QLD: Unpaid Strata Levies and Overdue Fees at Settlement

Question: If an owner short pays their levies, how is the money allocated? Do they still qualify for any discount?

An owner recently short paid their levies. Our body corporate manager allocated funds received to the admin fund levy and the insurance levy. The owner received the 20% standard discount on each payment. The balance of the funds wasn’t sufficient to cover the sinking fund levy, so no discount was allocated. If the levies are short, why grant a discount on any levy component?

Our body corporate manager advised that each component was a separate levy, so each discount is considered separately. We asked why levies paid should be allocated against admin, followed by insurance and sinking fund. We were advised it’s the order in which the levies appear. What usually happens when an owner short pays their levies?

Answer: The committee should make every endeavour to assist owners in accessing applicable discounts and preventing the imposition of interest penalties.

To look at the answers to your question, there are a couple of applicable sections of the act. The below references are from the Standard Module Regulations.

First, let’s look at section 164, which allows for a discount, provided the relevant motion has been passed at a general meeting:

S164 Discounts for timely payment

The body corporate may, by ordinary resolution, fix a discount to be given to owners of lots if a contribution, or an instalment of a contribution, is received by the body corporate by the date for payment fixed in the notices of contribution given to the owners.

The keywords here are “or an instalment of a contribution”

In this context, it would appear the body corporate has the authority to give a discount even on a partial payment (instalment), by the due date specified in the notice of contribution.

Next, we will look at section 166, the payment of a debt (which is a levy contribution):

S166 Payment and recovery of body corporate debts

5. If an owner is liable for a contribution or an instalment of a contribution, and a penalty, an amount paid by the owner must be paid-
   
   1. first, towards the penalty; and
   
   
   2. second, in reduction of the outstanding contribution or instalment; and
   
   
   3. third, towards any recovery cost for the debt.

If the body corporate is satisfied there are special reasons for allowing a discount of a contribution, or waiving a penalty or liability for recovery costs, the body corporate may allow the discount, or waive the penalty or costs in whole or part.

In interpreting the above, even if the owner was overdue with their payment, the body corporate appears to be able to give a discount in whole or part. Regarding the order of payment on a contribution, here it is applied to the oldest debt owing.

Third, let’s look at section 197, the insurance premium:

Part 6 Insurance Act, Section 189

S197 Insurance of common property and body corporate assets

4. The owner of each lot that is included in the community titles scheme is liable to pay a contribution levied by the body corporate that is a proportionate amount of the premium for a policy of insurance taken out under this section that reflects the interest schedule lot entitlement of the lot.

For clarity, the insurance levy is only issued separately if the interest entitlements of a lot are different from its contribution entitlements.

Regarding your concerns, there is no definition in the Act or Regulations as to what contribution must be paid first – admin, sinking or insurance.

The only definition is that if there is a debt, then it’s the interest first, then the contribution and finally any other amount.

However, the body corporate, via its committee, is tasked with making a decision on behalf of owners regarding such matters. The strata manager (body corporate manager) is engaged to assist the committee with its administrative and financial duties.

As such, if the committee feels it is more in order to allocate payments to the administrative fund first and the sinking fund second, followed by the insurance levy (if this is separately levied), it should provide instructions to the strata manager accordingly.

What has not been addressed here is, was the owner ever advised that they short paid the levy? There may be a valid reason as to why this occurred, and if they have made up the shortfall, the committee has the ability to reinstate any lost discounts.

What should ordinarily occur: The committee should make every endeavour to assist owners in accessing applicable discounts and preventing the imposition of interest penalties.

This post appears in Strata News #669.

Karen Thompson Vision Strata E: contact@visionstrata.com.au P: 07 5630 6546