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.
This post appears in the July 2022 edition of The NSW Strata Magazine.
Rod Smith
The Strata Collective
E: rsmith@thestratacollective.com.au
P: 02 9879 3547
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