Do Community Scheme Financiers Get the Credit they Deserve?

The January-March 2021 issue of The Community Schemes Ombud Service’s (CSOS) digital industry publication SharedLiving, carried an article titled ‘Levy Financing Companies – Saviour or Scourge?’

While the author of the article is unknown, but identifies themselves as writing from a ‘consumers perspective’, there are glaring inaccuracies, false assertions and in our opinion, very bad advice to community schemes.

I’m responding to this article in order to dispel the inaccuracies, from a supplier/ provider point of view and pose an alternative title – ‘Are Community Scheme Financiers Afforded the Credit They Deserve?’

Undoubtedly in any industry there are “rogue players” who give an industry a bad name. While the article points out that levy financing 10 + years ago led to the ruin of many schemes, the author should perhaps have considered why these schemes approached levy financiers in the first place and then perhaps that their biggest failing, for whatever reason/s, was that they failed to deliver what they promised and set out to achieve.

While the need remains, ZDFin is confident that the market landscape has changed. It is simply incorrect to paint all industry players with the same scathing brush.

While quick to point out (and correctly so) that schemes need to be run as businesses, given the custodian nature of Trustees or Director roles in the case of certain HOA’s and the sums of money being looked after, the article naively fails to appreciate that business and finance go hand-in-hand, regardless of the industry one puts under a microscope.

Ironically, the very homes a large number of scheme members live in, would not be occupied but for the provision of finance; without finance there would be no scheme.

One also needs to understand the dynamics and differences of Community Scheme financial products and make a distinction between Levy Finance, as one product and Project/Maintenance Finance, as another – two distinctly different products and associated offerings.

When looking at the latter, the intention of the legislature with the imposition of what is commonly known as the ‘New Act’ in October 2016, the Sectional Titles Schemes Management Act (STSMA), was very clear. The introduction of a 10 Year Maintenance and Repair Plan aims to, in simple terms, afford schemes the opportunity to assess their necessary maintenance needs over a 10-year horizon, raise the capital to attend to the respective maintenance issues via a reserve levy and thus have a healthy and maintained scheme.

The problem for many schemes is raising the required capital, which can lead to massively increased levies; the reality in current economic climates is that schemes simply cannot raise the funds needed to support the well-intentioned maintenance plans imposition.

There is little doubt that the well-intentioned legislation combined with prevailing economic conditions has severely complicated the lives of financial trustees who now need to juggle between affordability and necessity; a void that reputable financiers are well-placed to fill.

In just five months of operation, ZDFin has assisted 15 different schemes with finance offerings that include maintenance project funding, funding for security upgrades, roofing, painting, lifts, waterproofing, to name but a few. The bottom line for us is that no matter who we extend our various financial product offerings to, we UNEQUIVOCALLY need to add value to the scheme, the schemes’ Trustees or Directors and importantly, to the very members themselves who are responsible for the repayment of the finance taken.