NSW: Q&A Special Levies, Levy Payments and Overdue Levies

Our large strata complex needs to raise a $1 mill special levy to carry out remedial water ingress repairs. After reviewing all documents sent by the strata management company and remedial engineer, there are issues with the quotation.

We need to call an EGM to repeal the special levy. The strata manager delayed sending the documentation, and the invoice is due in a few days. Will owners lose their voting power if they have not paid their special levy?

Answer: It depends.

The answer is, it depends.

If the notice for the meeting is sent before the first instalment (or total amount) of the levy is due, the owners will be financial, provided they do not have any other contributions or amounts outstanding.

Section 4(1) of the Strata Schemes Management Act 2015 defines unfinancial owner as:

unfinancial owner means an owner of a lot in a strata scheme who has not paid all contributions levied on the owner that are due and payable and any other amounts recoverable from the owner, in relation to the lot.

Clause 23(8) of Schedule 1 of the Strata Schemes Management Act 2015 provides as follows:

(8) Voting rights cannot be exercised if contributions not paid

A vote at a general meeting (other than a vote on a motion requiring a unanimous resolution) by an owner of a lot or a person with a priority vote in respect of the lot does not count if the owner of the lot was an unfinancial owner at the date notice of the meeting was given and did not pay the amounts owing before the meeting.

If the notice for the meeting to rescind the special levy was sent after the special levy (or instalment) was due and an owner has not paid the special levy (or instalment) prior to the date of the meeting, the owner will be unfinancial and will not be entitled to vote on the motion.

Matthew Jenkins Bannermans Lawyers E: enquiries@bannermans.com.au P: 02 9929 0226

This post appears in Strata News #710.

Question: Can strata levies be revised partway through the year with retrospective application? Do we call an EGM with a motion to revise the standard levies?

Can strata levies be revised partway through the year, before the next AGM and the next year’s budget? If so, can they be revised with retrospective application?

Obviously, it’s standard to set levies once a year and then raise special levies as required. This is not about special levies. We are interested in revising (increasing) standard levies for the current period, hopefully with retrospective application (that is, for the entire current period, from the beginning).

All lots in the strata scheme are owned by one person, so there would be no issues with votes or objections.

I presume we could call an EGM with a motion to revise the standard levies (or to revise the budget and the standard levies) and for those levies to be retrospectively applied (or for the remaining installments to be larger to top up the total to the newly revised amount). Would this be valid?

Answer: Yes, this is possible.

Yes, they can be revised. I suggest you do the following:

Hold an EGM to vote on this item. Passing levies must be done at a General Meeting. The strata committee is not able to vote on this matter. It must go to all owners

The agenda should have a motion to rescind the future levies that you want to amend.

The agenda should then have a motion to vote on the updated levies with the updated amounts.

Rod Smith The Strata Collective E: rsmith@thestratacollective.com.au P: 02 9879 3547

This post appears in the July 2024 edition of The NSW Strata Magazine.

Question: Our owners corporation held an AGM to impose a one-off payment of $100,000 divided between 33 units. The special levy is due in six weeks. Can we arrange to pay in instalments? We are seniors and don’t have the funds available. Why have they done this?

Answer: Contact your strata manager as soon as possible.

It is possible that your scheme has to undertake some substantial remedial works (as the owners corporation must due to its statutory obligations) and requires additional funds to do so.

Since you state that you are short of funds, you should contact your strata manager as soon as possible to seek the owners corporation’s consideration of a payment plan for your specific needs (which must be done at a general meeting) over a 12 month period (unless the owners corporation has already determined it does not wish to enter into payment plans).

Each application for a payment plan should be assessed on merit, and an owners corporation may seek proof of any financial hardship.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in the June 2024 edition of The NSW Strata Magazine.

Short Video: Q&A Battling owners for adequate levies in a small strata scheme

After many years of toil as treasurer in his three lot scheme, Dean finally got the admin and sinking funds into a healthy position only to find the other two owners have called a general meeting to reduce levies.

Dean explains the ups and downs of committee membership in a small NSW owners corporation. He details his ongoing struggle to convince the other owners, who may have entirely different motivations, that a healthy sinking fund balance is a good idea. Rod Smith from The Strata Collective gives Dean a few ideas that may lead to a brighter future for the scheme.

Rod Smith The Strata Collective E: rsmith@thestratacollective.com.au P: 02 9879 3547

This post appears in Strata News #684.

Question: Are the dates for quarterly levy payments set at the AGM, or do they carry on from the previous financial year?

Are quarterly levy payments dates set at the AGM, or do they carrying through to the next financial year even if our AGM is held later in the year?

Answer: The dates generally carry on from the dates set at the first AGM unless the dates are reset for accounting purposes.

An owners corporation must, at each annual general meeting, estimate how much money it will need to credit to its administrative and capital funds for actual and expected expenditure. The dates generally carry on from the dates set at the first AGM unless for accounting purposes the owners corporation resets the dates to better align their AGM’s and financial year ends.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #653.

Question: One non-resident owner will not contribute to special levies. Without this payment, the other three owners bear the financial burden.

For 30 years, we’ve had various problems and difficulties with a non-resident owner. They pay their strata quarterly levies and have contributed to some upgrades but refuse to contribute to special levies for items they disagree with.

We’ve sent them levy reminders plus a final reminder which they ignore. We’re happy this owner is non-financial and cannot be more involved during meetings, but we’re struggling financially. Without this owner’s share of the special levies, the other three owners have the financial burden.

Answer: It’s not about asking very nicely to pay. They have to pay. If they don’t pay, you need to refer this to a lawyer.

I don’t think this is about a challenging person or situation. This is a situation where someone’s not paying. In strata, the bottom line is you need money to survive. The strata scheme needs money. There are no ifs, buts, or maybes. When it comes to strata levies, if you are part of an Australian scheme, you pay. That’s it, no discussions, you pay.

If you don’t pay, you can expect debt collection to be enforced against you. Why? Because without your contributions, the body corporate cannot pay its bills and if it cannot pay its bills, the scheme falls into disrepair or even worse, the building is not insured. If it’s not insured, your liability will be extraordinary.

It’s not about asking very nicely to pay. They have to pay. If they don’t pay, you need to refer this to a lawyer.

Chris Irons Strata Solve E: chris@stratasolve.com.au P: 0419 805 898

This post appears in the May 2023 edition of The NSW Strata Magazine.

Question: I purchased my apartment at the end of Sept 2021. In Aug 2022 I received a special level of $24K to replace the cladding. At the time of sale, the fire cladding order wasn’t mentioned. Who pays the special levy?

