Putting aside for the moment the questions around the relatively high interest rate charged on Strata Loans, having your Owners Corporation / Body Corporate borrow to pay for defects seems the most equitable method of paying for them.
We are used to putting aside funds every year to pay for major expenses that will crop up in the Future. The Capital Works Fund is not only a useful way of ironing out the “lumpiness” that occurs when large expenses have to be paid at irregular intervals, but it is also a means whereby “Today’s Owners” contribute to the wear and tear on everything from pumps to carpets that their ownership & occupation necessarily involves.
Paying for Defects or the consequences of a fire order is different. These are often very large costs that relate to Past events (construction negligence) – quite likely to a time before any of the current owners became owners. It seems most equitable that the burden and pain of paying for these costs should not fall on “Today’s Owners” alone, but be spread across all those who will be owning / occupying the complex for years to come.
If the OC borrows for a term of 7 or 10 years the repayments may start almost immediately but the financial impact of these repayments will be spread across more than one generation of owners – a more equitable way of paying for the costs of “legacy” issues like defects
S T R A T A A N S W E R S PTY LTD practical solutions for strata living
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