Can the owners corporation call in a strata loan without consulting lot owners?

Firstly, when deciding to take out a loan, the owners corporation must determine whether a special resolution or an ordinary resolution is required to take out the loan. This will be determined by the total amount being borrowed. If the loan is more than twice the annual budget, the owners corporation will need to obtain a special resolution. Alternatively, if the loan is less than twice the annual budget, the committee have the power to pass an ordinary resolution to take out the loan.

Before agreeing to provide a loan, the lenders have strict requirements and guidelines that they must adhere to, such as requesting copies of the minutes of the meeting where the resolution was passed, balance sheets, insurance details and the financial documentation of the owners corporation over a number of financial years and the details of the committee members who will be authorised to sign off on the drawdown of the loan.

As noted above, the strata loan provider will provide a set of recommended resolutions, which it recommends the owners corporation pass, prior to approving a loan. These resolutions will also contain a delegation to the committee to make decisions on behalf of the owners corporation in respect to any aspect of the loan (such as drawdown, payout or increasing the loan amount).

These resolutions must also take into account the repayment of the loan (principal and interest) over the duration of the loan to ensure that the owners corporation has the necessary funds to make the monthly loan repayment. A levy would likely be resolved at this time to ensure the repayments could be made.

The loan may also stipulate that the owners corporation does not pay interest on the full amount, only on what has been drawn down. You would need to check this with the owners corporation manager or the loan provider.

It is therefore likely that your owners corporation committee have passed such resolutions in the first instance and hold the power to pay out the loan earlier than the agreed term. We suggest that you request a copy of the minutes of the meeting wherein the loan was resolved.

Alternatively, you can also contact the loan provider directly to discuss any technical requirements of the loan and the parameters surrounding the agreement to provide funding.