Our building received notice that we would need to replace the cladding as it was unsafe in 2020. I signed a sale note to purchase my apartment in early July 2021 and settled at the end of September 2021.

In August 2022 I received a special level of $24K to replace the cladding as per the order given to the committee in 2020. There was no indication to me at the time of sale that there was a fire cladding order, that it would be the owner’s responsibility and certainly no indication that it would have to be paid in one lump sum.

Is the responsibility for the payment on the previous owner or me?

Answer: Generally, a special levy will be payable by the owner at the time the special levy is raised by the owners at a general meeting.

Thanks for your question. It’s difficult to be very specific without some more information, but generally, a special levy will be payable by the owner at the time the special levy is raised by the owners at a general meeting. We don’t have any information about the date that the owners raised this levy, but we are assuming it was raised after September 2021. In that case, it would appear that you are liable to pay the levy unless there was a specific provision in the contract for sale where the previous owner(s) agreed to pay some future levies.

As an owner you would have had the opportunity to attend the general meeting and contribute to the discussion and voting in relation to the amount and payment schedule for the special levy. Special levies are often raised in instalments to assist owners in managing their cash flow. As this levy is large (we assume it’s $24,000 for your lot, but we don’t know the details of your unit entitlement) it may be possible to approach the strata manager about paying it over a period of time.

Michael Ferrier Eyeon Property Inspections E: michael.ferrier@eyeon.com.au P: 02 9260 5510

This post appears in Strata News #620.

Question: Can one owner offer to pay more towards a special levy than the rest of the Owners if they are wanting a common property renovation to proceed?

Can one owner offer to pay more towards a special levy than the rest of the Owners if they are wanting a common property renovation to proceed?

I thought that anything for common property that cannot be covered by the capital works fund has to be split among the owners based on their lot’s allotment/entitlement.

Answer: The Act requires all contributions to be levied in accordance with the unit entitlements of each lot.

Section 83(2) of the Strata Schemes Management Act (‘the Act’) requires that all contributions be levied in accordance with the unit entitlements of each lot.

An exception to this lies within section 144 of the Act, however that only applies to maintenance and upkeep of common property that is specifically referred to in the common property rights by-law. Section 144 allows the by-law to provide another way of apportioning costs for maintenance and upkeep of that common property.

Tim Sara Strata Choice E: tsara@stratachoice.com.au P: 1300 322 213

This post appears in the October 2022 edition of The NSW Strata Magazine.

Question: Without committee approval, our Strata Manager has sent out a notice of a Special General Meeting with a motion to raise a special levy of $200,000 for the sinking fund. Do they have the authority?

Our strata manager has sent out a notice of a Special General Meeting with a motion to raise a special levy of $200,000 for the sinking fund. As a member of the strata committee, I know this motion has not been discussed at any strata committee meeting and there are no emails except for the Special General Meeting notice.

At the previous meeting, there was a general discussion about a possible need to raise more money. We decided that we would discuss the matter further at the following committee meeting, yet this has not occurred.

Is this legal? Does the Strata Manager have the authority to organise this motion without committee approval?

Answer: It is unlikely that the strata manager would simply have placed the motion on the agenda without any direction

It is not illegal as owners are permitted to have motions considered. It is unlikely that the strata manager would simply have placed the motion on the agenda without any direction. It seems that the strata manager may have observed a serious lack of funds to carry out essential and urgent repairs and may have been concerned about a delay in raising funds to attend to the same.

You can ask the Chairperson to defer consideration of the motion until the relevant strata committee meeting has been held if time is not of the essence.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in the September 2022 edition of The NSW Strata Magazine.

Question: What is the best way to deal with a lot owner who continues to be in arrears?

Answer: We never make any concessions or allowances. If they ask for rebates or interest reductions, the answer is always a hard ‘No’.

Most strata schemes will have one or more owners who are in arrears. In our business, the way we combat that is by a strict policy around levy arrears.

Levies are required to be circulated at least a month prior to the due date. If levies are due on 1 September, we circulate the levy invoice to owners late July. Then we start sending reminder notices after 34 days, then on the 48th day and the final notice at 64 days, then the matter goes to our lawyers for a formal notice to pay the levies. That’s the first step. That’s a whole other conversation around how lawyers and debt collection agents recover money.

There’s 10% per annum interest charged on overdue levies, so if the levy is due 1 September, you would have all of September to pay before interest is charged, but 1 October hits, interest accrues back from 1 September, and it’s 10% from there. They are paying interest on those outstanding amounts, plus getting arrears notices.

We’ve got some habitual owners who are always in arrears. We send them first, second, third notices, interest notices, you name it, and they remain in arrears. Annoyingly, when it gets to the statement of claim and gets to court level, they come up with $15,000 or $18,000, cut a check and pay off their levies and start again. They don’t get so far in arrears that they get down the bankruptcy proceedings stage. We have to grit our teeth and bear it.

We never make any concessions or allowances. If they ask for rebates or interest reductions, the answer is always a hard ‘No’. They’re always welcome to put a motion forward for the AGM, but the owners would also vote a hard ‘No, you’re always in arrears. If you can’t afford your levies, you probably need to consider your options about ownership’.

It’s an annoying reality that most schemes have one or two owners that are always in arrears but they do get 10% tax free interest.

Rod Smith The Strata Collective E: rsmith@thestratacollective.com.au P: 02 9879 3547

This post appears in the July 2022 edition of The NSW Strata Magazine.

Question: Due to a lack of management, our OC has neglected to collect levies. Can they be fined for not enforcing strata fees?

The owners corporation did not renew our strata management contract due to the cost of the service. This has caused us to fall behind in our levy collections and therefore, our capital works funds. Can the OC be fined for not enforcing the collection of levies?

To catch up, each owner needs to pay over $2000. Some owners wishing to sell are concerned they will be liable due to our low capital works fund account.

Answer: An owners corporation cannot be fined for failing to collect levies from owners. However, there are other serious consequences of failing to do so.

An owners corporation cannot be fined for failing to collect levies from owners.

However, there are other serious consequences of failing to do so. For the most part, the owners corporation will become dysfunctional and this can lead to the (compulsory appointment of a strata managing agent which is another topic, but in summary, very costly for the owners and takes away their ability to make decisions for themselves).

Over time, the owners corporation will run out of funds to pay its suppliers (services such as water, energy, cleaning, repairs etc.), effectively making it insolvent.

Eventually, the owners corporation will fail to be able to undertake repairs or maintenance of its common property under its strict duties under section 106 of the Strata Schemes Management Act. This will devalue the property overall.

