SA lot owners are wondering about late levy payments and making up the deficit. Tony Johnson, Stratarama answers their queries.
Jump directly to the QUESTION you are after:
- QUESTION: Can a strata manager force (by threatening with court action) an owner to pay extra fees to cover the non-payment of another owner?
- QUESTION: A voting form has been issued to all owners with options for paying or postponing levies. As this relates to varying the levy contributions, how should this be done?
Question: Can a strata manager force (by threatening with court action) an owner to pay extra fees to cover the non-payment of another owner?
Answer: Essentially each member is responsible to make sure that the Corporation can meet its financial requirements.
In regards to a Strata Corporations financial position, the group members are both severally and jointly responsible for the costs associated with the group. These costs being those set out in a budget at a properly convened meeting (both for recurrent and forward budgeting). In addition, it may be costs that were unexpected such as emergency works. Essentially each member is responsible to make sure that the Corporation can meet its financial requirements.
No one owner is responsible for the Corporation costs, nor is one unit Owner responsible individually, or held responsible for another unit Owners fees individually. However collectively the group is responsible for the costs, and where one Owner is not meeting their financial obligations, it may become necessary for a group to raise a higher levy across the whole group of members to raise sufficient funds to cover the works/ or ongoing financial requirements of the group. This levy may be higher against all parties than would be necessary, had one (or more) Owners been able to meet their financial requirements to the group and pay their levies.
For this reason it is an unfortunate situation where one or more Owners could be financially struggling as it does in fact put added burden on the rest of the group members to meet the groups financial requirements in the short term.
A Strata Manager should of course be endeavouring to have all members meet their financial requirements in a timely fashion but in some instances this simply does not occur, and could see a decision made in a magistrates court for a payment plan, sale of unit or other outcome, but in the short term whilst this process is being carried out by your Manager and/ or Committee members, the rest of the group is burdened by the extra short term costs.
Strata Titles Act 1988
21—Unit holders are guarantors of strata corporation’s liabilities
- (1) If a strata corporation defaults in payment of a pecuniary liability, the liability is enforceable against the unit holders jointly and severally.
- (2) The unit holders have amongst themselves a right of contribution determined by
reference to the respective unit entitlements of the various units.
This post appears in Strata News #383.
Question: A voting form has been issued to all owners with options for paying or postponing levies. As this relates to varying the levy contributions, how should this be done?
We are a strata community of 40 plus units in Adelaide. An idea was put forward among the committee to allow owners to pay no strata levies for one quarter to assist with the financial fall out of COVID-19. A voting form was sent out to all owners with the option of:
- pay contributions as usual or
- waive contributions for one quarter.
Is there any rule or regulation relating to how this should be done? As it relates to varying the levy contributions, should the vote be a simple majority or require unanimous vote?
Answer: In the current climate, groups have needed to reconsider (at least short term) how these resolutions can be made, such as having a teleconference, zoom meeting or social distancing at a meeting in person.
Thanks for the query. COVID-19 has certainly created financial issues for every individual, but also every organisation or Corporation where the Owners may have an unprecedented problem with many Members being able to pay their contributions on time.
Each Corporation must look at their circumstances of the group individually. For example, some groups simply would not be able to continue to function for the full period if one quarter of the levy contributions were not paid. They may be able to survive for the quarter on savings, but then need to replenish those funds in order to meet their pre-existing financial obligations to third parties or it may not be possible to delay urgent maintenance, or maintenance that is necessary to ensure safety of the group. Some may be able to waive, or postpone payments, or increase payments in later quarters. Some Corporation groups may choose to waive arrears interest for the current quarter. A group should carefully review their upcoming expenditure and future requirements before making a decision to hold or waive levies.
The decision made to set a level of contributions for the group based on their estimated expenses is usually made at an AGM, by an Ordinary resolution. At a properly convened meeting, the same ordinary resolution can be passed to determine what level of contributions will be paid/ altered. The section of the Act which you refer to above is correct.
In the current climate, groups have needed to reconsider (at least short term) how these resolutions can be made, such as having a teleconference, zoom meeting or social distancing at a meeting in person.
section 27 — Power to raise money
- A strata corporation may raise such funds (including reserve funds for future expenditure of a capital nature) as it thinks necessary.
- For the purpose of raising funds the strata corporation may, by ordinary resolution, levy contributions against all unit holders.
- The contributions—
- will be proportional to the unit entitlements of the various units; or
- will be determined on such other basis as the strata corporation decides by unanimous resolution.
- A strata corporation may, by ordinary resolution—
- permit contributions to be paid in instalments specified in the resolution; and
- fix (in accordance with the regulations) interest payable in respect of a contribution, or an instalment of a contribution, that is in arrears.
- The strata corporation may recover an unpaid contribution (and interest on any such contribution), as a debt, from the unit holder of the unit in respect of which the contribution is payable (whether or not that person was the unit holder when the liability arose).
- If the strata corporation carries out work that wholly or substantially benefits a particular unit or group of units, the corporation may, subject to any agreement to the contrary, recover the cost of that work as a debt from the unit holder or unit holders of the unit or units.
- Where the cost referred to in subsection (6) is recoverable from two or more unit holders, the extent of their liability will be proportioned according to the unit entitlements of their respective units.
- An amount paid by a person under this section is not recoverable by the person from the strata corporation when he or she ceases to be a unit holder.
- ordinary resolution of a strata corporation means a resolution passed at a properly convened meeting of the corporation by a simple majority of the votes of unit holders present and voting on the resolution;
This post appears in Strata News #363.
Have a question about late levy payments and making up the deficit or something to add to the article? Leave a comment below.
- NAT: Q&A Non Payment of Levies: Financial Options to Survive COVID-19
- NAT: Q&A Reducing Strata Levies During the Coronavirus Crisis
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
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