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[Anonymous]

In the event of an owner owing thousands in unpaid strata fees is the Owners Corporation ultimately accountable for the cost of retrieving the money?  Should the O/C be entitled to a full reimbursement when the matter is settled?

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[Jimmy-T]

My understanding is that the OC is entitled to be reimbursed for the cost of collecting outstanding arrears but I have a sneaking suspicion this was challenged in court in the past year or so – not sure what the final outcome of that was but I think reasonable costs can be added to the original debt.  Anyone have any other thoughts?

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[Anonymous]

Section 80 of the Strata Schemes Management Act 1996 (NSW) gives the OC the power to collect its costs of recovering the debt: 

“An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.“

In a 2009 case (Owners of Strata Plan 36131 v Dimitriou) the NSW Court of Appeal gave some guidance as to how section 80 is to be interpreted. The Court found that the recovery costs could be recovered however only to the extent that they are reasonable in amount and properly and reasonably incurred.

The upshot is that OC's cannot be guaranteed of recovering the full amount of costs incurred in recovering levies, however in the majority of cases an OC can recover most of their costs if not all of them.

Kind regards,

Daniel Dimock

Lawyer
———————————-
TEYS Lawyers
The Strata Law Experts
02 9562 6500

daniel@teyslawyers.com.au

https://www.teyslawyers.com.au

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[Anonymous]

I have a similar Question about overdue payment of quarterly strata fees.

 

I didn’t receive quarterly notice for the levies and only found out about the overdue amount when the following quarters notice arrived.

 

The noticed stated there is a 10% PA over due fee applied, which has been my understanding of the penalty for not paying on time.

 

I paid the over due amount with the pro-rata calculated 10% interest component straight away.

 

Couple of days later I receive another notice in the mail that the over due calculation is out by $0.11 cents, and  I’m now required to pay additional “stage 1 debt recovery fee” as well.

 

How is this possible, I never said I want going to pay , I never received the initial notice to remind me to pay.

 

Just because the mail went missing in the post they are presuming I had no intention to pay my levies.

 

Can they do this , is this the LAW?

 

Is this the reason for this line in section 80 of the Strata Schemes Management Act 1996 (NSW)?

“and the expenses of the owners corporation incurred in recovering those amounts.”

 

Shouldn’t they warn/remind me of the outstanding amount before sending out debt recovery charges?

 

Thanks

Ali.

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[Anonymous]

Hi Ali,

Unfortunately the Strata Schemes Management Act (the Act) provides that delivery of a levy notice to a lot owner is not required for a quarterly levy contribution to become paysable:

“s.78(6)
Regular periodic contributions to the administrative fund and sinking fund of an owners corporation are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not served on the owner.”

The logic behind this seems to be that lot owners are deemed to have notice of quarterly contributions when they are determined at general meeting.

In your situation it would seem that the strata manager has acted somewhat unreasonably in sending out a further levy notice in order to claim 11cents which could easily have waited on your account and been added to the next quarterly contribution when it becomes payable.

As you note section 80 of the Act gives the owners corporation the power to recover the costs which it incurs in collecting levies from lot owners. However the NSW Court of Appeal has provided guidance as to how this section should be interpreted in the 2009 case of Owners of Strata Plan 36131 v Dimitriou.

In that case the Court said that only those costs which are properly and reasonably incurred and which are reasonable in amount are recoverable.

It is arguable that the strata manager’s fees for sending out a further levy notice to you to collect 11cents are not a cost which has been reasonably incurred. However, in this situation legal action would simply not be financially realistic.

The best course of action will probably be to speak to your strata manager and try to get them to see your point of view and the error of their overzealous levy collection policy.

Kind regards

Daniel Dimock

TEYS Lawyers

daniel@teyslawyers.com.au

https://www.teyslawyers.com.au

 

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[Anonymous]

Thanks Daniel,

 

Your answer confirms my view it was a petty act by petty people. In the past whenever this has happened, I paid the late interest fee, and the matter was left at that.