An owners corporation cannot legally commit to works if it has insufficient funds to do so. In other words, if one knowingly doesn’t have the money to pay for a job, it’s considered to be fraud if they proceed to engage a tradesperson regardless.

Owners might choose not to pay levies now but that won’t stop the obligations. It won’t stop the building from deteriorating. Failing to pay those levies now just “kicks the can down the road” – the problem doesn’t disappear.

Furthermore, repair and maintenance become more expensive the longer it is left. Take concrete spalling as an example – the longer it is left to fester, the more it grows, and the more damage occurs.

If owners do plan to sell, imagine what prospective purchasers will think when they look at the records and see that there are debts on not only their lot but others as well. Prospective purchasers will see low funds in the capital works fund and compare them against the ten-year capital works fund plan and see red flags (i.e. special levies in the future).

So, in summary, the owners corporation needs to look to its future and all of the ramifications that will inevitably come from its decisions today. This is why owners corporations are required to have capital works funds – to set aside funds for those expected and unexpected major works that will eventually come.

An owners corporation decides on its levies by resolution at its annual general meeting. Once that decision is made, the levies are “struck”, meaning they must be paid. The only way to undo that is to hold another general meeting and pass another resolution, either amending the levies or cancelling future levies. An owner or a strata committee cannot simply decide to ignore levies. When owners do sell, the owners corporation will be asked to produce a strata information certificate (also known as a section 184 certificate) disclosing any overdue levies. This will be factored into the settlement process as well, and most purchasers would demand that the sale price be decreased by the equivalent amount of any outstanding levies (or demand that the vendor pays them prior to settlement).

Tim Sara Strata Choice E: tsara@stratachoice.com.au P: 1300 322 213

This post appears in the July 2022 edition of The NSW Strata Magazine.

Question: I’m on a payment plan for my levies. At the last general meeting I was unable to vote because the levy instalment did not fall before the meeting. Why am I unfinancial?

I’m a pensioner living in an over 55 complex. Due to money restraints, I’ve made arrangements to pay my levies by instalments each month.

At a recent general meeting I was unable to vote because my next instalment was not due at the date of the general meeting.

Should I have been able to vote bearing in mind the Strata Manager, presumably with the consent of the Owners Corporation, approved the levy payment agreement?

Answer: If the payments are overdue (but subject to a payment plan), you are still not financial for the meeting.

Unfinancial is all contributions due and payable, paid by the meeting – unfortunately, if the payments are overdue (but subject to a payment plan) they are still not financial for the meeting.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in Strata News #672.

Question: If a unit owner has paid their regular levies but has not paid a special levy – now overdue – are they still ‘financial’?

Answer: Special levies or normal levies, if due, must have been paid in order to vote at a general meeting.

“Unfinancial owner” means an owner of a lot in a strata scheme who has not paid all contributions levied on the owner that are due and payable, and any other amounts recoverable from the owner, in relation to the lot.

Special levies or normal levies if due must have been paid in order to vote at a general meeting.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in Strata News #567.

Question: How do you get the owners corporation to understand that their current levies will not cover the cost of running a scheme and that they should approve a special levy or increased levies?

Answer: There are long term ramifications for strata schemes that don’t adequately budget their funds.

This is the million dollar Strata Manager question. I would say that there are many strata schemes in New South Wales, and probably across the world, that don’t raise adequate levies. Owners are constantly telling the Strata Manager and the strata committee ‘We need to reduce the levies. Levies are too expensive‘, etc.

Communicate your concerns at budget time. Provide suggestions of where you think you need to raise the levies. For our strata schemes, we suggest that the administrative fund covers costs with a little bit of a buffer. This leads to a little bit of surplus each year. For the capital works fund, follow the recommendations of the capital works fund plan. This is really important so there’s enough money in your strata for future years.

I’ve seen what happens when buildings have to raise special levies. One of my buildings has had to raise $5 million over the last five years to do facade works, lift works and renovations. This was all because they under budget in the first 15 years of the strata scheme’s life. There are long term ramifications for strata schemes that don’t adequately budget their funds.

Rod Smith The Strata Collective E: rsmith@thestratacollective.com.au P: 02 9879 3547

This post appears in Strata News #557.

Question: If I’ve accidentally paid my levies twice, can the strata manager provide a refund?

I made a mistake and paid my levy invoices from my strata manager twice. My account is now in credit but I need the money sitting there to cover other bills. The strata manager insists that she cannot give me a refund. Is she obliged to refund me the money if I ask for it?

Answer: The strata committee should be able to permit a refund and instruct the agent accordingly.

I can’t speak for other strata companies, however ours certainly offers the ability for owners to seek a refund for any overpaid levies.

The strata committee should be able to permit this and instruct the agent accordingly.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in Strata News #551.

Question: A lot owner in our small block has consistently been in arrears with levies. Although they are on a payment plan the situation is not improving. Do we have other options to recover the overdue levies?

We have one owner in our small strata block of six that has consistently been in arrears for over 18 months. The owner makes small monthly contributions but is always 6 months + behind. They get charged the standard 10% interest on the overdue amounts.

Our Strata Manager has indicated there’s not much he can do if the owner is adhering to the payment plan. Is this correct or are there other options to recover the overdue levies faster?

Answer: Even if the defaulting owner is on a “payment plan”, the Owners Corporation can initiate legal proceedings for debt recovery.

Your Strata Manager is not strictly correct. Even if the defaulting owner is on a “payment plan”, this does not limit the rights of the Owners Corporation to initiate legal proceedings for debt recovery as outlined in Section 85(7) of the Strata Schemes Management Act 2015.

85 Interest, discounts on contributions and payment plans

The existence of a payment plan does not limit any right of the owners corporation to take action to recover the amount of unpaid contributions.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #544.

Question: Is voting for a special levy a general, special or unanimous resolution? If it’s a general resolution, as an equally split OC can a poll be called to help us land on a decision?

I live in a 4 unit strata property. An engineer’s report has indicated we require significant work to replace our roof and façade features. Due to age and condition, there are also concerns over continued degradation and safety as well. We have shingles, tiles and wooden frame sections gradually falling off onto pedestrian areas.

There’s not enough money in the capital works fund, so we need to raise a special levy.

What are the rules around voting for a special levy? Is it a general, special or unanimous resolution? If it’s a general resolution, can an entitlement poll still be called to help us land on a decision as an equally split OC?

How do we best manage the repayment terms for the special levy? Due to the safety and integrity issues, to expedite the work there’s a preference with some to take the mortgage refinance route. However, others would prefer to run the gauntlet and pay over a couple of years. Can we vote on different timeframes to reach a majority agreement?

