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Austrata Hybrid Loan®

The Austrata Hybrid Loan® is designed to provide flexible funding options for Owners Corporations (OC) or Body Corporates (BC) undertaking projects.

How It Works

The loan comprises two key components:

Initial Loan

Provided to your OC/BC to cover the total GST-inclusive cost of the project.

Owner Contributions

At project completion, owners can choose how they pay their share of the loan.

This structure allows for flexibility, ensuring that owners who prefer a lump sum payment can save on interest, while others have the option to pay over time.

Simple & Easy Process

We’ve designed the Austrata Hybrid Loan process to be straightforward. Below is a step-by-step diagram showing how funds are drawn down, with indicative timing.

Learn more about Austrata Hybrid Loan®

How Much Do I Pay if I Want to Become a Self-Funding Owner (SFO)?

If you choose to become a Self-Funding Owner (SFO), your payment is calculated as follows:

Your Share = Lot Entitlement % (or Unit Entitlement %) × Total GST-Inclusive Project Cost

The lump sum payment for SFOs under the Austrata Hybrid Loan is identical to what would be paid if a Special Levy were used. Upon project completion, you will receive a schedule detailing the exact amount required to become an SFO.

Understanding Levies

To comply with strata legislation, levies are applied uniformly to all owners. Here’s how it works:

Loan Repayment Levies

Raised by the OC/BC to cover the Total Loan Amount.

For SFOs

Levies appear on your invoice as a notional charge but are offset by corresponding notional loan repayments.

Levy Invoices Examples:

Below are indicative levies invoices for two lot/unit owners, Jane Lin and Philip Ibrahim, both lot/unit owners having the same Lot Entitlement (or Unit Entitlement) %. Jane is an SFO and Philip is not.

SELF-FUNDING OWNER (SFO)

Ms Jane Lin

Jane's address

Tax Invoice 12345

Due Date 1 July 2022

Levies for the period
Strata Plan Number
Address
Lot Number

1 July 2022 – 30 September 2022
SP12345
45 Smith Street, Urbanville, This State, 1234
101

Invoice Summary

	Amt	Gst	Total
Administration Levies	$ 1,000.00	$ 100.00	$ 1,100.00
Sinking Fund Levies	$ 500.00	$ 50.00	$ 550.00
Loan Repayment Levies	$ 3,000.00	$ 300.00	$ 3,300.00

Total Levies Payable (inc GST)
Less Loan Repayment Credit
Net Amount Owing (inc GST)

$ 4,950.00
-$ 3,300.00
$ 1,650.00

NON-SFO

Mr Philip Ibrahim

Philip's address

Tax Invoice 12346

Due Date 1 July 2022

Levies for the period
Strata Plan Number
Address
Lot Number

1 July 2022 – 30 September 2022
SP12345
45 Smith Street, Urbanville, This State, 1234
102

Invoice Summary

	Amt	Gst	Total
Administration Levies	$ 1,000.00	$ 100.00	$ 1,100.00
Sinking Fund Levies	$ 500.00	$ 50.00	$ 550.00
Loan Repayment Levies	$ 3,000.00	$ 300.00	$ 3,300.00

Total Levies Payable (inc GST)

$ 4,950.00

Frequently asked questions

What is the benefit of a Hybrid Loan?

The Hybrid Loan allows some owners to pay their share of a project cost as a lump sum, avoiding paying interest on a loan, whilst other owners pay their share of a project cost over the life of the loan.

Briefly, how does it work for the OC/BC?

The OC/BC is borrowing an amount from Austrata in order to pay external suppliers, and at completion of the project part of the Austrata loan is effectively replaced with a loan from one or more SFOs. Key terms and conditions such as interest rate, length of loan, repayment frequency etc. of Austrata’s loan and the SFO loans are identical, so the proportion borrowed from each does not matter to the OC/BC; the total loan repayments are the same regardless of how much is lent by Austrata and how much is lent by the SFOs.

Can the OC/BC repay the loan early if it wants to?

Yes, if Austrata’s loan is variable rate, then by definition the SFO loans will be variable rate also, so the loans can be repaid early without penalty.

What happens if the OC/BC receives a windfall gain?

If the OC/BC receives funds from sources other than from owner levies, whether arising from proceeds of insurance recovery, successful litigation, government grants or for any other reason, if these funds are to be utilised to repay debt then the repayment must be applied to ALL loans in equal proportions, e.g. if 50% of Austrata’s loan balance is being repaid early, then each of the SFOs must also have 50% of their loan balance repaid to them at the same time.

Can the OC/BC establish more than one Hybrid Loan or Standard Loan for different components of the project, so that lot/unit owners can pay a lump sum on some but not all of the project?

Where a program of works is expected to run over an extended period, and the program consists of multiple discrete projects (e.g., replacement of windows and also the upgrade of balconies/balustrades), then with your Strata Manager’s consent it may be possible to utilise a combination of a Hybrid Loan with one or more Standard Loans.

Can an allowance for variations be included in the amount borrowed?

