ABC levies debts report misses the mark



There’s a story in the ABC TV’s business report about how an apartment owner who’s had a run of rotten luck has just had everything made worse by her owners corporation forcing her into bankruptcy.

The woman fell behind on her levies of $600 a quarter until her accumulated debts hit the $10,000 threshold required before bankruptcy can be pursued.

In the meantime, the owners corporation had offered her a payment plan to give her some wriggle room. She was unable to keep that up.

Eventually the strata scheme decided to cut their losses and handed the issue to a debt collection firm and they pursued bankruptcy.

What a bunch of heartless bastards that strata scheme must be! At least, that’s the lazy implication from the ABC report.

But hang on, those heartless bastards are the woman’s neighbours who, by clear implication, are expected to subsidise her, and are somehow wrong for reaching the end of their tether and saying, after $10,000 in debt has accrued – that’s four years of non-payment – that they need to start looking after the majority of people in the block.

Forget for a moment that the sub-heading on the “Strata Stress” story is: “Strata Companies facing calls to offer hardship arrangements”? Strata companies? This is NSW, not WA. And doesn’t the story go on to say the woman was offered a payment plan?

Lazy, lazy, lazy.  Kick the strata committee – everybody hates them anyway!

“Skyrocketing Strata fees are sending a growing number of homeowners….. bankrupt,” says the caption on the ABC’s home page. Ummm, aren’t fees going up because of inflation?  And doesn’t the owners corporation – i.e. all the owners – have a legal obligation to maintain and repair the block, pay the energy bills and hire cleaners?

As Paul Morton of Lannock Finance says in this week’s podcast, we have every sympathy for the woman and her plight, but when you sign up with the responsibilities that go with apartment ownership, they don’t include taking a share of someone else’s debts.

As it turned out in this story, the woman actually had some money in superfunds and was able to pay off part of the debt.

And while the story reveals that 10 per cent of bankruptcy applications are for levies debts, even that is misleading.  Are levies the only financial commitments these cost-of-living strugglers face?

Or is it, as we suggested a few weeks ago, a case of levies being a low priority when there are other payments that you’d never dream of delaying?

This is just another slack report that goes for the easy target – nasty horrible strata committees – without asking what being $10,000 short in their budget meant for the wellbeing of the building and ALL the people who live in it.

And it’s only made worse by the knowledge that strata schemes can raised loans to cover their shortfalls, costing them nothing, until such time as levy debts are paid off either thanks to a reversal of fortune or the sale of the property.

There is a story here, but surely it’s about how everyone in strata is struggling to some extent with rising costs, in their homes and in shared strata expenses, and it’s being exacerbated when some owners decide that the one bill they can’t or won’t pay is their levies.

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      OPINION There’s a story in the ABC TV’s business report about how an apartment owner who’s had a run of rotten luck has just had everything made worse[See the full post at: ABC levies debts report misses the mark]

      The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
      • This topic was modified 7 months, 3 weeks ago by .
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    • #70014

        I have previously lived in a mid-size strata lot in urban Sydney City, where two owners were behind in their levy payments.  The OC allowed a repayment scheme to be set up, whereby the debt incurred interest, but the aim was to repay the outstanding debt within two years.  New levies added to the debt, so the repayments had to account for the new levy as well as the debt within each three month period.  Since very few owners cared, this scheme worked quite well.


          My comment on the topic of Arrears of Levies is:

          • The duty of the OC to repair and maintain, to pay insurance premiums, etc is hard coded into the Act and unavoidable.
          • The cost of repair and maintenance, insurance, etc is funded only by levies.
          • The duty of a lot owner to pay levies must be regarded as equally hard coded.
          • The obligation to pay interest on arrears of levies is similarly (slightly less) hard coded but can only be reduced or waived by a general meeting.
          • The obligation of the OC to collect arrears (within the provisions in the Act) must be regarded as equally hard coded.
          • Community living should not oblige co-owners to support one of their number no matter how necessitous their circumstances.