Answer: It is an ordinary resolution – majority vote. A poll can be called.

Ordinary resolution – majority vote. Yes, a poll can be called by any entitled owner if the decision is split on a per lot vote.

There are ways to balance this, however, strata finance is the best option to get urgent works underway and then you can raise significant levies over a slightly longer timeframe (than if you were needing the money upfront) which should negate paying much interest while giving you flexibility.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in the February 2022 edition of The NSW Strata Magazine.

Question: If strata levies have been raised for a project such as painting, must the funds be used for that expense?

Our strata raised a special levy last year for $9,000 for painting. We all paid the special levy but it was used for other expenses. We have received another notice for us to pay a special levy for painting, this time for $15,000.

I contacted our strata manager and raised my concerns requesting that this special levy be used for painting. They’ve responded that they can not guarantee that no as other expenses may arise. Is this legal?

Answer: There is nothing in the Strata Schemes Management Act 2015 that regulates a special levy can only be used for particular works.

There is nothing in the Strata Schemes Management Act 2015 that regulates a special levy can only be used for particular works.

Part 5, Division 1 & 2 of the Strata Schemes Management Act 2015 specifies how levies can be raised and how they are dealt with.

Unfortunately there are often unexpected repairs and costs in a strata scheme and if the Capital Fund balance is low (as the amount of the special levy would indicate in your case) then it may have been required for another more urgent purpose.

The second special levy must however be raised at a General Meeting of all owners and as an owner you can raise your concerns at that meeting and there should be a motion on the agenda giving owners the right to consider placing restrictions on the Strata Committee under Section 36(3) of the Strata Schemes Management Act 2015. This might assist in ensuring owner have the right to determine the spending of the funds raised.

The vote for a special levy is a simple majority and so if sufficient owners are opposed to another special levy it will be defeated.

Noting the above comments I should advise that Section 36 (2) of the Strata Schemes Management Act 2015 specifies that the decision of the Owners Corporation prevails over that of the Strata Committee. So it depends upon how the motion was originally passed to raise the special levy and what wording was used.

Robert Fothergill Strata Life E: Robert@thestratalife.com.au P: 02 9456 9917

This post appears in Strata News #533.

Question: How can I stop the never-ending nightmare of raising special strata levies?

We purchased a unit in April 2018 with special levies meant to finish in June 2020. The strata have continued to raise special levies and the quote agreed on in 2016 (apparently) has more than doubled.

I want this money back. I do not want the doors and windows replaced. My windows are in excellent condition and don’t need replacing.

The special levy was meant to raise $250,000 and now it’s meant to raise over $500,000. Can we get them to stop the levy? It’s outrageous to double the cost mid levy. The quote should have been accepted and once the cost was covered, they should have stopped.

How can I stop this never-ending nightmare of special strata levies?

Answer: If the owners corporation has passed the proper resolutions, you are liable to pay the expenses of the owners corporation in proportion to your unit entitlements.

Irrespective of whether you consider that your windows are in excellent condition, it appears that the owners corporation decided to replace all windows and doors either as a repair function or upgrade special resolution.

On the assumption that the owners corporation has passed the proper resolutions, you are liable to pay the expenses of the owners corporation in proportion to your unit entitlements.

You, however, as an owner, have the right to make an application to NCAT for Orders that the levies are “excessive” in which case NCAT can order a refund. Should you elect to pursue this course, we recommend you seek expert strata legal advice.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #516.

Question: We owners are being issued a $40,000 special levy. The owners corporation are suggesting we pay in instalments over a 3 year period. We’ve been advised that we can’t pay in full, which is our preferred option. Is this the case?

Answer: A levy can definitely be paid off in advance, particularly given the full amount is known. The account would just remain in credit balance until enough levies have accrued against it to remove the balance.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in the September 2021 edition of The NSW Strata Magazine.

Question: My strata manager is withholding some of my levy notices. How do I ensure these late notices are sent to me, as the strata manager is ignoring my emails?

I think my strata manager is withholding some of my levy notices. They say I am unfinancial, therefore I could not vote at the last AGM. I’ve sent three emails asking for the levy notices that I’m missing.

How do I ensure these late notices are sent to me, as the strata manager is ignoring my emails?

Answer: Not receiving a notice isn’t a reason to not pay the levy

I would definitely put it in writing if you haven’t already. When you do put it in writing, I’d give a reasonable timeline for compliance, ie the timeline for that Strata Managing Agent to respond.

If you feel that they haven’t yet responded, then you need to take further action and that is to apply to NCAT – your first step is mediation. I just wanted to note how we have a Section 83(4) of The Strata Schemes Management Act that doesn’t actually require a strata managing agent or the delegated Treasurer of an owners corporation to issue a levy notice. Although it’s a standard common industry practice that you would be served a notice every quarter reminding you and prompting you of the amounts due and payable, it’s not a legal requirement under the Act. Not receiving a notice is no reason to not pay the levy.

You should be writing to the Strata Managing agent, putting in writing, giving them a reasonable deadline to respond. If they haven’t responded, I would then make an application to the tribunal, and mediation is the first step.

I’m confident that when they receive an application for mediation, they will respond. Otherwise, they would have to give reason as to why they haven’t responded.

Another option is if your managing agent provides access to their portal you could uplift a levy statement. If you don’t already have access, request access to the portal, obtain your login details and try uplifting the levy statement through that portal.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #502.

Question: We have a Special Levy going to pay for a contract to address a waterproofing problem. Our strata manager is adding GST to the levy invoices. Is this correct?

Answer: Regardless of a scheme being registered, it pays GST on expenses so has to collect that amount in levies

The ATO site is very helpful on this issue: Strata schemes and real estate agent services

A strata scheme is required to register for GST if:

it is considered to be a non-profit body and its turnover is more than $150,000 (turnover must include levies on unit owners)

it is not considered to be a non-profit body and its turnover is more than $75,000 (turnover must include levies on unit owners).

Most schemes will be a non-profit body (as otherwise it may have to distribute interest income or profits from rental or other activities).

Thus the scheme in question could be registered if it elects to be registered (as many commercial schemes do under the above thresholds as the owners are in many cases, GST registered) or would be required to be registered if it meets the above thresholds.

A scheme which is registered will need to conduct BAS statements.

Regardless of a scheme being registered, it pays GST on expenses so has to collect that amount in levies – it just can’t claim GST input if not registered.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in the August 2021 edition of The NSW Strata Magazine.

Question: To compensate for money I’ve spent on repairing common property, I’m withholding levies payments. Is this the right course of action?

