Summary:

A Strata Company may consider taking out a strata loan where essential works have to be carried out to maintain the common property. This is a good option if the owners are unable to afford a special levy and do not have enough in their Reserve Fund to meet the cost of urgent works that need to be carried out immediately.  

More Information

Sometimes it's necessary for works to be carried out immediately to comply with the STA 1985 and maintain common property.

There are times when raising a Special Levy isn't an option. Owners all have different financial circumstances and coming up with $5,000 or more is simply impossible for some owners.

In these circumstances, a strata loan may be the best route, as the works can be carried out straight away and the payments can be spread over a number of years, which owners can budget for.

Your Strata Manager can guide you through the process and seek quotes on your behalf and money can be drawn down in stages while works are being carried out. As with all loans, interest is payable.

Example Case:

A strata complex in Scarborough has 12 single-storey units. The complex itself sits on a very valuable block close to the new foreshore development.  

However, the buildings are in a bad state and the need for a new roof is urgent but some owners cannot afford the special levy, therefore the roof continues to be patched up as and when a new leak appears. 

These temporary repairs are costing the Strata Company a lot of money, which could be better used toward a complete roof replacement.

The insurance company have now imposed an excess on the policy of $5,000 for any claims relating to the "escape of liquid" to dissuade the owners from persistent claims and due to their claims history, they cannot get a competitive quote from any other insurer. 

The building lacks funds and their current cash flow cannot support the ongoing maintenance.  Many special levies are needing to be raised, which is causing frustration. 

In this instance, it is recommended that that owners look into taking out a loan, to fund the replacement of the roof.