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QUESTION: I’m chairman of a Seventies block of 30 flats that requires major work on internal and external cracking.
We have had many quotes from engineers over many years and have accepted one that means raising a special levy of between $2,000 and $3,000 each, depending on unit size, to pay for the first stage.
Our strata manager says a loan needs to be to be raised and has called a meeting at short notice for this.
Is it common practice to get a loan for major works? Who pays the interest? Isn’t it up to each unit holder to make personal arrangements for loans? They’ve had lots of warnings of impending spending – JS, Edgecliff
ANSWER: Because some people may be better able to pay than others, it’s only fair to vote on whether to impose a special levy or arrange for a loan through a specialist strata loan company. It’s a pity there hasn’t been much time allowed to let everyone know properly what the choices are.
Strata loan interest rates are relatively high because the loans are “unsecured” – you can’t offer common property as a surety. However, strata lenders say the ultimate cost to borrowers is no greater than a bank loan or, indeed, spending your savings and losing accrued interest.
The loan is raised by the Owners Corporation and is serviced via an additional amount added into the levies, based on unit entitlements. The two leading companies in this field are Lannocks and Strata Finance although there may be others.
Many owners prefer to pay up front because a loan increases levies for a few years and they fear it may put future purchasers off. Other owners might simply not have the money and might face having to sell up if they are forced to pay a special levy.
The most important thing is that everyone gets to make an informed choice. You need to get the work done and you don’t want to be in the business of driving people out of their homes.
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THIS IS AN EDITED VERSION OF A QUESTION AND ANSWERS THAT YOU WILL ALSO FIND IN GREATER LENGTH IN THE FLAT CHAT FORUM.
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