After repeated requests from the Strata Manager, some of the long standing activities of strata are not completed so we’ve withheld the quarterly levies.

Over the last few years, special levies were collected for rectification works and these have not been completed. In addition, there have been issues with the internal exhaust fans that were not completed by the strata manager and I replaced them on my own account.

Since some of the amounts are the Owners corporation’s responsibility and there has been no satisfactory outcome, I have held back Levies due for the past year and I intend to continue holding back any quarterly levies until the amount owed equals the costs that I have incurred in fixing some of the defects/remedial activities that I deem to be necessary in my unit complex.

Can the Owners Corporation adjust my levy against the costs that I have incurred whether there is an approval or not?

Answer: If you do not pay your levies, then you will be an unfinancial owner with the consequences that you cannot vote at general meetings and you cannot be a member of the strata committee.

Under the Strata Schemes Management Act 2015 (SSMA) there is no legal basis for a lot owner to refuse to pay a levy or for an owners corporation to reduce the levy one lot owner pays. This is the case even if the owners corporation is refusing to comply with its legal duties or is being mismanaged. In those cases, the appropriate thing for the lot owner to do is apply for mediation at Fair Trading and then for orders at NCAT to rectify the situation.

If you do not pay your levies, then you will be an unfinancial owner with the consequences that you cannot vote at general meetings and you cannot be a member of the strata committee.

You are not entitled to be re-imbursed (for example by a reduction in your levies) for the money you have spent repairing common property. The NSW Supreme Court in the case of The Owners – Strata Plan 32735 v Heather Lesley-Swan [2012] NSWSC 383 has made it clear that where a lot owner spends their own money to fix common property because the owners corporation has failed to do so, the lot owner is not entitled to be re-imbursed the cost by the owners corporation unless there is a prior agreement between the two to permit the re-imbursement. The reasons the Supreme Court gave that one person is, generally speaking, not permitted to do work on another person’s property without the latter’s permission, and an owners corporation must be able to engage and control the contractors that work on common property so that the owners corporation can enforce warranties against contractors for defective works. An owners corporation cannot enforce warranties in a contract between a lot owner and a contractor.

If the owners corporation has budgeted for quarterly levies and raises those quarterly levies and any special levy, but it is not spending the money raised at all or the money is not required (which may be the case if a lot owner has paid to repair common property because the owners corporation has not) then there may be some scope for a lot owner to apply to NCAT for an order reducing the size of the levies under section 87 of the SSMA. Under section 87, NCAT may change the amount of a levy or its manner of payment if NCAT considers that the amount of a levy is inadequate or excessive or that the manner of its payment is unreasonable. An applicant for such an order must first apply for mediation at Fair Trading.

Carlo Fini Lawyer (NSW)

This post appears in the August 2021 edition of The NSW Strata Magazine.

Question: We receive a delayed strata levy. On the levy it shows 2 quarters plus interest, however, this was sent late from the strata. Are the owners still responsible for the interest?

Answer: If the levy was issued late, they should not be charged any interest.

They shouldn’t be responsible for the interest. If it was issued late and interest was charged due to the lateness of that notice then No, but they might want to check if the interest relates to those two quarters and it doesn’t relate to a previous amount. But no, if it was issued late, they should not be charged any interest.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #497.

Question: We’ve just bought a townhouse in NSW and have since received a special levy notice of $7000 to repair balconies. Surely this levy should go to the previous owners?

We recently bought a townhouse in NSW. We have since received a special levy notice of $7000 to repair balconies. We received the bill, but surely as this was agreed upon prior to settling on the property we should not be liable to pay? We were not informed by the strata management or consulted that these works were going ahead. Should this bill fall onto the previous owners?

Answer: Generally, the obligation to pay levies falls with the owner at the time the levies are due for payment.

It is difficult to comment specifically without knowing the dates and circumstances of the raising of the special levy. Generally, the obligation to pay levies falls with the owner at the time the levies are due for payment. An adjustment is made at settlement where levies have been paid in advance and sometimes an agreement is made between the buyer and seller regarding the obligation to pay upcoming special levies.

If no agreement was made, I think it would be difficult to claim these levies from the previous owner. The amount and reason for the special levy would have been shown in the relevant general meeting minutes when it was raised. I’m not sure whether you obtained a strata records inspection report for this property but you would expect it to show current special levies if they had been raised prior to the report being prepared. If you would like some more specific information on this issue I suggest you contact your conveyancer or feel free to contact us.

Michael Ferrier Eyeon Property Inspections E: michael.ferrier@eyeon.com.au P: 02 9260 5510

This post appears in the July 2021 edition of The NSW Strata Magazine.

Question: Are all legal costs recoverable when you engage a lawyer to recover outstanding levies?

Answer: Yes, they are recoverable

Yes. So under the Act that is a legal costs, it’s very specific. Basically any debt recovery cost that are incurred as a result of pursuing late payments, non payments or outstanding levies is fully recoverable.

What happens is, when we incur those costs, we charge it to the ledger. So any final settlement or final debt recovery process that is pursued by debt recovery officers or lawyers through the Owners Corporation, that would always be recouped at the end.

So yes, they are recoverable.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in the July 2021 edition of The NSW Strata Magazine.

Question: When recovering late levy payments, can the Owners Corporation recover the costs of using a lawyer/debt collector from the recalcitrant owner?

In a previous response you mentioned that when recovering late levy payments, the fourth letter of Demand should be “by lawyer/debt collector”. Who is preferred in the first instance, a lawyer or a debt collector, and why?

Can the Owners Corporation recover the costs of using a lawyer/debt collector from the recalcitrant owner?

If the services of a lawyer become necessary, do the lawyers charge their fees to the Owners Corporation or do they pass their fees on to the recalcitrant?

Answer: The lawyer’s fees are recoverable from the defaulting owner and form part of the overall debt.

Our practice is that the first three letters of demand are issued by our office and, if they do not generate a satisfactory response, then a lawyer is engaged to either elicit a response or commence debt recovery proceedings.

The lawyer’s fees are recoverable from the defaulting owner and form part of the overall debt.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #469.

Question: One lot owner is refusing to pay levies. What is the correct/recommended procedure to pursue debt recovery and in what order should those steps be taken?

I am the “Honorary Administrator” of a self-managing strata scheme of four townhouses.

We may need to take levy recovery action against one owner who is refusing to pay the 4 equal quarterly levy contributions discussed and agreed to as an agenda item at our AGM.

I have sent several friendly reminders and a formal letter of demand to pay by 4 equal quarterly instalments as required under the NSW Strata Schemes Management Act and the Owners Corporation, but he is refusing.