          The very sad truth is that if you can’t afford to pay the levies necessary to fund obligatory repairs and maintenance, insurance, etc, communal living with communal obligations is not for you. You must sell your strata unit and make arrangements which you can afford, including considering whether you can buy a house where you can do (or not do) what you like.

          A. Mazed

            On the subject of debt, I think I had alrewady written something. As an “old man” (I’m 72) this should not be happening to me! I was unemployed for a shgort time and could nbot afford the levies on my investment property. I tried to sell the property as it is an investment for mny old age. Five months later nobody will buy the property. So, I am in arrears with the levies, owe $6,000 in fees to the Real Estate guy who said he could sell my property within a fortnight!!! PLus the solicitor’s fee. As I am working, I can afford certain things like paying my own mortgage but now STRATA have put ion the debt collectors. There is a lot of work to do on the property. I can’t afford to keep paying upwards of $7-8,000 a quarter for repairs. It’s a vicious circle. My agent can’t sell the property to pay my debts and the fees keep going on and on. While I am working that only pays my needs and my mortgage, nothing else. Any help out there or solution???

            • This reply was modified 7 months, 3 weeks ago by .

              We’ve just been through this in a block of six units in Sydney.  One owner had two lots in the block (rented out) and fell behind in levies.  Seriously behind.  I don’t know anything about his financial situation but I think some personal issues were impacting his income.  The levies had been temporarily increased for 2-3 years (all owners were on the Committee so he was part of that decision) because we needed to replace the lift, which is a huge expense for just six lots and five owners.

              After he hadn’t paid these hefty levies for more than a year, we asked the strata manager to take action (should have happened earlier but for some reason the strata manager dropped the ball).  Collections activity escalated over about 12 months and ended up with bankruptcy.  He then sold both apartments.  New owners moved in and we discovered that his tenants had been living with all kinds of unresolved maintenance issues, some of which were the responsibility of the owners’ corporation.  So we’re now up for maintenance that might not have been so bad if he’d reported it earlier, but I think he was trying to keep his head down because he owed so much money.

              The point is, during that 2-3 year period, four owners were keeping the building going – paying all the bills and also saving for the lift.  The lift was essential as we have frail people in the building who rely on it to get upstairs from the carpark.  So it had to happen, even if we were still chasing his portion of the funds.  The four of us who were paying were really struggling as these levies were huge and we had to keep paying these high levies to make up for his shortfall.

              Now that the units have changed hands, the outstanding levies have been paid through the settlement process and we have sufficient funds to cover the lift and hopefully enough left over to pay for the unexpected maintenance on his apartments.  But we were seriously panicking about that settlement process, unsure whether there would be enough money to pay us.  If he was over-mortgaged and also owed money to the state government for unpaid land tax, the owners’ corporation could have been left high and dry.  Owners’ corporation is an unsecured creditor, so among the last to be paid.  We really need that protection currently provided in the rules – in part so that the debts don’t get so high they are unmanageable and cause perverse outcomes (which happened in our case with him owing so much money he didn’t feel he could ask for necessary maintenance work).



                Uberowner said:

                the owners’ corporation could have been left high and dry.

                It is not correct to say that that “the owners corporation would have been left high and dry”.

                That will be the position of the purchaser:
                Section 84 Liability of persons other than owners for contributions
                (1) If, at the time a person becomes the owner of a lot, another person is liable to pay a contribution in respect of the lot, the owner is jointly and severally liable with the other person for the payment of the contribution and any interest on the contribution.

                It is for this reason that the purchaser becomes your debt collector and ensures (in the interests of the OC and themselves) that all outstanding levies are paid on or before completion.

                • This reply was modified 7 months, 3 weeks ago by .

                  It is not correct to say that that “the owners corporation would have been left high and dry”.

