We received these questions about overdue strata fees from NSW Lot Owners. Bronwyn Smith from Smith Partners Lawyers, Rod Smith from The Strata Collective and Leanne Habib from Premium Strata have provided the following responses.
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.
This post appears in Strata News #194.
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.
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.
This post appears in Strata News #214.
These articles are not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
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 for 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.
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.
This post appears in Strata News #139.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.