Question: Our strata manager informed the Strata Council 2 weeks after the AGM that the strata fees are invoiced with a 2 month lag. The suggested increase exerts financial pressure on all lot owners personal cash flow with only a few days notice of this change. What can we do?
Our strata manager informed the Strata Council 2 weeks after the AGM that the strata fees (admin and a special levy) are invoiced with a 2 month lag to the financial year 12 months period. We hear that the levies schedule needs to be accelerated to align with the financial year due to accounting practices. This means 14 months levies will be due from owners in less than 12 months.
The strata manager wants to start with adjusting payments within less than a month. This exerts financial pressure on all lot owners personal cash flow with only a few days notice of this change.
What grounds do we have to push back on this? We have in mind calling an EGM (we’ve run these before) to discuss only this issue? Can we agree to align the invoicing into the correct year but negotiate that NO INTEREST PAYMENTS are incurred if payment is not made until payments are 2 months overdue? This will allow owners to make payments in line with the original cash forecasting and gradually catch up but not incur interest charges. This will give owners time to adjust. Or are there other options?
Answer: Any aligning of the levies to the financial year should have formed part of the notice provided to all owners for the AGM.
Without having any of the documents at hand we can only provide guidance in relation to these queries.
When an AGM is scheduled, the notice of the meeting includes items of business such as the adopting of a proposed budget and the striking of strata fees.
The levy detail should be included in the AGM notice to clearly show when the levies are due and payable, and in what amounts.
These items are then resolved by a majority vote at the AGM and minuted accordingly. This then provides all parties clear instructions on what amount the levies are for the upcoming 12 month period and when they are due. This is particularly important to ensure any persons buying into the property are fully informed of the levy amounts.
Any aligning of the levies to the financial year should have formed part of the notice provided to all owners for the AGM.
The Strata Manager does not have the ability to change the levy amounts or due dates except via a general meeting and the owners agreeing to do so.
The Strata Company has the ability to progress with an EGM. This gives the owners the ability to gather and discuss the matter and agree on a way forward for the rest of the year. The Strata Company can resolve to defer interest charges for a period of time. If you wish to sit and discuss the matter with the other owners then the EGM will provide the format for you to do this.
I note that the Strata Company now also has the ability to have a resolution outside of a general meeting which is a circular resolution. This still requires all owners to be formally notified and provide their voting preferences accordingly however does not require the owners to gather and discuss. The owners can be provided the options and a voting slip, and the circular resolution can then progress.
You may want to ask the Strata Manager if you will incur any charges for either of these forums to be used ie: EGM or Circular Resolution, as most management agreements will include charges for both options.
You may also want to review your balance sheet and determine whether the Strata Company had sufficient funds available as an opening balance to be able to “carry” the expenditure of the proposed budget in the 12 month period, without adjusting the levies.
To adjust levies after an AGM the owners (Strata Company) will need to do so formally via an EGM or Circular Resolution, and then minute accordingly for their records.
This post appears in Strata News #459.
Shelley Fitzgerald
Emerson Raine
E: shelley@emersonraine.com.au
P: 9330 3959
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