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Hi
Firstly, my apologies, I searched but could not find the right topic to add on to.
After much investigation/due diligence, our Owners Corp. (OC) has voted to accept a number of special levies over taking out a strata loan in order to address the building defects in our young building. Some key points:
- The builder and developer are both bankrupt
- There is no building warranty insurance to claim against (legally they did not need to have this insurance for a development greater than 3 storeys)
- We have been down the path of legal advice, etc. (no joy to be had)
- We are a medium sized strata plan (<100 units)
- Total of the special levy per unit is approximately 25k
My question is this:
Has anyone had experience where an owner/s have sought approval to implement a payment plan. If so, what learning’s are you able to share and how was it addressed?
Many thanks in advance,
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If by a “payment plan” you mean spreading the load over several months or years for people who can’t afford to stump up the money in one hit, then you have closed the door to the easiest and most efficient option for this – a strata loan.
Bearing in mind that most construction jobs require a series of payments – up front, during and after completion, who is going to carry the can when the less well off owners can’t meet their special levy payments?
Given that your OC has, it would seem, rashly dismissed strata loans despite the problems a minority of owners would have in paying, there are only two options left open to individual owners – they can extend their mortgages by $25K (the cheapest leans you will ever get anywhere) or default on their levies (penalty interest 10 percent p.a.).
The latter would, of course, leave the OC short of funds for the building work, as well as disenfranchising the late payers. However, the Owners Corp can, by special resolution (75 percent of owners voting at a General Meeting), agree not to charge the late payers penalty interest so as not to add to their additional financial burdens.
Strata loan companies such as Lannocks are very experienced in this area and would be able to devise a system such as a line of credit whereby only the people who couldn’t afford to pay up front were being charged interest.
For instance, the law allows OCs to discount levies by 10 percent for early payment. That way you may be able to work this so that you get a loan but only those who couldn’t afford to pay up front were paying interest.
Failing that, your committee should do whatever it can to assist owners who need to extend their mortgages or get a loan. Don’t forget that mortgage providers actually have a priority vote in strata so they should be taking a bit of responsibility in these matters.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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