Question: Our small plan of five detached lots contributes to building insurance. If one owner refuses to pay their share, can we pursue the outstanding money as a late levy payment? Can we charge interest?
Our strata plan consists of five detached lots sharing a common driveway. We don’t have a council of owners but buy joint strata building insurance. What do we do if one owner doesn’t pay their share of the insurance premium?
For the premium to be valid, it has to be paid in full before the expiry date. One owner refuses to contribute. If all other owners increase their payment to cover the deficit, what action can we take to recover this money?
Can overdue insurance payments be pursued similarly to late levies? Can we charge interest on the amount owed?
Answer: It will depend on whether you have an admin fund in place or not.
If an admin fund is in place
Unless your strata scheme has scheme by-laws for a 3, 4 or 5-lot scheme that exempt the strata company from a designated function under section 140, insurance premiums would form part of your strata company budget even if it is the only expenditure item in the budget. In this case, funds raised to meet that premium are strata levies. The levy may be an annual levy due and payable just before your insurance renewal.
Provided the levy to meet the insurance premium is raised at a general meeting of the strata company via approval of the strata company budget in accordance with Section 102(1) of the Strata Titles Act 1985 (STA1985) and levied in accordance with section 100, the strata company can apply interest at the rate set out in the general regulations (11% at this time).
Section 102(1) states:
Budget
“A strata company must prepare a budget for each financial year and submit it for approval to its annual general meeting.
Section 100(1)(a) and (b) state:
Administrative and reserve funds and contributions
- A strata company must —
- establish a fund (an administrative fund) for administrative expenses that is sufficient in the opinion of the strata company for the control and management of the common property, for the payment of any premiums of insurance and the discharge of any other obligation of the strata company; and
- determine the amounts to be raised for payment into the administrative fund; …
If no admin fund is in place
Should your strata company not have an administration fund, being a single tier strata scheme (a scheme where no lot sits above or below another lot), sections 53E of the STA1985 become relevant. This section states:
53E. Recovery of premium by strata company or owner if no administrative fund in single tier strata schemes
- If —
- in accordance with section 140, an administrative fund is not maintained by a strata company under section 100(1)(a); and
- the strata company or the owner of a lot receives notice of the amount of any premium or other charge for insurance under clause 53D, the strata company, or the owner, may give notice in writing of that amount to the owner of each lot in the scheme, or each other owner, and require the owner to pay a share of the premium or other charge before a specified time.
- The share payable by the owner of a lot is —
- a sum equal to the same proportion of the amount as the unit entitlement of the lot bears to the sum of the unit entitlements of all the lots in the scheme; or
- if applicable, a sum fixed under the scheme by-laws.
- If —
- notice has been given to the owner of a lot under subclause (1); and
- the amount of the owner’s share has not been paid to the strata company or the insurer before the specified time, that amount becomes a debt due by the owner to the strata company and may be recovered by it in a court of competent jurisdiction.
- If the amount of an owner’s share has become due to the strata company but has not been paid, the owner of another lot may —
- pay the amount; and
- recover the amount as a debt on application to the Tribunal.
This post appears in Strata News #681.
Luke Downie Realmark E: ldownie@realmark.com.au P: 08 9328 0999