Strata levies can often be a hidden sting for new owners, an unexpected second hangover after the elation of finally becoming an owner (the first being, of course, stamp duty). Strata levies are frequently a forgotten household cost and, frequently, one that can go unpaid when funds are tight.
Are strata levies important?
Yes. The funds raised through strata levies pay for important upkeep and repairs to common areas of the property, without which the property would fall into disrepair, along with more everyday costs including utilities, building insurance and your strata manager’s fees.
What happens if I don’t pay my levies?
The immediate consequences of non-payment are more largely administrative in nature. An owner who has not paid its levies is deemed “unfinancial” or “non-financial” and also loses a number of key privileges, including the right to vote at general meetings or to be a member of the strata committee.
However, the obligation to pay the levy will not go away – in fact, interest on the amount owing will be charged at a rate of 10 per cent p.a., unless the Owners Corporation passes a resolution waiving interest. This interest does not kick in until payment is one month overdue, but will then apply from the due date until the date payment is made.
An overdue strata levy (and any interest payable on the levy) is a debt due and payable, and accordingly it is open to the Owners Corporation (at their discretion) to bring proceedings against non-financial owners in the NSW Civil and Administrative Tribunal (NCAT).
This can be a costly exercise and is generally not recommended until arrears become significant, although NCAT may make orders requiring the non-financial owner to pay the Owners Corporation’s costs incurred in recovering unpaid levies.
An Owners Corporation must not bring proceedings against a non-financial owner in NCAT unless it has given the owner at least 21 days’ notice of the action. This notice must set out the following:
- the amount of the contribution, interest or expenses sought to be recovered;
- the recovery action proposed;
- the date the amount was due to be paid;
- the manner in which the amount may be paid;
- whether a payment plan may be entered into; and
- any other action that may be taken to arrange for payment of the amount.
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What if I really can’t pay it? Can the Owners Corporation bankrupt me?
Yes. In more extreme circumstances (where a debt of more than $5,000 including interest is owing), the Owners Corporation may apply to place a non-financial owner into bankruptcy in order to recover unpaid levies. If this occurs, the non-financial owner’s property may be sold by the Trustee in Bankruptcy on their behalf, and strata levies will be paid from the proceeds of sale.
However, Owners Corporations are also empowered to enter into payment plans with non-financial owners to facilitate payment of overdue levies on terms which are more manageable for owners under financial hardship. Any owners experiencing hardship should ideally approach their Owners Corporation to discuss payment options before falling into arrears.
Do you have any questions about your strata? Get in touch with the strata experts at Jamesons today!