A lot owner is questioning their debt recovery procedure in NSW. Rod Smith, The Strata Collective provides the following response.
Question: Our strata is requesting we pay a special levy as over 10% of lot owners have failed to pay their 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 failing to pay their 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 that are behind in paying their levies, 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, with reminder letters to be issued against owners in arrears followed then by recovery action against any owners who fail to pay their levies 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.
Do Strata Plans Need a Debt Recovery System in Place?
December 2015: This article about implementing a debt recovery procedure in NSW has been supplied by Bronwyn Smith, Smith Partners Lawyers.
Debt Recovery Procedure in NSW
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 arrears 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 if they do have difficulty paying their strata 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 unpaid levies 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 arrears increase, placing further strain on the paying lot owners.
All lot owners should speak to their Strata Managers and have a Debt Recovery Process voted on at the next AGM and ensure that the debt recovery process in NSW is adhered to.
For more information about implementing a debt recovery procedure, other strata levy questions or information particular to NSW strata legislation, visit Your Strata Levies or Strata Legislation NSW pages.