This article discusses special levy balcony repairs strata and why all owners may have to contribute, even without a balcony.
Question: The balconies of 5 of our 7 units require work. Costs have been divided equally although my apartment does not have a balcony. Am I required to pay the special levy?
I own a ground floor apartment in the ACT in a complex of 7. Five apartments need balcony work done at a cost of $110,000. One of the balconies alone will cost approx $60K as it is larger and needs a new balustrade.
My apartment does not have a balcony. Do I have to contribute to this special levy, which is approx $10,000 each? Also, shouldn’t the owner of the larger unit contribute more as they are gaining greater value to their property?
Answer: As the Owners Corporation consists of all units, and the balconies are a defined part, they are Common Property.
It seems there are much needed maintenance repairs happening at your scheme.
It can be a slight misconception that balconies form part of the common property due to the Maintenance responsibility of the balcony falling to the Owners Corporation, However, I can confirm that whilst the responsibility of maintenance falls with the Owners Corporation, they are a unit subsidiary as specified on the Units Site Plan and are considered a part of the unit itself.
It would be similar to repairs happening to the roof of your scheme. Although you’re on the ground floor, all units would need to contribute towards the maintenance or repairs of the roof.
The Owners Corporation can decide at a General Meeting how a Special Levy might be calculated and charged. It sounds as your Owners Corporation decided to equally divide the costs. An alternative would have been using the Unit of Entitlements registered against the Scheme for each unit; typically this does make cost sharing more equal.
This post appears in Strata News #541.
Mark Zezulka
ACT Division Manager
Civium Communities
E: mark.zezulka@civium.com.au
Our building needs significant structural repairs at a cost of about $2million divided by 24 units. The strata wants to take out a loan at 9% interest costing us $2500/ month for the next 3 years.
I have the cash to pay my share but I don’t want to pay all that interest. The agm looks like it will vote in favour of the loan, but puts us on a large monthly burden which I can not afford.
What can I do and are there vehicles I can use to not enter the loan and just pay my share?
Hi Robert
We have just received this reply back from Andrew Boss, Firstrata Finance:
This is a common concern where major strata works are being considered and owners are in different financial positions. Some owners may have the funds available and prefer to pay their share upfront, while others may need to spread the cost over time.
Whether you can pay your share directly will depend on how the Owners Corporation resolves to fund the works and how the loan and levies are structured. If the proposed arrangement is a standard strata loan, you will likely not be able to simply opt out as an individual owner unless the funding structure specifically allows for this.
What should you ask before the AGM?
Before the AGM, you should ask the strata manager or committee to clarify:
• whether owners have the option to pay their share upfront;
• whether paying upfront would reduce or remove that owner’s interest cost;
• how the monthly repayments have been calculated;
• whether repayments are based on lot entitlement;
• whether alternative funding options have been considered; and
• whether any alternative structure can be clearly explained before owners vote.
These questions should be asked before the AGM is held and any motions are passed, as it may be much harder to change the arrangement after the loan and levy structure has been approved.
Is there an alternative structure?
One option the Owners Corporation could explore is whether a specialist hybrid funding structure is available. For example, the Firstrata Hybrid Loan is designed to allow some owners to pay upfront while others repay over time. This can be useful in buildings where some owners want to avoid interest and others need the flexibility of staged repayments.
However, this is a loan structure with specific features that may or may not be suitable for your Owners Corporation – you should ask how any proposed structure would be documented, approved and administered, including how levy credits or offsets would work for owners who pay upfront.
Why this matters
A single funding method can place pressure on owners in different ways. A large special levy may be difficult for some owners to pay upfront, while a standard loan may not suit owners who have the cash available and do not want to pay interest.
A properly structured alternative may help the building proceed with necessary works while giving owners different ways to meet their financial obligations.
Before the vote
You should raise this before the AGM and ask that the funding options are clearly explained to all owners before they vote. Once a loan and levy arrangement has been approved, your ability to avoid participating may be limited.
Strata legislation and approval requirements can vary between states and territories, so the correct process will depend on where the scheme is located and how the resolutions are drafted. As this scheme is located in the ACT, the Owners Corporation should ensure the proposed loan, levy arrangements and any alternative funding structure are properly considered under the ACT unit titles framework.
Andrew Boss
Firstrata Finance
W: firstratafinance.com.au
E: aboss@firstratafinance.com.au
T: 1800 59 59 00
This information is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.