The lot owner has requested to pay by setting up a periodic payment arrangement with his bank to pay in small fortnightly instalments.

After sending out reminder notices and a formal letter of demand, what is the correct/recommended procedure to pursue debt recovery and in what order should those steps be taken?

Answer: The process is as follows

Generally speaking, the process is as follows:

1st Letter of Demand by strata manager for unpaid levies

2nd Letter of Demand by strata manager for unpaid levies

3rd Letter of Demand by strata manager for unpaid levies

4th Letter of Demand by lawyer/debt collector for unpaid levies

Legal proceedings for debt recovery are commenced

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #464.

Question: A lot owner in our 6 lot scheme has been overseas for over a year and hasn’t made a levy payment for that duration. Why would our strata wait so long to recover the debt?

In our residential building of 6 units, one lot owner has been overseas for more than a year and hasn’t made a levy payment for that duration. Strata have said they are in debt recovery and going through the courts.

Why hasn’t strata acted much sooner and how long can this go on before its resolved? I would have thought after 3 months of no levy payments and strata would issue a debt recovery action letter to the owner.

Answer: The strata manager was waiting for instructions from the strata committee

You are correct – the strata manager appears to have been tardy in chasing the levies, however, it may be that the strata manager was waiting for instructions from the strata committee. The practice is usually that 3 separate reminder letters are sent with formal debt recovery proceedings being instituted thereafter.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #462.

Question: A special levy of $3000 was struck for each of our 6 owners for our driveway to be concreted. Quotes have not even been accepted as yet, but we are now being charged interest on late levy payments. Is this legal?

Answer: No debt recovery action can be taken against the owner for 30 days past the levy due date.

First of all, it is important to note that a Special Levy can only be raised by majority decision at a General Meeting. The motion to raise the funds would specify the amount to be raised, purpose of the funds and the due date of the levy.

In terms of a debt recovery action being taken, such as the interest you are being charged, no debt recovery action can be taken against the owner for 30 days past the levy due date. Once the 30 days has elapsed, interest would accrue against the levy from the due date of the levy at a rate of 10% per annum.

Please find the below section from the Strata Schemes Management Act 2015: Section 86 Recovery of unpaid contributions part 2A states

(2A) An owners corporation may, without obtaining an order under this section, recover as a debt in a court of competent jurisdiction, a contribution not paid at the end of 1 month after it becomes due and payable, together with any interest payable on that unpaid contribution and the reasonable expenses of the owners corporation incurred in recovering those amounts.

Michael Smythe NSW Branch Manager Civium Communities E: michael.smythe@civium.com.au

This post appears in the March 2021 edition of The NSW Strata Magazine.

Question: We did not receive a levy invoice or a notice of arrears. The next period notice invoice for levies, strata is charging interest and there is a notice of arrears fee. Do we have to pay the arrears notice fee and interest if we never received the invoice?

Answer: Unfortunately, you are liable to pay the levies irrespective of whether you received the notice or not.

Unfortunately, you are liable to pay the levies, irrespective of whether you received the notice or not (see below bolded):

83 Levying of contributions

An owners corporation levies a contribution required to be paid to the administrative fund or capital works fund by an owner of a lot by giving the owner written notice of the contribution payable.

Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and section 82) by the owners in shares proportional to the unit entitlements of their respective lots.

Any contribution levied by an owners corporation becomes due and payable to the owners corporation on the date set out in the notice of the contribution. The date must be at least 30 days after the notice is given.

Regular periodic contributions to the administrative fund and capital works fund of an owners corporation are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not given to the owner.

You are liable for interest and arrears etc unless the owners corporation determines generally or specifically to you that such fees will not apply.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #455.

Question: What happens if you get a levy notices for works you think are illegal? What rights do I have to not pay?

What happens if you get a levy notices for works you think are illegal? The body corp have not obtained the correct council permits and I think the work is going to be order to be demolished anyway, what rights do I have not to pay for them?

Answer: Regardless of the legality of the purpose for which the money was raised, if meeting the meeting was legal and the notice for the contribution was properly issued I do not see how an owner could withhold payment.

Regardless of the legality of the purpose for which the money was raised, if meeting at which the contribution was struck was legal (e.g. notice periods were met and the voting was achieved) and the notice for the contribution was properly issued – I see no reason that an owner could withhold payment.

Should the owner withhold payment and the levies fall overdue, they will be liable for interest and risk having debt recovery proceedings take place against them.

I suggest that the owner would be best challenging the issue at the tribunal if they believe the owners corporation is acting illegally; they are otherwise able to try and convene a general meeting (by arranging a qualified request) to overturn the decisions regarding the works and the associated levy.

19 Other general meetings

The secretary or a strata committee of an owners corporation may convene a general meeting (that is not an annual general meeting) of the owners corporation at any time.

The secretary of the owners corporation, or another officer if the secretary is absent, must convene a general meeting (that is not an annual general meeting) of the owners corporation as soon as practicable, and not later than 14 days after, receiving a qualified request.

A meeting may be convened on a qualified request even if the first annual general meeting has not been held.

A request is a qualified request for the purposes of this section if it is made by one or more owners of a lot or lots in the strata scheme having a total unit entitlement of at least one-quarter of the aggregate unit entitlements.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in the February 2021 edition of The NSW Strata Magazine.

Question: At an AGM, should there be a motion for an extra levy or is it discussed together with the other regular contributions?

At an AGM, how much detail is needed to be specified in a Motion for an extra levy?

If extra levies are needed, do we have to specify the reasons and name of company and amount etc….

Should there be a motion for this or is it discussed together with the other regular contributions?

If this is put in a special motion with all details, can it already be voted for and dealt with instead of having another extraordinary meeting to vote?

Answer: The “additional moneys” to which you refer would form part of the expected expenditure.

Because at each AGM the owners corporation must consider how much money it will need to credit to its capital works and administrative funds for actual and expected expenditure, the “additional moneys” to which you refer would form part of the expected expenditure and you would not likely need to raise a special levy because during your estimation at the AGM you will know how much you will need to be raised and you must have before you a statement of the existing financial situation of the strata scheme.

A special levy is only required if the owners corporation is subsequently faced with expenses it cannot meet from either fund, or it was not allowed for in the annual budget (and funds were required to complete specific repairs and therefore could not wait to raise moneys over a further budget period) in which case a general meeting would then be required to consider and approve a special levy.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in the December 2020 edition of The NSW Strata Magazine.

Question: On our levy notices, the levy payment periods were not included. Is this ok?

On our levy notices, the levy payment periods were not included. Is this ok?

