A Strata Loan is a loan to the body corporate of a building to fund strata improvement projects like renovations, structural or aesthetic improvements, green projects, energy upgrades, mechanical improvements, maintenance and repairs, and repairs.
It is an alternative source of funding for the owner corporation to pay for projects, rather than accessing the capital works fund (formerly called a sinking fund) or raise a special levy.
Owners corporations, Body corporates and Community associations are eligible for a Stata Loan.
Company title properties, Self Managed Strata Plans Building management committees, Building management statements, Principal body corporate are ineligible borrowers.
There are many compelling benefits for choosing a Strata Loan over accessing the sinking fund or raising a special levy:
With some lenders, a strata loan can also be used to pay for strata insurance, professional services and litigation.
Strata Loans are usually unsecured and there is no security in the form of mortgages, banker’s liens, charges or caveats.
Loans are issued directly to the body corporate who is responsible, rather than the individual owners. This means there is no requirement to investigate the financial position of each individual lot owners.
While the Strata Plan executive representatives are required to sign the loan documents, neither owners, committee members or the strata manager are not required to give personal guarantees.
Yes, remediation of combustible cladding is a perfect example of when a Strata Loan can be used.
Owners will benefit from having the peace of mind that they are living in a fire safe building, as well as the confidence that the market value of their properties will be restored and the building’s legislative obligations have been met.
A body corporate that believes the developer or their contractor is responsible for the combustible cladding may also wish to use a Strata Loan to pay for the legal proceedings.
Most lenders will charge a commitment fee and an establishment fee to set up a Stata Loan.
There are usually no other ongoing charges, and no repayment fees, with the only charge being the interest rate for funds drawn.
Any other ad hoc fees are detailed in the loan contract, such as a processing fee to use any undrawn loan funds.
Loan terms for a Strata Loan are typically 1 to 10 years for a residential Strata Plans. A shorter loan term will apply to commercial or mixed property types.
Loans can be either or variable or fixed rates, depending on the preferences of the owners corporation.
Loans can also be set as interest only, and structured so that the loan will be fully repaid by the end of the loan term.
For some lenders, loans are not redrawable. This means any early repayments cannot be accessed at a later date and a new application must be submitted. However, if a loan is partially drawn down the balance can be drawn down at a later stage within the loan term.
There is usually no maximum or minimum loan, however some lenders may only fund projects up to a percentage of the aggregate market value of the lots in a strata company e.g. 20%.
Please contact us to advise:
We will work with your Strata Manager to collect and assess the supporting documents required by our lenders to approve your loan.
Once our submission is complete, we will work with our lenders to request a proposal that can presented at your Strata Plan’s Annual General Meeting or Executive General Meeting.
A motion will then need to be passed as per your strata requirements that the Strata Plan agrees to enter into a loan contract.
The supporting documents required to start your Strata Loan application include:
During the loan process, Conditions Precedent (CP’s) will then be issued and must be met before the loan may be settled. In addition to the above documents these may include: