A Comprehensive Guide to Strata Finance in Australia in 2025

Strata finance is a new and innovative finance option for Owners Corporations and Bodies Corporate across Australia and can be a powerful tool for maintaining, upgrading and future proofing strata titled properties. When used responsibly, it enables Owners Corporations to manage large-scale capital works without imposing sudden financial strain on individual owners.

As residential and commercial strata-titled properties age and regulatory compliance tightens, the need for funding major capital works, renovations, and emergency repairs often exceeds the available funds in the strata's sinking or capital works fund. Strata finance bridges this gap by offering specialised funding solutions tailored to the unique legal and operational environment of strata schemes.

This guide provides an in-depth overview of how strata finance works in Australia, its legal framework, key benefits and risks, typical use cases, and best practices for managing the finance process. 

1. Understanding Strata Finance

What Is Strata Finance?

Strata finance is a loan or line of credit obtained by the owners corporation (in NSW and Victoria) or body corporate (in Queensland and other states) to fund common property works. Unlike personal loans, strata loans are taken out in the name of the strata entity, not individual owners.

These loans typically do not require physical collateral and are unsecured, although the lender may rely on the power of the body corporate to levy contributions from lot owners.

Common Uses for Strata Finance

• Major building repairs or remediation (e.g., cladding rectification)

• Capital improvements (e.g., roof replacement, repainting, plumbing upgrades)

• Compliance works (e.g., fire safety upgrades, disability access)

• Energy efficiency upgrades (e.g., solar panels, LED lighting)

2. Legal and Regulatory Framework

Legislation by State and Territory

Each Australian state and territory has its own strata legislation. Some of the key acts include:

• NSW: Strata Schemes Management Act 2015

• VIC: Owners Corporations Act 2006

• QLD: Body Corporate and Community Management Act 1997

• WA: Strata Titles Act 1985 (as amended in 2020)

• SA: Strata Titles Act 1988

• ACT: Unit Titles (Management) Act 2011

• NT: Unit Titles Schemes Act 2009

• TAS: Strata Titles Act 1998

Each act governs:

• How finance may be obtained

• Voting thresholds required

• Disclosure and resolution processes

• Levy recovery rights

Authority to Borrow

Generally, the owners corporation or body corporate must pass a special resolution to approve borrowing. This usually requires:

• A specific motion at a general meeting

• A certain percentage of lot owners (or unit entitlements) voting in favour (often 75% or more)

In some jurisdictions, there may be requirements for disclosing terms of the loan, interest rates, fees, and repayment schedules before a vote can be validly passed.

3. Types of Strata Finance Solutions

Term Loans

Fixed sum borrowed upfront

Fixed or variable interest rates

Repaid over 1–15 years

Suitable for known projects with clear budgets

Line of Credit

Flexible access to funds as needed

Interest is paid only on amounts drawn

Useful for ongoing or uncertain costs

Lump-Sum vs. Drawdown Facilities

Lump-sum: Ideal for urgent repairs or once-off projects

Progress drawdown: Aligns with construction milestones and reduces interest cost

4. Key Features and Conditions

Feature	Description
Security	Usually unsecured. Some lenders require assignment of levy rights.
Repayment	Typically repaid via quarterly strata levies or special levies by Individual Lot Owners with monthly repayment schedule by the OC to lender
Interest Rates	Range between 8% and 12%, depending on risk and term.
Fees	Establishment fees, monthly fees, early repayment charges may apply.
Terms	1 to 15 years, with longer terms attracting higher interest.
Credit Assessment	Based on size, levy arrears, financial management history, insurance status.

5. Benefits of Strata Finance

• Avoids large special levies that may burden individual owners

• Accelerates project delivery (e.g., fixing safety issues quickly)

• Spreads cost over time, aligning with long-term use of the asset and allowing for some cost alignment for Individual Lot Owners if property is sold.

• Preserves liquidity in the sinking or capital works fund

• Supports property value by maintaining and upgrading the building

6. Risks and Considerations

Financial Risk

If default occurs, recovery action may be taken via levy enforcement. Interest costs increase total outlay compared to direct levies

Owner Resistance

Some owners may object to borrowing due to higher long-term costs

Market Risks

Rising interest rates can affect repayments (unless fixed rate secured).

Legal Challenges

Improperly passed resolutions or lack of disclosure may invalidate finance agreements

7. Process of Obtaining Strata Finance

Step 1: Feasibility and Costing

Obtain detailed scope and quotes for works. Consider alternatives such as special levies or using reserves

Step 2: Finance Assessment

Engage a strata finance broker or lender. Provide records (budgets, levy arrears, insurance, minutes, financials)

Step 3: Approval Process

Include finance motion on AGM or EGM agenda. Distribute loan disclosure documents. Pass resolution with required majority.

Step 4: Execution and Funding

Sign loan agreement on behalf of strata entity. Funds disbursed to contractor or body corporate account

Step 5: Levy Adjustments

Adjust levies to include repayment schedule. Inform owners of levy increases or payment options

8. Alternatives to Strata Finance

Option	Description
Special Levies	Upfront cost split among owners, often unpopular
Using Reserve Funds	Preferred if funds are sufficient
Staged Projects	Split works over multiple years to spread cost
Government Grants	May be available for energy efficiency or cladding

An innovative new solution for strata in 2025 and beyond

Successful execution of Strata finance depends on sound governance, transparent communication, and a clear understanding of obligations.

Strata committees, lot owners, and strata managers should work collaboratively with financial professionals to assess whether strata finance is the most appropriate solution for their scheme's needs and long-term objectives.