After discussion the Strata Management Company agreed to include this on the levy notices, however, they do not seem to be following the usual accounting quarters as per the financial year. Why is this?

Answer: Levy notices don’t have to state the period they cover but it’s good practice to include it.

Levy notices don’t have to state the period they cover but it’s good practice to include it.

There’s no requirement for levy periods to cover the same 12 months as the financial year (and much of the time they won’t – it’s just a matter of collecting the total over 4 quarterly instalments).

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in the November 2020 edition of The NSW Strata Magazine.

Question: What happens to the interest charged on overdue strata levies?

Answer: Interest is taken as income to the relevant fund to which the levies are outstanding.

Interest charged on outstanding levies is payable at 10% per annum and is taken as income to the relevant fund to which the levies are outstanding – administration or capital works fund.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in >Strata News #322.

Question: We’ve raised a special levy for a re-roofing job on our building. 3 weeks after the payment deadline 2 lot owners have still not paid. How can we recover the money?

I live in a 23 lot strata complex. We are having a major re-roofing job done which has required the raising of a special levy. 3 weeks after the payment deadline 2 lot owners have still not paid.

The Strata Manager can not issue a work order until all levies are paid. Where do we go from here?

Answer: The act is clear on interest being payable 30 days after a levy falls due and collection costs being borne by the responsible owners.

If the scheme has adequate money in the bank for the works (inclusive of any accrued admin/capital works funds) they should issue a work order to proceed.

Otherwise, the act is clear on interest being payable 30 days after a levy falls due and collection costs being borne by the responsible owners.

If it’s a matter of money in the bank, the scheme could take out a loan or raise further special levies.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in Strata News #319.

Question: I understand when my levy payments are due. Does the 30 day required notice period apply to Special Levies?

The NSW STRATA SCHEMES MANAGEMENT ACT 2015 – SECT 83 states:

Any contribution levied by an owners corporation becomes due and payable to the owners corporation on the date set out in the notice of the contribution. The date must be at least 30 days after the notice is given.

I understand when my levy payments are due. Does the same apply for special levies? Does the 30 day required notice period apply?

Answer: Yes, it does, the key word being ‘Any’.

Yes, it does, the keyword being ‘Any’.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

What is a Special Levy?

For a detailed explaination, take a look at this video by Michael Ferrier, Eyeon Property Inspections.

What are Special Levies?

NSW Fair Trading, on their Levies and Capital Works Funds page, provides the following definition:

Owners corporations can vote to introduce a ‘special levy’, which can sometimes be a large amount. Special levies can be sought where there are insufficient funds to cover large capital works or unforeseen works, for example, to carry out major repairs to the common property.

They are calculated according to the lot entitlement of each lot owner.

Question: For the purpose of calculating overdue strata fees, could you please advise when it is deemed that an electronic transfer of a Strata unit owners levy fee is deemed to have been paid?

For the purpose of calculating overdue strata fees, could you please advise when it is deemed that an electronic transfer of a Strata unit owners levy fee is deemed to have been paid?

Is it considered paid the moment that the funds have been accepted and a receipt issued, considering most transactions go through overnight?

Answer: Funds are deemed received when the recipient may access funds.

In our view, electronic funds transfers should be treated like personal cheques ie funds are deemed received when the recipient may access such funds, in other words, when cleared funds stand to the credit of the Owners Corporation’s bank account.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #277.

Question: Can the owners corporation charge interest on overdue strata fees? If so, is there a regulated, standard rate?

Answer: Many strata schemes have difficulty with one or two owners with overdue strata fees, however, this many unfinancial lot owners is unusual.

Yes, an owners corporation may charge interest on overdue strata levies. This is regulated by:

85 Interest, discounts on contributions and payment plans:

A contribution, if not paid when it becomes due and payable, bears until paid simple interest at an annual rate of 10% or, if the regulations provide for another rate, that other rate.
Interest is not payable if the contribution is paid not later than one month after it becomes due and payable.

Further, the owners corporation has the right to waive interest payable.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

This post appears in Strata News #239.

Question: Payments in advance are withheld to be used in the period they fall due. Is this normal practice?

Our strata scheme pays levies quarterly and sometimes some owners pay the entire year’s levies in advance, eg, in the first quarter.

Whilst those advanced funds are strictly accounted for by our strata manager company, they are not released for expenditure until the date of the quarter in which they would be due had they not been paid in advance. Is this normal practice? Is this a practice subject to negotiation or is it governed by NSW strata legislation?

With maintenance having been neglected in years past, we are experiencing quarterly cashflow problems in spite of dramatically increasing levies. Use of funds paid in advance could assist getting through the financial year without having to call for a Special Levy.

Answer: Any levies paid in advance will sit in the owners corporations funds and be accounted for on the balance sheet under ‘levies paid in advance’.

This doesn’t quite make sense. Any levies paid in advance will sit in the owners corporations funds and be accounted for on the balance sheet under ‘levies paid in advance’ or similar. The money will show as paid on the owners ledger and as each levy falls due, will be accounted for.

It is not uncommon that in the event of cash flow issues, owners might be called by the owners corporation to pay their levies prior to the due date and that is a matter for each owner.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

This post appears in Strata News #236.

Question: After calling our new strata management company for information, I have personally been charged a sum. Until the invoice is paid, I am unfinancial. Are strata management companies authorised to act as a “debt collector” for the owners corporation?

Our small strata of 10 units in Sydney recently changed to a new strata management company.

I have just received an invoice from them issued “on behalf of” the Owners Corporation that states: Lot !: Answering phone enquiries $82.50.

At no time was I advised that my call was to be time charged to the owners corporation and the owners corporation were entitled to recover the charge from me.

My phone call related to the validity of a motion at the last AGM.

I have declined to pay the invoice on the basis I neither have a contract with the owners corporation nor the strata management company. I have been advised that until the invoice for $82.50 is paid I am unfinancial and therefore can not vote at an upcoming general meeting.

I understand other owners who have sought advice from our strata manager under the Full Strata Management Agency Agreement were not subsequently charged by the owners corporation (who of course may not have been invoiced by the management company).

The strata manager relies on this:

The Act states that an unfinancial owner is:

“unfinancial owner” means an owner of a lot in a strata scheme who has not paid all contributions levied on the owner that are due and payable, and any other amounts recoverable from the owner, in relation to the lot.

This includes both levy payments and any other recoverable amount, such as invoices.

Is the strata manager correct in this specific case? Whilst the small amount involved sits on the levy notice as overdue strata fees I remain an unfinancial owner. I am effectively being blackmailed. Pay up or you can’t vote. This impediment goes to the heart of my issue.