                  I have heard various takes on this, including that the owners corp must pursue the unfinancial owner for a debt repayment through a court, just to establish that the funds from the sale can be used to pay off the debt.  I wonder if there is a difference between unpaid levies and interest invoked as a result of the non-payment, as well as the costs incurred in pursuing the debt.

                  The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.

                    I had not heard of and do not accept as correct the quoted take on the section. If it is correct, no lot owner would ever pay a quarterley levy until a judgment was obtained against them for each one. The same logic would apply to unpaid Council rates, water rates and land tax.

                    I can only draw to attention and rely on the specific provision in the Act.

                    The Standard NSW form of Contract for the sale and purchase of land – 2022 edition provides for adjustments of outgoings to be made between the vendor and the purchaser on the adjustment date (usually the date of completion of the contract for sale) in these terms:
                    “14 Adjustments
                    14.1 Normally, the vendor is entitled to the rents and profits and will be liable for all rates, water, sewerage and drainage service and usage charges, land tax, levies and all other periodic outgoings up to and including the adjustment date after which the purchaser will be entitled and liable.”

                    Make certain that the unpaid levies are clearly disclosed in the strata information certificate issued by the managing agent on behalf of the OC under section 184 of the Act. Then, no purchaser (or his solicitor or conveyancer) is likely to expose himself to the risk of being liable to pay a levy left upaid by the vendor by faiing to ensure that this obligation is adjusted between the parties on completion.

                    If a sale is in the air, the purchaser and his solicitor or conveyancer are the OC’s greatest allies and best debt collectors.


                      I had not heard of and do not accept as correct the quoted take on the section.

                      With all respect, what are you referring to?  There are several quoted sections.  It would help if you highlighted the section you are referring to and clicked on “quote” – that’s what it’s there for.

                      Also, we are getting off topic here.  The question is, would you as an owner be prepared to carry a share of the debt of another owner until they sorted themselves out, or would you send in the bailiffs (figuratively speaking) at the first signs of long-term financial distress?

                      The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.

                        Sorry everyone for my earlier post that said our Owners Corp could have been left high and dry if there were insufficient funds available from settlement to cover the unpaid levies (and interest, solicitor fees, collections fees, court fees etc). We were aware that the debt would pass to the new owner but we were also told that a savvy new owner could make it a condition of purchase that they were not responsible for that debt, and then we would have to pursue the prior owner through court. Effectively “high and dry” with only expensive legal remedies available to us.

                        Also, what if the new owner also refused to pay? How long would this drag on?

                        That comment led a few other posters off track. But my main point is – no, I would never again allow unpaid levies to slide as they can slide to the point where it’s difficult to recover them and as we found, once it got to that stage the owner stopped engaging with the other Committee members and started to neglect his apartments, to the detriment of all.


                        Sir Humphrey

                          The question is, would you as an owner be prepared to carry a share of the debt of another owner until they sorted themselves out, or would you send in the bailiffs (figuratively speaking) at the first signs of long-term financial distress?

                          I have been on both ends of this. When we bought our unit, we thought all the conveyancing had gone through but one step didn’t happen. The solicitor did everything correctly and there were two cheques (it was the olden days) from his trust account to pay off the considerable unpaid rates and owners corporation levies that had been subtracted from the sale price. The former owner had their money but the two cheques were still attached to the file by paper clips when the ACT Law Society decided to freeze the trust account and those two cheques could not be paid until the the trust account was unfrozen. I have no idea what the solicitor had done to cause the ACT Law Society to freeze his trust account on the day of settlement of our unit purchase.

                          We were young and had scraped together every penny for a very small deposit and had no way to find any more for these debts. We had to implore the Executive Committee to accept our assurance that we had been assured by the Law Society that those cheques would be able to be cashed eventually. Some months later, we were informed that the payments had been made and we were off the hook.

