VIC lot owners would like to know if non essential contract work can be suspended and Owners Corporation fees be reduced during the Coronavirus crisis. Chris Irons, Hynes Legal and Joel Chamberlain, Horizon Strata provide the following responses.
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- QUESTION: Will owners corporations in Victoria lower their fees during the coronavirus crisis?
- QUESTION: Are Owners Corporations able to suspend non essential contracts and reduce strata levies to help get us through this terrible coronavirus crisis?
Question: Will Owners Corporations in Victoria lower strata levies during the coronavirus crisis?
Answer: As we go to print, neither the law nor government announcements, offer you a suitable remedy.
Great question. One that will have to be addressed by many Owners Corporations in these turbulent times. As we go to print, neither the law nor government announcements, offer you a suitable remedy.
Owners Corporations are empowered to levy fees to fund their budgets, chase arrears, add penalty interest, etc. Fees and budgets will have been approved at your last Annual General Meeting. So, it will prove problematic for the Owners Corporation to simply lower fees without formulating and having those approved reduced fees.
If we believe the authorities, unemployment could reach more than 15% as a result of the coronavirus restrictions. For an Owners Corporation, this can mean 15% of their budgets becoming unfunded. It is serious.
Whether you are an owner-occupier or a landlord, Owner’s Corporation fees are just another cost to be met along with food, mortgages, electricity, etc. Owners Corporations will be aware that fees will rank below those other costs, in people’s priorities. They know that practically it can take a very long time to enforce collection. They need to listen to people enduring financial stress and react in a diligent but practical manner.
Your best option is to communicate early with your Owners Corporation and explain your situation. You will not be alone. Others will be experiencing the same problem. The earlier you deal with this, the quicker the Owners Corporations will be able to plan.
There can be a number of actions they can make to address short term cash flow problems ranging from levy deferrals, trimming costs, Maintenance Plan adjustment, borrowing, etc. Most importantly, make sure you and your family are safe.
This post appears in Strata News #333.
Question: Are Owners Corporations able to suspend non essential contracts and reduce strata levies to help get us through this terrible coronavirus crisis?
Are Owners Corporations able to suspend non essential contracts and reduce strata levies to help get us through this terrible coronavirus crisis?
Has there been any effort by Strata Management Corporations or the Governments to look at reducing the cost of strata levies?
I ask this for two reasons:
- Owners and tenants may lose jobs and will be unable to cover mortgages and Strata fees
- Contractors and residents will be required to work in areas outside their safe zones and may pass on or get the COVID-19 virus.
Banks are willing to suspend/adjust mortgages, but nothing has been discussed to help apartment owners.
It must be said that councils need to step up in this area as well.
Remove all non essential services such as services scheduled to passenger lifts, car stackers, non fire doors, electrical services and plumbing services.
Essential services on all fire equipment would need to continue to comply with Australian standards.
All these non essential services account for 70% of Strata fees and will enable residents to get lower corporate fees if these contracts are reduced to only call outs or breakdowns.
Strata Management Corporation should also assist by reducing their fees by at least 50% because their workload would also be reduced substantially.
Everyone has to give a little to get through and Strata, contractors and investors must not be exempt.
Has there been any discussion in this area since this terrible Coronavirus has shut down the world?
Answer: Decisions cannot be arbitrarily made to cease doing something without that first having been put to a vote.
You raise some very valid and timely points. There’s been a lot of discussion in the media about impacts of COVID-19 on the property market generally and then other reports about things such as open houses, auctions and impacts on tenants.
It’s important to remember that things happen in body corporate – or strata, or owners’ corporation, depending on where you are – jointly. In other words, decisions cannot be arbitrarily made to cease doing something without that first having been put to a vote or subject to an order of an adjudicator, court or tribunal. That is how things get done. So in relation to your proposal to reduce services by a certain percentage, you are at liberty to put that proposal in the form of a motion to a meeting and have it voted upon. Equally, those entitled to vote are entitled to agree or disagree with it.
Body corporate levies are set according to the needs of the building and are used to maintain common property and pay for things like insurance and other outgoings. If you’re suggesting fees should be halved, that’s fine but you’d need to still have the money to pay for things. How do you make the distinction between what is ‘essential’ and ‘non-essential’ spending? Almost all body corporate expenses are necessary. Bodies corporate are parties to contracts and there are statutory obligations to do certain things. Imagine not serving the lift and it breaks down. Is that right?
Those things won’t necessarily change because of the pandemic. I’m sure your view of that would not be the same as everyone else’s in that building. To put it another way: if a body corporate had no expenses whatsoever, then the levies could stop as well. But that is not realistic.
I know from some of the client enquiries and discussions I’ve been having levies are becoming a pressing issue across Australia. My experience with strata managers is that they have all become busier dealing with these issues than not. No doubt more discussions on this will take place in the weeks ahead. You’ve got every right to put your concerns to your elected representatives – that is, after all, their role.
This post appears in Strata News #332.
Have a question about reducing strata levies during the Coronavirus crisis or something to add to the article? Leave a comment below.
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