The Strata Titles Act 1985, also known as the strata reforms, came into effect in May 2020 and these were welcomed for bringing strata communities ‘into the 21st century’. These reforms have effectively introduced better buyer information, more efficient dispute resolution, and improved strata management and by-laws.
This did take place over a year ago so clearly this is not breaking news, but under the changes in the strata act, there is now more appropriate rigidity on the requirements for repairs and maintenance. As an extreme example, recently a complex in Melbourne received the biggest strata loan in history, to re-clad. It demonstrates strata expenditure that was necessary – once identified – but was likely unforeseen by the individual owners at the time of purchase.
When it comes to strata, there will inevitably be an instance of required expenditure, outside of general maintenance, that may require strata finance. It is as important now as ever to plan and budget for something that comes out of left field, with some strata complexes reportedly budgeting up to five years in advance.
Potential Uses of a Strata Loan
Strata loans are unsecured, which means that they do not affect existing mortgage arrangements. They provide immediate access to funding for time-sensitive repairs or projects that might be considered negligent or irresponsible to hold off on. Those potential uses might include:
- Major renovations or replacements – such as roof, lift, or car park repairs.
- Energy efficiency upgrades – such as lighting, cooling, or solar.
- Upgrades to meet the latest safety requirements – such as balustrades or pool.
- Large capital works to enhance the value of the building.
- Unbudgeted items or emergency repairs.
- Property related legal fees.
Benefits of Strata Loans
When required works are identified, owners corporations or body corporates do have options, but they will always depend on the amount required. When a sinking fund is short of capital and the required levies are too much to raise from owners, external funding through strata finance is available.
A strata loan provides immediate access to funding and is more likely to satisfy all the individual owner’s ability to contribute, given the costs are spread out over a longer timeframe. Additionally, the loan would allow work to get started immediately to avoid potentially costly delays, and even allow your preferred contractor to carry out the works.
If necessary, strata loans can be structured to be repayable over 10 to 15 years.
How Southshore Can Assist with your Strata Loan
If you are managing a strata body corporate with more than 8 members and require a strata loan tailored to best suit the stakeholders, Southshore Finance can help. We are happy to prepare appropriate details and even attend your next general meeting to present the proposal, for acceptance to proceed.
For us to get started, simply provide us with the following information:
- How much the strata’s body corporate needs to borrow.
- What the funds will be used for; both lump sum and draw-down intentions.
- How many individual lots the funding applies to.