The Act clearly entitles a Sectional Title Body Corporate to borrow money required by it in the performance of its functions and duties. Further to this, the Sectional Title Schemes Management (STSMA) obliges and empowers the Body Corporate to establish and maintain an administrative fund which is reasonably sufficient to cover the estimated operating costs incurred by it such as:
1Repair, upkeep, preservation, control, management and administration of the common property;
2Local authority charges for the supply of electricity, gas, water, fuel and sanitary and other services to the building and the land;
3All premiums of insurance; and
4For the discharge of any duty or fulfilment of any other obligation of the Body Corporate.
The STSMA further requires bodies corporate to establish and maintain a reserve fund in such amounts as are reasonably sufficient to cover the cost of future maintenance and repair of the common property.
Borrowing funds ensures that the Body Corporate has the benefits of:
1TIME to take the necessary action to collect outstanding levies and rehabilitate the levy defaulter;
2ACTION to implement required maintenance immediately, avoiding the risk of further deterioration, containment of additional unnecessary costs, price escalations and inconvenience to all unit owners;
3PRESERVING the asset value of the Sectional Title units and hence protecting the property investment of all unit owners;
4GUARANTEEING the Body Corporate financial cash flow and stability; and
5PROTECTING the paying owners from the costs of the loan and from subsidising their non-paying owners whilst ensuring delivery of required services to the Body Corporate.