New system makes funding repairs easier

The banking industry found that standard funding practices for building developments were difficult to apply in the case of repairs to multi-unit complexes with several owners. The industry has responded by developing a solution to provide unit owners and body corporates who require funding with the assurance they need to enter into building repair contracts.

“This is a significant breakthrough for affected unit owners,” New Zealand Bankers’ Association chief executive Kirk Hope said.

“We appreciate the difficulties leaky unit owners have been through, both financially and emotionally. We’re pleased to have worked out a solution for them that applies across the banking industry.”

Under the scheme unit owners use a third-party escrow account to fund the repairs. The escrow funds may be made up of bank loans and the owners’ own deposits. The account is established under an escrow deed that is entered into by the body corporate and the escrow agent. The escrow agent will only release funds after payment instructions from the body corporate. Payment instructions must be supported by appropriate building professional certification.

The Bankers Association said an escrow account was a way to avoid using body corporate accounts.

The scheme is available both to loan-funded owners who are required by their bank to use an escrow account to pay for repairs, and to self-funding owners who would prefer paying for the repairs through an escrow account rather than a body corporate account.

Different documents are available under the scheme depending on whether or not the repairs are eligible for a contribution from the government’s Financial Assistance Package.

The arrangement was developed by the New Zealand Bankers’ Association and member banks ANZ, ASB, BNZ, HSBC, Kiwibank and Westpac, and is available to customers of all New Zealand retail banks.