                          More recently, as treasurer, I have chased up several of our residents when they have fallen behind by 6 months to a year to discretely ask them to sort out a payment plan with our managing agent and to talk to me if they can’t work out anything. Some unit owners have fallen behind more than once but all have always caught up before the arrears got to be more than one year’s worth.

                          We have generally have only one or several units with arrears out of about a 100 units at any particular time. The ACT requires a general meeting resolution to do anything other than charging 10% simple interest and we have not ever done that but we have sometimes asked the managing agent to waive other fees such as for 2nd and later reminder notices. Sometimes there is a good reason such as a unit owner has died and the executor is still sorting out probate and will not have the cash until they are able to sell the unit.

                          We don’t have cash flow problems because 98% of units are typically paid up so we can afford to be a bit tolerant and the OC ultimately doesn’t lose due to the compulsory 10% interest.


                            Any help out there or solution???

                            Get your owners corp to get in touch with our sponsors, Lannock Finance.  They may offer a Levies Relief loan which will mean the owners corp isn’t out of pocket – interest on the loan will be covered by your penalty interest – and that will take the pressure off you to pay back the debt at the worst possible time.

                            The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.

                              Thanks Jimmy for shining a light on this very concerning issue and the prospect of the introduction of legislation that will harm many innocent people. Such a pity also that the ABC have been very biased and chosen to only show one side of the story.

                              My situation, a family member is a unit owner in a block of five. The other owners consist of an investor, an age pensioner, a person with a disability and an owner occupier.

                              My family member has an intellectual disability and has recently been diagnosed with a life threatening disease. In spite of the personal challenges my family member faces, (and the majority of owners being pensioners  on fixed incomes), all but one have continued to ensure their levies are up to date, that one person is the owner occupier.

                              This owner has been given many opportunities over the last few years to make arrangements for payment which have been ignored resulting in the debt now being many thousand of dollars. Understandably in a small complex this non payment is significant and very frustrating as this owner continues to enjoy the benefits of essential major work currently being carried out. Extremely disappointing also that this owner is aware of the hardships that others are facing.

                              If it is felt there is a need to make changes to the legislation maybe what would be fairest would be to move to a model where the bankruptcy trigger amount would vary depending on the number of units. In our situation the $10,000 threshold for bankruptcy is already too high. If this is introduced the government will effectively be giving the green light for owners to have a $50,000 line of credit resulting in a devasting impact on the lives of many, in particular vulnerable people who are making huge sacrifices to meet their commitments.



                                Unpaid levies have a great impact on smaller schemes where every other owner has to carry the debt of others.

                                This forces future budgets on smaller schemes to be recalculated at the AGM.

                                Since I know there are particular owners who are notoriously late with levies and in our case one who we have before the court, I have to factor that in to future budgets.

                                I have to build in a buffer to run the scheme because of late payers and basically calculate the division of levies to not how many lots in the scheme, but to how many lots I know will pay their levies consistently. This causes increased levies to cover that culture in the building

                                I am sympathetic to genuine cases with short term financial problems, but you get many owners who claim financial distress on their investment properties. Sorry, but if you have an investment property, you are NOT in financial distress. You have the luxury of an investment property that you shouldn’t own if you can’t pay for it.

                                The court process can take while to work itself out, but it is necessary with some lot owners

                                Our case is near nine months in to a stage of garnishee orders, writ for levy of property and forced sale of property if pushed to the limit. The legal system is slow unfortunately.

                                When you have bad owners with bad faith, I would rather make them sell the property and perhaps take a  loss even in a bankruptcy,  than be stuck with an owner who will continually be an issue. Who you know may end up being forced to pay their debt by the court, but you just know they will do it all again and again.

                                Whilst it is standard that owners get 3 reminders about late levies automatically, the 4th stage of calling in the debt collectors is not triggered in the system. It’s up to committees to alert Strata managers when the 4th stage is triggered. Why it’s not automatically triggered in the system as the other 3 stages is a mystery to me.

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