Question: Who is responsible for levy collection? What can an owners corporation do if arrears delay funding for urgent repairs?
Is the strata manager responsible for ensuring levies are paid on time? Who is responsible for starting debt recovery action for unpaid levies, and what timeframe should apply?
Our owners corporation is undertaking major repairs for water ingress, and we need to raise a special levy to fund the works. This will add pressure on owners, and I am concerned we will not have enough funds to meet the contract deadline.
What options does the owners corporation have if levy arrears or delayed payments prevent us from having the funds available when the contractor requires them?
Answer: Strata managers administer the process, but financial decisions and enforcement action remain the legal responsibility of the owners corporation.
Generally speaking, yes, a strata manager is responsible for monitoring levy payments, issuing notices, and maintaining proper financial records, depending on the terms of their appointment and management agreement. However, the strata manager does not decide whether debt recovery action proceeds. That authority rests with the owners corporation.
If levies remain unpaid, the owners corporation must resolve to take formal recovery action. Before doing so, the law requires that owners be offered the option of a payment plan where appropriate, and that at least 30 days’ notice of legal action is provided.
Recent amendments to NSW strata legislation clarify that an owners corporation can reasonably refuse a payment plan if entering into one would leave insufficient funds available to meet its repair and maintenance obligations. This is particularly relevant where urgent works, such as water ingress repairs, must proceed.
If recovery action is authorised and a debt judgment is obtained through the NSW Civil and Administrative Tribunal (NCAT) or the Local Court, the debt can then be enforced through standard legal processes. These may include garnishing rent from a tenanted lot, seizing assets, or ultimately forcing the sale of the lot if the debt remains unpaid.
Why this issue matters
Levy arrears are one of the most common financial risks in strata schemes, particularly when major repairs are required. Even a small number of unpaid levies can significantly affect cash flow, delay essential works, and expose the owners corporation to contractual penalties or building deterioration.
Understanding who does what helps avoid unrealistic expectations. Strata managers administer the process, but financial decisions and enforcement action remain the legal responsibility of the owners corporation.
What should your next practical steps be?
If your scheme is facing urgent repair costs and potential levy shortfalls, the committee should act quickly and proactively.
- Review arrears immediately: Request an up-to-date arrears report to identify which lots are in debt and how long payments have been outstanding.
- Issue reminder notices promptly: Ensure levy notices, interest charges, and reminder letters have been properly issued in accordance with legislation and your agency agreement.
- Assess payment plan requests carefully: Payment plans cannot be unreasonably refused, but they may be declined where they would jeopardise the scheme’s ability to meet essential repair obligations.
- Authorise debt recovery without delay: Where arrears persist, the committee should formally resolve to commence recovery action. Delays can significantly increase financial risk.
- Consider interim funding options: Where major works must proceed urgently, schemes may also consider raising a supplementary special levy, arranging a strata loan facility, or staging works where possible to manage cash flow.
- Regularly review the levy position of all lots: Review on a monthly basis a minimum levy position report so you can manage arrears proactively to avoid cash flow issues for the scheme and to ensure the owners corporation can pay its expenses on time.
A proactive and consistent approach to levy management helps protect the scheme’s finances, ensures repairs can proceed on time, and reduces the risk of disputes or escalating legal costs.
This post appears in Strata News #786.
Leanne Habib Premium Strata E: info@premiumstrata.com.au P: 02 9281 6440