If the owners corporation had invoiced me directly they would have to seek recovery of the claimed debt through the local court and I would not be unfinancial at any stage, whatever the outcome of the court action.

Are strata management companies authorised to act as a “debt collector” for the owners corporation on this issue and include the invoice on my levy notice?

If there is strength in my argument I will seek adjudication by NCAT if necessary to establish a clear precedent for the NSW strata industry. I feel that strongly.

I just wonder how many owners receive similar invoices after speaking to their strata manager?

What is my position regarding this seemingly small charge which could have significant implications in the future regarding further charges when seeking advice on strata matters?

Answer: No, the strata manager is not authorised to act as “debt” collector. Write to the strata manager and ask them for the legal basis upon which they are entitled to on-charge their costs.

While we have not reviewed the relevant strata management agency agreement, there is likely to be a line item which empowers the strata company to charge the owners corporation per phone call on a timed basis.

As for the owners corporation on-charging you, in the absence of a by-law or other agreement from you, it is unclear on what legal basis the owners corporation is doing so. You should check the by-laws applicable to your scheme to ascertain the existence of such a by-law (such by-laws are not uncommon).

So you can challenge the legal basis upon which they on-charge you and refuse to pay and take it further eg mediation etc or simply pay to ensure your financial status. You are correct in your understanding that whilst a smallish charge, if they are legally charging you, failure to pay renders you unfinancial and prevents you from being nominated/appointed to the strata committee and disentitles you to vote on all resolutions (other than unanimous resolutions).

Are strata management companies authorised to act as a “debt collector” for the owners corporation? No, the strata manager is not authorised to act as “debt” collector in the absence of clear authorisation eg by way of a by-law or other agreement in place. Most by-laws recover moneys owed to the Owners Corporation as debts due ie through the normal debt recovery channels eg local court.

Perhaps you could write to the strata manager and ask them for the legal basis upon which they are entitled to on-charge their costs before you go through legal channels noting that there is no contract, arrangement, agreement with you nor any by-law empowering them to do so.

Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440

These articles are not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

This post appears in Strata News #214.

Question: Our strata is requesting we pay a special levy as over 10% of lot owners have overdue strata fees. I do not want to pay this special levy. What will happen to me?

I live in a 54 units complex. Last week I received a letter from strata requesting us to pay the special levy due to some 6 units having overdue strata fees. I think it is unfair so I do not want to pay this special levy. What will happen to me?

Answer: Many strata schemes have difficulty with one or two owners with overdue strata fees, however, this many unfinancial lot owners is unusual.

Unfortunately, many strata schemes have difficulty with one or two owners that are behind in paying their levies. This is normal however 6 owners in a building of 54 being in recovery is unusual.

I would suggest that your strata manager isn’t following up the levies promptly. It is so important to ensure that you appoint a strata manager that has strong processes around debt collection and control of overdue strata fees, with reminder letters to be issued against owners in arrears followed then by recovery action against any owners who still have overdue strata fees after receiving reminders.

An owners corporation can raise special levies at a General Meeting for a number of purposes including a shortfall of funds due to owners not paying their levies. A short term special levy may be required at your building to ensure that the Owners Corporation can continue to operate whilst the outstanding levies are being recovered.

I would recommend against refusing to pay this special levy as you may end up in litigation to recover your outstanding amounts. I would suggest you assist your owners corporation and pay this levy as soon as you can.

I would, however, suggest that you ask your strata manager to send you a copy of the levy collection process and policy as this may require improvement to avoid this situation in the future.

Rod Smith The Strata Collective E: rsmith@thestratacollective.com.au P: 02 9879 3547

This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.

This post appears in Strata News #194.

Debt Recovery Procedure for Overdue Strata Fees in NSW

Do Strata Plans Need a Debt Recovery System for Overdue Strata Fees in Place? Yes is the simple answer!

Why? So a lot owner does not get too far behind in their strata levies, making it impossible to get their far overdue strata fees up to date. If a debt recovery process is part of the yearly AGM Minutes, which each lot owner receives, all the lot owners are aware of the procedure for overdue strata fees if they do have difficulty paying their levies.

Having the debt recovery procedure in the yearly AGM Minutes is also a reminder to all lot owners of the process. It ensures that the individual lot owner is aware that recovering overdue strata levies is not done on an ‘ad hoc basis’ reinforcing that there is a system in place – and this debt recovery procedure in NSW will be adhered to.

This makes the process less personal and more of a business transaction. This is exactly the way a Strata Plan should be run, as a business of the owners. Executive Committees and Strata Managers routinely obtain quotes for cleaners, gardeners, accountants, and lawyers who assist them in running the Strata Plan. However, Executive Committees and Strata Managers do not consider overdue strata fees in the same way – as a debt to the plan which should be collected as early and as quickly as possible.

I often see one lot owner in a small strata plan or a minority of lot owners in larger plans who don’t pay their levies and the strata plan can’t pay the necessary expenses as a result. The Strata Plan will then obtain a loan so that they can pay their yearly expenses whilst the minority of lot owners continue to not pay their levies and their overdue strata fees increase, placing further strain on the paying lot owners.

All lot owners should speak to their Strata Managers and have a Debt Recovery Process for overdue strata fees voted on at the next AGM and ensure that the debt recovery process is adhered to.

Bronwyn Smith Smith Partners Lawyers E: bsmith@smithpartnerslawyers.com.au P: 02 8089 3160

Question: What are the requirements to contact a lot owner regarding overdue strata fees? When can legal action against the lot owner commence?

I was wanting some legal advice on what the requirements are to contact an owner regarding overdue strata fees? In particular, is the Owners Corporation only required to send a single letter informing the lot owner of the overdue strata fees before legal action can be pursued?

Answer: A letter of demand should be sent as it may affect the question of the Strata Plan recovering costs at the end of the court proceedings.

Legally, the overdue notice is sufficient. However, practically a letter of demand should be sent as it may affect the question of the Strata Plan recovering costs at the end of the court proceedings.

Also, a letter of demand puts the lot owner on notice that:

the levies are outstanding and the lot owner then has the opportunity to pay the levies or question the validity of them and
it clearly advises the lot owner that if the outstanding amount is not paid then legal proceedings will be commenced within a certain time frame e.g 7 or 14 days.

I have found that a letter of demand will also often elicit a response from the lot owner such as a payment plan.

Bronwyn Smith Smith Partners Lawyers E: bsmith@smithpartnerslawyers.com.au P: 02 8089 3160

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

This post appears in Strata News #139.

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