Strata Loans

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.

Company title properties, Self Managed Strata Plans Building management committees, Building management statements, Principal body corporate are ineligible borrowers.

• Owners enjoy the lifestyle benefits and investment returns of completing the project sooner.
• Ability to pay for the project immediately to avoid the problem getting worse, rather than waiting for the capital works fund to accumulate
• Owners can put their money towards better uses such as paying down their home loan, making personal investments or simply saving

• Multiple repairs and renovations can be bundled into one project which can save time and money, and minimise disruption to owners, tenants and guests
• Loan repayments are incorporated into quarterly strata levies with a much smaller impact to your outlay than a special levy
• there is no mortgage or personal guarantee required to secure the loan by individual owners

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.

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.

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.

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%.

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.

1. A signed Application Form or Acknowledgement of Intent to Proceed
2. A copy of the invoice, quotation or agreement for the proposed works
3. A list of aged levy debtors
4. A copy of the strata roll of current members
5. The last 2 years financial statements for the strata plan, including details of levies which have been prepared in accordance with applicable laws for the past two financial years

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:

• A copy of the Annual General Meeting minutes passing the resolutions to carry out works, the terms of the loan (loan term, loan purpose, loan amount, and the nominated Bank or Lender) and to impose an additional levy
• Notice of Resolutions executed under common seal
• Where the loan is over $1M, an insurer’s certificate of currency or other acceptable evidence of building and other insurances, including public liability insurance.
• If a project manager or Quantity Surveyor (QS) is required, a confirmation of their appointment by the Strata Plan for the purpose of overseeing the works being undertaken.
• Other reasonable requirements as required the bank or lender.