining a strata loan may be to raise a special levy for the work. The resolution to create a special levy must be passed by at least ordinary resolution at a General Meeting.

SSKB is Australia’s leading strata management company specialising delivering expert advice and management to Owners Corporation and Body Corporate communities.

This article contains general information only. It does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice.

Click here to contact the SSKB team today. 

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