Yes, Austrata typically includes an allowance for variations for unforeseen expenses that may arise during the project works.

Can the Hybrid Loan be used as a line of credit?

The Hybrid Loan is an amortising loan product, not a come-and-go line of credit facility, albeit it can be subject to multiple progress draws.

Is the interest rate fixed or variable?

The interest rate is variable.

What if we don’t need the full loan amount?

If the full amount is not required, the Strata Manager will advise Austrata, and loan repayments will be structured accordingly.

An SFO pays its proportion as a lump sum, so does this mean it will not have an increase in strata fees - that is, no additional costs / payments?

Each SFO will be charged Loan Repayment Levies to pay for its proportion of the loan repayments, but these levies charged will be offset by the loan repayments owed to each SFO by the OC/BC.

There are no additional costs or payments for SFOs pertaining to loan repayments.

Are SFOs responsible for the interest on the Austrata Loan?

All lot/unit owners are responsible for all loan repayments made by the OC/BC, whether for the Austrata loan or the SFO loans.

Each SFO effectively “pays” its share of the loan interest on the Total Amount borrowed with the “proceeds” of the loan repayment it receives from the OC/BC.

Can an SFO sell its apartment with the loan attached so that the incoming purchaser only needs to pay normal levies?

Only those owners at the time when the project is complete can become an SFO.

An incoming purchaser who buys a lot/unit from an existing SFO can become an SFO, achieved by way of the SFO Agreement being assigned from the original SFO to the purchaser.

An incoming purchaser who buys a lot/unit from a “non-SFO” does not have the option to become an SFO.

Do all lot/unit owners pay levies in respect of the loan?

All lot/unit owners are charged Loan Repayment Levies by the OC/BC in accordance with the lot/unit owner’s share of your OC/BC.

SFOs are charged Loan Repayment Levies in accordance with their lot/unit entitlement (or unit entitlement) percentage, but these levies are offset by the loan repayments due to them from the OC/BC under the SFO loan.

Non-SFOs are charged Loan Repayment Levies in accordance with their lot/unit entitlement percentage and must pay these levies in the normal stipulated timeframe.

How do we know what the levies amount should be?

Austrata will calculate the total Loan Repayment Levies based on the expected loan repayments, taking into consideration the interest rate and loan term, and if it is a progress drawdown loan also taking into consideration the timing and amount of loan drawdowns during the first year.

What happens if the agreed Loan Repayment Levies differ from the actual repayments (e.g. if interest rates change)

Austrata keeps a ledger of all levies charged and all loan repayments, allowing it to automatically calculate any difference that may arise during the year.

If there is a material change in the loan repayments, shortly before the next AGM, Austrata will calculate the levies to meet the expected loan repayments in the upcoming year, will adjust this based on any difference in the current year and will communicate this to the Strata Manager.

Does Austrata charge/receive interest on the loans provided by the SFOs

Austrata does not charge nor receive any interest on the loans from the SFOs to the OC/BC.

Is there compound interest?

Interest is charged to the OC/BC loan account each month, and to the extent that the loan repayment is made at or before the scheduled time, then no compound interest will apply.

What happens if the interest rate changes, will SFOs have to pay increased levies?

If the interest rate changes on Austrata’s loan, then the interest rate on each SFO loan will also automatically change under the terms of the SFO loan.

This means that the OC/BC ’s total loan repayments will go up (if rates go up) or down (if rates go down), all lot/unit owners will be charged higher (or lower) Loan Repayment Levies, but this will be offset by the increase (decrease) in loan repayments from the OC/BC to each SFO.

In summary, a change in interest rate makes no practical difference to SFOs.

What happens if a lot/unit owner does not pay its loan repayment levies?

If any lot/unit owner is late in paying its levies, regardless of whether the levies are Administration Levies, Capital Works Levies or Loan Repayment Levies, the OC/BC has many remedies available to it, including but not limited to charging interest on overdue amounts, taking enforcement action to recover the debt and if required ultimately seeking a judgment from the court to take possession and seek to have the lot/unit owner’s apartment sold, from which the outstanding levies are recovered from the sale proceeds.

The Working Capital Facility offered by Austrata can provide additional short-term funding to the OC/BC to cover any cash shortfalls arising from loan repayment levies not being paid on time.

What are the key loan terms?

The key loan terms are stipulated in the loan documentation, including:

interest rate,
length of loan,
repayment frequency etc.

Does the hybrid loan conform with relevant legislation?

Yes, Austrata has obtained legal advice from law firms in each state confirming that the design and operation of the hybrid loan product is in accordance with relevant legislation.

What if there is a default on the loan?

The rights of Austrata and of the SFOs in the event of default on the loans is stipulated in the loan contract, noting that Austrata and the SFOs rank equally in their claims against the OC/BC.

Will there be any evidence of an SFO loan on individual title?

The SFO loan is between the entity that owns the lot/unit (you as an individual/s, company, trust etc) and the OC/BC, nothing is noted against the lot/unit.

In any event, the SFO loan is an asset and not a liability.

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Austrata Hybrid Loan®

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