COVID-19 prompts Strata Levy Funding Lifeline
Owners corporations and body corporates are being offered a strata levy funding lifeline during the COVID-19 health crisis.
The impact of COVID-19 is being felt by consumers and businesses across the country as conditions are imposed to help slow the spread of the virus.
The strata sector has not been immune to the COVID-19 health crisis. Strata management companies and body corporates have been inundated with calls and enquiries from strata owners seeking to defer strata levies.
The challenge for owners corporations and body corporates is balancing the budget when maintenance costs could be higher and levy contributions could be lower due to financial hardship of its owners.
The strata and body corporate sector supports more than just owners. The industry supports thousands and thousands of small businesses, sole traders and subcontractors – as well as their families.
Managing strata cash flows during the pandemic will be a significant challenge in the months to come. Collectively, owners corporations and body corporates need to make smart and equitable decisions.
Dealing with a strata levy shortfall
In response to a potential strata levy shortfall, Lannock Strata Finance has introduced a new loan product.
Lannock Strata Finance CEO Paul Morton said the owners’ corporation in this situation can take advantage of a product called Levy Assist, which provides a loan to help manage levy payments.
Levy Assist generally provides a year’s funding for all owner corporations, and more if required, and enables an owners’ corporation to meet its financial obligations way past the anticipated end of the virus crisis.
“Levies are the lifeblood of the body corporate system as they cover the cost of maintaining the building, insurance and other running costs,” Mr Morton said.
Given the economic downturn due to COVID-19, many owners are afraid that they will be unable to pay their levies. This will mean people who maintain strata complexes such as gardeners, builders and cleaners could struggle to get paid.
As a flexible option, the levy assist loan basically acts as a safety net for strata, which the corporation can opt out of using. In the case of unuse, they will not be required to pay any amount.
The borrower also decides the length of time for which they will need assistance, meaning that they will not be restricted to the usual three- or six-month period.
“The Levy Assist loan puts the owners in control. We don’t tell the corporation what amount we’ll lend, we let the owners work out what is best in their situation. There is a standard term and interest only period, but we’ll also adjust that if you want something different.”
“We don’t ask for personal financial information, there’s no security, set up cost, bank liens, fees, charges, caveats or personal guarantees. We let you pay it back over time or in one hit whenever you like without penalty.”
“The corporation can decide each month whether to fund its needs by drawing on the loan or by using funds from other sources,” he highlighted.
According to Mr Morton, the decision about levies and loans should be made at a owners corporation or body corporate general meeting.
“Every owner corporation is different and owners have different needs and objectives – the general meeting is the place to decide which is best for each particular group.”
*The product is not available to strata corporations in Tasmania.