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Topic
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Whether to seek funding via a private strata finance company for a large building project involving replacement of 20 balconies: ie 4 metal panels and 4 metal posts per apartment.
Building quotations range from $676,000 to $1.2million! In addition, there is a Consultant Engineer’s Supervision fee of 9.9% of the total building cost as well as Home Builders Compensation Fund [HBCF] Insurance.
AGM is being held this month, May 2025. Agenda items for this Project propose a (i) Special Levy of $900,000 (after Owners have already paid Special Levies for the last 4 years but not nearly enough to fund the Project) and (ii) raising this enormous amount via a Loan through a Strata finance company – two companies have been listed.
Bearing in mind, such finance companies charge Variable Interest Rates, currently between approx 9.70% to 9.80% as well as Application Fee and possibly late payment fees, Owners would be indebted for X number of years (the exact period to be decided at the AGM).
NB: the Special Levy is in addition to the Strata Management’s General Levy!
Given that most Owners would be new to such strata financing, I seek advice whether taking on such a Loan would be advisable… or not?
8 May 2025
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Replies
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I’m curious, do all balconies in the complex have to be replaced, or is the 20 a subset? And is the work urgent?
Our (smaller) building had a big project a few years back and we chose to increase levies for two years and save for the project, spreading the less pain over a longer period. That worked for us and we were fortunate that no other urgent project came up that would have forced us to use the saved funds for a different, more time-critical, purpose.
Both your proposed funding options would not have this same risk as the money would have to be spent on the balcony project.
You could possibly do two special levies – half to fund the start of the project and then another half to fund the completion.
You need to factor in non-payment by one or more owners. It can take a while for a formal collections process to run its course – does your CWF have enough to pay your builders if a couple of owners don’t pay up and you have to chase them for the funds? We had this happen on our project – 1/3 of owners got behind on the increased levies so the CWF had to cover their portion of the payments while we went through collections, bankruptcy proceedings and finally a sale, at which time the CWF was repaid. This is a risk with both your proposed funding options – some owners may be stretched financially and have difficulty paying for this. But I’m sure you know that already.
Hi
Your experience sounds very similar to what we are going through right now.
But what I have found is the Engineering Company’s people are not licenced to:
- Produce a Building Condition Report which is the basis for what needs to be fixed.
They called it an Engineering Inspection Report. - Produce a Regulated Design which is the basis for how the waterproofing is going to be fixed.
They called it a Remediation Engineering Specification
If it’s the same company I would recommend that you check those documents carefully before the OC commits to spending money.
I’m okay if Jimmy T wants to share my email details with you so we can compare notes.
Cheers
I’m okay if Jimmy T wants to share my email details with you so we can compare notes.
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- Produce a Building Condition Report which is the basis for what needs to be fixed.
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