Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/354755
MORTGAGEBROKER mbabc.ca summer 2014 | 27 stratafinancing realize that a project is necessary and will most likely improve the value of their unit but do not have the funds to pay their share. Certainly, there are owners who know the project is necessary and have the resources to pay their share, think everyone else should too and if their neighbors can't pay they should sell their unit and move. e most likely special levy and borrowing resolution to get past a three-quarter vote will allow some flexibility in how the funds can be paid. Such a resolution would allow for owners who have the funds available to pay their share of the levy in full, while others who do not have the funds available pay a monthly payment toward their share of the levy, with interest, over an agreed upon term and amortization. e strata corporation loan would match that term and amortization. e monthly payments from the owners to the strata corporation cover the loan payments to the lender. Hopefully this structure satisfies enough of the owners that a 75 per cent vote is achieved and the strata corporation can proceed with the project. As with any compromise, this one is not perfect. e borrower is the strata corporation, not the individual owners who still owe their share of the levy. Under the SPA, expenses incurred by a strata corporation must be divided among the owners by unit entitlement. e fees and costs to set up the loan must be borne by all the owners, regardless of whether or not they are paying their levy monthly or all at once. In addition, if there were a shortfall in collecting from those owners paying monthly, that shortfall would have to be covered by the strata corporation either from the CRF or by another special levy on owners. is sometimes leads to those owners with resources to vote against borrowing as they do not want to be 'on the hook' for their neighbour's debt if they don't pay. Once again, the chance of a shortfall is slim due to the strata corporation's priority on the title of any strata lot that might default. From first enquiry to funding a loan could take as little as three months but more likely will take more than 12 months. It is normal for a strata corporation to hold at least one, and sometimes two or three information meetings before giving the required 21-day notice for an AGM or SGM. is is a niche market that requires much patience and perseverance. e product cannot be 'sold', merely offered. Marketing is difficult; there is no directory of strata corporations to allow you to look them up. Strata property managers are hit and miss; some welcome the concept as an option for strata corporations struggling to approve a major project, while others are against it, saying the only way a strata corporation should fund a project is with a special levy, paid in full by all owners. • Brian Chatfield is a mortgage broker and longtime member of MBABC. He is principal at 1 City Financial Ltd., a corporate member of MBABC.