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Q. How do we know if we should borrow?
A. Deciding whether to borrow is a matter for the strata council and unit owners, with input from professional advisors, including whomever assists in planning the contingency fund requirements. When faced with a substantial special levy, owners want to know all of their options. Our loan product allows the strata council to offer more payment options.
Q. What if some owners wish to simply pay the special levy outright?
A. This is not a problem. In almost every case we see owners who wish to pay the special levy in a lump sum and be done with it. Others appreciate the flexibility our loan product offers and wish to make monthly payments instead. Both groups can be accomodated by a properly worded special levy resolution.
Q. What kind of project is eligible for financing?
A. Virtually any type of repair, maintenance or acquisition can be financed, including: roofing, building envelope, garage work, windows, balconies, fire or plumbing retrofitting, elevators, security systems, landscaping, waterproofing, heating and air conditioning, general refurbishing, or for acquisition of real property to be added to the common element (ie - caretakers or guest suite).
Q. What about delaying the work?
A. The corporation should look at the work to be done and the consequences of delaying or spreading the work over several years. While deferring work may save financing costs, it can dramatically increase future construction costs and may negatively impact market value in the interim.
Q. How long do we have to repay the loan?
A. The repayment amortization can be up to twenty five years, but the interest rate cannot be fixed for longer than five years. If you choose a repayment amortization longer than five years, the balance outstanding at the end of five years is either paid in full or the interest rate is fixed at then current rates. This is much like renewing a mortgage after a five-year term.
Q. Should we repay the loan as soon as possible?
A. Prompt repayment (shorter amortization) will reduce the financing costs, but it is important to evaluate what the owners can reasonably afford to pay monthly. If owners cannot meet monthly payments, their ability to retain their units may be threatened. While the work is necessary, unit owners should not be put under too much stress.
Q. What is the monthly payment?
A. As with any loan or mortgage, the monthly payment depends on the amount borrowed, the term of the loan and the interest rate. In our experience, an affordable monthly payment for each owner is usually the most important issue. Financing is customized to achieve this whenever possible.
Q. What is the process to get the funds?
- Upon inquiry from you Strata Manager/Strata Council, 1 City Financial Ltd. provides a quote outlining the basic terms of the proposed loan including interest rate, term and amortization options.
- If the Strata Corporation wishes to proceed with an application based on the quote, we require some basic information which is readily available from the Strata Corporation.
- 1 City Financial Ltd. provides a commitment letter and provides to the Strata Corporation's legal council a form of special resolution and solicitors opinion required to document the loan.
- The Strata Corporation provides its members with a proper minimum 14 days notice of a SGM in order to approve the resolution authorizing the borrowing and including the loan payments in the Strata Corporations annual budget.
- A 75% majority poll vote is required to pass the resolution at the SGM.
- Once the resolution is passed our solicitors prepare the full security documents and provide them to the Strata Corporation's solicitors for review and signature by authorized signatures of the Strata Corporation.
- Upon execution of the security documents, the loan funds are forwarded to the Strata Corporation. This entire process, including the notice of meeting, can be accomplished within 4 - 6 weeks.
Q. What about legal liability?
A. Your corporation’s lawyer will recognize our documentation as being very straight-forward. It is important that the borrowing is properly approved in accordance with the corporation’s by-laws and the Strata Property Act. In this regard, a standard opinion of the corporation’s lawyer will be required. There is no mortgage security taken and unit owners are not required to sign individually. Each owner is only liable for the amount outstanding by their strata lot to the Strata Corporation. If they have paid all of their levies, there is no liability.
Q. What if an owner doesn't pay?
A. As with any non payment of maintenance or special levy fees, the Strata Corporation has a course of action it can take to collect. Generally, the Strata Corporation would enforce payment by filing a lien on the title of the delinquent strata lot and, if necessary, force the sale of the strata lot. More often than not, the arrears are paid by the company holding the mortgage on the property, as the lien in favour of the Strata Corporation actually takes priority over their mortgage. The owners who have paid their levy in full or are making their monthly contribution to the loan payment would not be affected.
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