This article discusses penalties for late strata levies, explaining that strata companies can only charge simple interest at the regulated rate and cannot impose higher flat penalties for late payments.
Question: Can our strata company charge a full 10% penalty for late fees rather than 11% simple interest?
Our strata company charges 10% penalty for late fees. I believe the Strata Titles Act only allows for simple interest to be charged at 11% per annum or as set by AGM. As such a one month late $800 payment should only incur interest of 1/12th of the annual 10% simple interest – eg. about $6.90 interest. Is that correct – or does the “as set by AGM” allow for the strata company to set a “penalty” of the full $80 to be charged to late payers?
Answer: The rate calculated in your example would exceed the 11% per annum set under the general regulations.
Section 100 of the Strata Titles Act 1985 sets out that a Strata Company must establish a fund for administrative expenses. If it is a designated Strata Scheme (10 lots and above or has a building replacement value of $5 million or above) it also must have a reserve fund and ten year maintenance plan.
The funds to meet these budgets is raised by levying contributions so determined on the owners in proportion to the unit entitlement of their respective lots (unless the scheme has a by-law in place varying this method).
The contributions become due and payable on the 1st day of the period in which they are for and section 100(4) provides that overdue levies bears interest on the amount unpaid at the rate of simple interest set out in the general regulations. Section 78 of the general regulations provides that the rate of simple interest specified is 11% per annum. This applies unless the company determines (either generally or in a particular case) that an unpaid contribution bears no interest or interest at a lesser rate.
The rate calculated in your example would exceed the 11% per annum set under the general regulations. The Act and its regulations does not allow for a Strata Company to determine an amount above the prescribed rate. It would appear that your Strata Company may be having difficulty understanding how to apply the rate of interest and as such I would recommend they seek advice or assistance from an accountant.
Some other points to note:
- Outstanding levies and any interest accrued can be recovered as a debt by the strata company in a court of competent jurisdiction.
- The strata company may agree to a compromise of such a debt. Interest paid or recovered forms part of the fund to which the contribution belongs.
- The owner of a lot is liable in respect of any contribution levied and any interest on the contribution, jointly and severally with any person who was liable to pay that contribution and interest when that owner became the owner of that lot.
This post appears in the April 2022 edition of The WA Strata Magazine.
Luke Downie Realmark Strata E: strataperth@gmail.com P: 08 9328 0999