When it comes to managing your strata finances during COVID-19, the best option – or combination of options – for your strata property will vary depending on your circumstances. Your strata manager is able to assist you with this if you require advice or additional information.Here are seven options you and your strata committee may consider, to manage strata finances during COVID-19:
The committee may not be able to control revenue, but you can revise expenditure and defer non-essential and discretionary spending. A cashflow forecast should be prepared to assess cashflow and any impact from the current environment. We have developed a tool to enable your strata manager to assist you with this.
You may also consider using funds in investment accounts, if necessary during this difficult time. Some banks may be offering removal of break costs for accessing funds from term deposits. The 31-day notice period is still required to access funds, so you should think about this early on.
The owners corporation can revisit the current budget under which the levies were determined at the last AGM in order to manage strata finances during COVID-19. Items of proposed expenditure could be reconsidered on the criteria of whether they are essential and/or are a legal requirement. A general meeting could then be held to reset the levies per a revised budget.
In New South Wales, strata legislation allows for money in your capital works fund to be used towards expenditure generally paid for from the administrative fund. This may be a good option to consider to manage strata finances during COVID-19.
A committee can transfer or loan money between the administrative and capital works funds to meet the upcoming expenditure of administrative or capitals works related items. There are some requirements around the determination of repayment within 90 days, which must be adhered to.
In Victoria, owners corporation legislation provides that money in your maintenance fund can be used for recurrent expenditure normally paid from the administrative fund, if the owners corporation has passed an appropriate special resolution.
Many properties pay their yearly insurance premiums for a year in one large sum. To improve cash flow and manage strata finances during COVID-19, your strata manager can talk to your broker or insurance company about paying your premium in lesser instalments. Most insurers do not charge an additional cost for such an arrangement.
You can also explore premium funding can also be explored through your insurance broker as another means to address cash flow. This must be approved at a general meeting.
While strata loans can help manage strata finances during COVID-19 if additional funds are necessary, the rules governing them are a little different for each Australian state.
New South Wales and Queensland
Committees may wish to evaluate external liquidity options via a strata or body corporate loan to meet its expenditure requirements, whether for capital works items or to supplement or replace levy contributions to make the scheme more financially resilient and provide flexibility.
For capital expenditure that you have designated funding within a capital fund, you can choose to retain those funds for general administrative spending and use a loan to help with costs that levies may have otherwise met.
Additionally, there may be the ability via financial institutions or financial intermediaries to establish a loan facility to supplement or replace a quarterly levy and to make the scheme more financially resilient. These facilities may fund up to 12 months of budgetary requirements and provide some level of flexibility. We can assist with further information and options on suitable products available from our financial partners.
The committee can seek to defer non-essential major works to alleviate financial pressure on owners, in order to manage strata finances during COVID-19. The committee must, however, continue to observe their obligations to repair and maintain common property and observe any contractual obligations already in place.
It’s important to look after one another during difficult times. Your strata committee may consider the following to assist owners and manage strata finances during COVID-19.
Consider payment plans
To ensure easy access to financial support, we have developed an online payment plan to guide those who are suffering financial hardship through this time. Please visit the “For owners” menu tab on the website of your branch and click on “Payment plan for levies and fees”. In addition, our managers are here to support you and are available for a conversation.
Consider removing or waiving interest on late levies
Strata legislation sets out the default rate of interest on late levies. However, the interest can be removed or waived by the owners corporation either generally or in a particular case.
Note: The funds belong to the owners corporation. The managing agent cannot make decisions regarding the removal of interest, acceptance of payment plans, and any amendments to budgeted contributions. These items require the resolution of the committee.To access our full range of strata resources or to stay up to date on regular updates, sign up to receive our quarterly newsletter by clicking here. For a consultation to review your by-laws, our Kemps Petersons Legal team is at your service to assist. Or, one of our team members can assist you with a free assessment – it’s free and carries no obligation.