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Frequently Asked Questions
An SFO pays their proportion up front, so does this mean they will not have an increase in strata fees – that is, no additional costs / payments?
Each SFO will be charged Loan Levies to pay for their proportion of the loan repayments, but these levies charged will be offset by the SFO Levies Credits each SFO is allocated.
There are no additional costs or payments for SFOs pertaining to loan repayments.
Are SFOs responsible for the interest on the Firstrata Loan?
All lot owners are legally responsible for all loan repayments made by the OC/BC. The general commercial effect of the Hybrid Loan is such that the proceeds from the loan levies paid by the non-SFOs are utilised to meet the Firstrata loan repayments.
How and when do the SFOs pay their money, and how do they know how much to pay?
After executing the SFO Agreement, each SFO will be issued with a Call Notice document that stipulates the amount due, the BPAY details for the SFO Trust and the due date.
The due date for payment will be as determined by the Committee and/or Strata Manager.
What is the SFO Trust and why is it used?
The SFO Trust is utilised to provide greater protection of funds for SFOs and to simplify the administration activities for the Strata Manager.
SFOs pay their money into the SFO Trust that is administered by Firstrata, and where the SFOs are the beneficiaries of this Trust, i.e. the SFOs have legal claim to their monies in this Trust, and where Perpetual controls the SFO Trust bank account.
Funds received into the Trust from the SFOs are released to the OC/BC when Firstrata receives a Drawdown Notice from the OC/BC.
Can an SFO sell their apartment with the loan attached so that the incoming purchaser only needs to pay normal levies?
Yes, the SFO Agreement provides for the automatic assignment of the benefits of the SFO Loan to the incoming purchaser, meaning the incoming purchaser does not need to pay loan levies.
Can an incoming purchaser be an SFO?
The opportunity to become an SFO only exists for those owners when the Hybrid Loan is established.
What happens to an SFO if there are significant defaults on the loan by non-SFO owners?
There are two distinct relationships: the first between Firstrata and the OC/BC, the second between the OC/BC and the owners.
The non-SFOs do not default on the loan per se, rather their obligation is to pay levies to the OC/BC which, on occasion, may not be paid on time.
If a significant number of non-SFOs have levies arrears, this could result in the OC/BC having a shortage of cash with which to repay the Firstrata loan.
The working capital facility can be utilised to cover this temporary cash shortage whilst the OC/BC takes action to recover the outstanding levies, noting that the process to recover outstanding loan levies is no different to the process to recover outstanding administration levies or sinking fund levies.
If the OC/BC does default on the loan repayments to Firstrata, Firstrata has the right to enforce the loan agreement with the OC/BC, which may include accelerating the action by the OC/BC to recover outstanding levies from non-SFOs along with raising additional levies from all owners to cover the cash shortfall.
What happens when an SFO sells their unit?
Nothing needs to be done. The incoming purchaser will continue to be charged loan levies for the remaining loan term, and they will also receive the offsetting SFO Levies Credits such that they have “no more to pay”.