OK, I believe that there are circumstances whereby owners can make payments related to common property on a different basis from simply everyone according to unit entitlements. This would operate where some owners can afford to pay the whole of the special levy up-front – and therefore avoid interest payments – but others can’t.
For instance, I know of a low-rise apartment block with multiple lifts where a few apartments don’t have or need lift access. In this block, only the apartments with lift access contribute to the lift maintenance fund.
To do this, it would require some legal instrument whereby some owners paid directly into a fund while others serviced the loan (which would also contribute to the fund). That fund would then pay for the work to be done.
It would be complicated but not impossible and, in fact, I can see the time coming when split special levies and loans will have to be offered for major works, so that owners who don’t have the money lying around to pay special levies aren’t forced to sell because of essential major works.
Now, I think it’s fair to say that the strata loan companies are not keen on this, for a variety of reasons, not least of which is that the less they lend, the more money they make.
However, there are other considerations. There is the attraction of it all being a lot simpler for everyone if all owners are participating in the loan.
It also means that future purchasers are making a contribution (which they can calculate as part of the sales price) rather than getting a free kick from benefitting from payments made in advance.
Also, strata lenders say that when people are considering the difference between lumps sum payments of a special levy with loan repayments, they tend to forget the “opportunity” cost of paying the whole lot out of your bank account.
For instance, have they cleared all their credit cards, the interest on which is about double the interest on a strata loan? Are they going to sacrifice something they want or need – like a holiday or a kitchen refurb to pay the special levy.
And then there’s the amorphous issue of community and collective responsibility. Many strata schemes allow a discount on levies that are paid in advance, so that’s one way people who are cashed up can save.
Having said all that, I’d love to hear from any Flatchatters who have successfully split maintenance and repair costs between a special levy and a loan, and from strata professionals who have helped to organise it.