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Topic
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Hi,
Am new to all things strata and need advice.
As a chairman of the Executive Committee ( running blind on duties and obligations ) we have taken the advice of our strata manager on all arrangements of building care and responsibilities.
We are in NSW a 70's 30 unit block of flats that now requires major work on a sinking corner that has internal and external cracking.
We have had many investigations and quotes from engineers over many years and have accepted one quote to fix.
That brings us to the raising of a special levy stage 1 for this amount approx $2,000 – $3,00 depending on size of unit.
The strata management agency advises a loan to be raised and has called a meeting within less than 7 days with only 2 dates to choose in same week – with no other dates available to meet until 2011 – work committments have me unable to attend.
So my questions is: is it common practice for exec committee to get a loan for major works ? Where can I find out more ? Who pays interest ? What advice , warnings can you give me ?
Is it not the personal obligation of each unit holder to make personal arrangements eg: personal loan, increase mortgage or savings ( have had lots of warning of impending spend ) to pay special levy ?
Thank you
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Replies
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Firstly, a loan can't be agreed by the EC – only by the Owners Corporation at a general meeting. Because there may be some people better able to pay than others, it's only fair that a majority of all owners decide on whether to impose a special levy or arrange for a loan through a specialist strata loan company. Strata loan interest rates are higher because the loans are “unsecured” – you can't offer any property as a surety. However, strata lenders will argue that the cost to borrowers is no greater, at the end of the day, than a bank loan or, indeed, spending your savings (and losing accrued interest).
And to answer your other questions, the loan is raised by the Owners Corporation and is serviced via an additional amount added to the levies, based on unit entitlements. The two leading companies in this field are Lannocks and Strata Finance although there may be others.
The difference, at the end of the day is philosophical as well as financial. Do you want the people who will benefit from the work (present and future owners) to pay for it or do you think current owners should pay for not having enough in the sinking fund to cover the cost of remedial work?
Many owners prefer to pay up front for the simple reason that a loan adds to future levies and may put future purchasers off (or they may be happy to see that necessary work had been done). Other owners simply don't have the money and might face having to sell up if they are forced to pay a special levy (although there's a body of opinion that that's what you get for 'saving' money by not keeping your sinking fund up to scratch).
You could go for an each-way bet. Get the special levy in to get work going and then look at a loan for the balance of the work if it's going to mean another hefty hit. But you are right to ask about this – the most important thing is that everyone gets to make an informed choice.
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