How community schemes can rely on debtor finance to cover levy shortfalls

Aug 31, 2020 | Debtor Finance

Community schemes rely on property homeowners to pay their levies every month to provide the necessary maintenance and settle bills from service providers. Most community schemes work on a tight budget, and without the levy income, it could fall into a vicious cycle which is hard to escape. When owners fall behind on their levy payments, the community scheme must rely on the contributions of the paying owners to cover all expenses – which is unfair and often leads to further default.

Most community schemes don’t budget for the legal cost to collect arrear levies, which places further pressure on its cash flow. This extra expense only adds to the pressure on the community scheme and while the bills pile up, the community scheme cannot function properly.

Without the levy income, three scenarios may happen:

  1. The paying owners have to cough up more to cover the shortfall, or
  2.  The community scheme would have to dip into its reserve funds or
  3. Planned projects or other expenses will be scaled back or cancelled.

Buildings that are well maintained and modernised attract interest and lead to increased property value If there are levy defaults, it means there will be no money to fund building maintenance and various bills will be left unpaid. 

Debtor Finance provides reliable and steady cash flow

A community scheme needs a dependable source of income each month to function properly. Projects and monthly maintenance need to continue without disruption to maintain the building and add value to the property. If levy arrears are causing a problem, Debtor Finance can unlock the cash flow. 

Debtor Finance is a loan facility that covers the shortfall that is left by owners who default on their levy obligation. This means there will be no interruption to paying bills or performing much-needed maintenance to the buildings. It also means that homeowners won’t be forced to cough up more money, or dip into reserve funds. 

Community Schemes can rely on Propell to cover levy shortfalls

Propell’s Debtor Finance is a revolving loan that provides up to 80% of homeowners’ levy arrears. An initial advance is made to the community scheme equal to 80% of levy arrears at the time of the agreement, and then every month this is re-evaluated based on an updated report of arrears. Propell then determines whether it should make a further advance to the community scheme or whether the community scheme needs to make a repayment.

If the total arrear levy balance increased, then Propell would advance an amount equal to 80% of the increase. Should the arrear balance have decreased, the community scheme would pay an amount equal to 80% of the decrease back to Propell. This revolving line of credit gives community schemes back their ability to function properly and relieves them of the pressure that unpaid levies cause on their budget.

If payments have dried up, your revenue stream shouldn’t

For more information on how Debtor Finance can help your community scheme, please contact us for a quote. We’ve also put together an informative video that you can share with other members of your community scheme, you can watch it here.