Strata Finance: A guide for strata and owners corporations
Sometimes a scheme needs money it doesn't have on hand. An unexpected repair, an insurance premium due before the next levy comes in, a major works project the capital works fund hasn't fully covered. When that happens, schemes generally have three options: wait until the reserves build up, raise a special levy, or take out a strata loan.
This page explains how strata finance works in general terms. The actual power to borrow, and the process for approving it, comes from your state's own legislation, so check your state hub for the specific rules that apply to your scheme.
What is strata finance?
Strata finance is a loan the scheme takes out, not a loan to individual owners. The scheme borrows as one entity, and repayments get folded into the ongoing levy structure. This saves individual owners from arranging their own finance.
This market is usually handled by specialist lenders, rather than mainstream banks. The loans themselves are usually straightforward: a fixed or variable rate, with none of the extra features you'd find in a standard mortgage.
Why would a scheme consider a strata loan?
Waiting for reserves to build up can delay necessary repairs, often leading to more damage and higher costs down the track. A special levy asks owners for a large lump sum all at once, which can create real financial pressure for some. A loan spreads the cost over time and builds it into the regular levy cycle.
Strata finance isn't the right answer for every situation, but if a scheme faces a significant expense without the reserves to cover it, it's worth understanding how it works.
Is strata finance secured against anything?
Strata finance is typically unsecured, so the loan isn’t tied to individual owners' properties and won’t affect their mortgage. Lenders want to know the scheme can meet its repayments, so they’ll look at levy collection history and the scheme’s overall financial health rather than the credit history and financial position of individual owners.
Does consumer credit law protect the scheme?
Strata schemes are covered by the National Credit Code under the National Consumer Credit Protection Act. This was a deliberate decision when the legislation was written. Unlike companies, which sit outside consumer credit protection entirely, strata corporations were specifically included. That means a strata loan for residential purposes generally carries the same responsible lending protections as a loan to an individual. Whether that applies to your specific loan depends on its purpose and structure, so it’s worth confirming directly with the lender.
Typical loan terms
Strata loans are generally shorter than a standard mortgage. Terms of one to ten years are common for residential schemes, with commercial and mixed-use schemes typically limited to around five years. Exact terms, rates and fees vary by lender and circumstance.
How is borrowing approved?
Every strata Act across the states and territories gives schemes the power to borrow, but the required resolution and threshold differ. In some states, it's a straightforward ordinary resolution regardless of amount. In others, the required resolution depends on the loan size in relation to the scheme. Check your state hub's legislation tab for the specific provision that applies.
What do lenders look at during the approval process?
In addition to ensuring the resolution is properly passed, lenders usually want to see the scheme's recent financial statements and levy arrears history, documentation of the work or expense the loan is for, and confirmation of who's authorised to sign on the scheme's behalf. Requirements vary between lenders, so ask for their checklist early.
Getting started
Because a resolution to borrow must be passed at a general meeting, schemes commonly seek indicative approval from a lender beforehand, so owners have the terms when they vote. From there, the process runs through your scheme's usual meeting and resolution requirements under your state's Act.
Whether strata finance makes sense depends on your scheme's specific circumstances. A financial adviser familiar with strata is best placed to help you weigh that up.