 

On the notice of levies, all that is advertised is. “If payment is not made by due date, interest will be charged”, there is *no* mention of debt recovery charges.

 

I suspect this is because of my run in with the strata managers over $2300.00 worth of plumbing I was not informed of in a 2 person EC, and they haven’t been able to justify, (see previous post “Does the strata manager have the right to?” http://www.flatchat.com.au/forum/strata-managers/does-the-strata-manager-have-the-right-to/ ) .

They decided to get back at me any petty way they can.

 

In my opinion the law is stacked in favours the strata management to have all sorts of “regulations/by laws” etc.  to beat up on  individual owners if they choose to do so.

 

Yet, if I happen to dislike their poor service it’s not a trivial matter, I can’t just pick up the books/records and go somewhere else.

 

I really don’t want to talk to these people.

 

Cheers

Ali.

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[realtor]

The debt recovery fees are an issue which I think could be getting out of hand.. whilst I appreciate that strata managers dont want to chase levies in arrears and they should be paid on time it is oh so common now that the managers hastly charge $30 (costs) for a letter being sent out for arrears (after about 2months this is about $450 of 'costs') 9/10 times the arrears turn out to be caused by a discrepency in the strata roll or an owner forgetting to update their mailing address however even with $450 of late fees at no time did anyone in the 'collections department' bother to pick up the phone and call the phone numbers listed on the strata roll which would have sorted the matter in 40 seconds..

 

Even worse I notice many strata managers are 'referring this to solicitors' whom charge $50 for referal to legal & $150 for an arrears letter every two weeks.. whilst in reality strata managers are printing these letters themselves in their office straight onto the legal office letter head..   a tidy profit made between the strata and solicitors for sending out a few letters say  200 apartments a month times 2 letters time $150 = $60k a month..  Banks are getting it at the moment for this sort of extortion on dishonour fees.. it wont be long till the strata managers do too..

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[Billen Ben]

It never ceases to amaze me how my SP seems to be able to up the stakes when it comes to being autonomy gone mad.
At the recent AGM the self-managed SP decided to include a motion to allow the OC to charge owners for debt recover.

From our the Debt Recovery Policy:
Pursuant to s80 of the Strata Management Act the OC will charge directly the lot owner in arrears the following fees:

Three month overdue notice   $70
Letter of Demand                  $100
Statement of Claim                Fees to be advised by the debt collector

This is in a self managed OC and the notices and letters would be coming from the Treasurer; not some outside agent.
First thing to note is that section 80 of the Strata Schemes Management Act (SSMA) allows the Owners Corporation to recover incurred expenses. It does not allow the OC to set its own table of fees.

The policy then waffles on but has other highlights such as “The Executive Committee Treasurer may make demands, engage the services of a debt collection agency or commercial agent, instruct lawyers, and commence and prosecute legal proceedings”

My SP has a significant levy in arrears problem. 25% of owners do not pay their levy and there has been a 20 year unwritten policy not to pursue debt.

Such quotes as the following can be found in CTTT files:
53. “It is the function of an Owners Corporation of a strata scheme under the Act to take responsibility for the repair and maintenance of the common property, to manage the financial affairs of the Owners Corporation, to collect the levies and to pay the legitimate expenses of the Owners Corporation and to arrange and conduct meetings in accordance with the Act.”
J Smith Senior Member CTTT Lawson & Clarke v Owners Corporation SP 61788 (Strata & Community Schemes) [2011] NSWCTTT 270 (27 June 2011)

Last year the EC blew off an AGM resolution to engage an agent. In a nutshell a non-owner (but mover and shaker) rang the agent and said his services will not be needed. The EC then just walked away from the AGM motion to engage the agent. It was unbelievable.

It is one thing for “professionals” to sting owners and that is an area in need of reform but when the owners start endorsing stinging each other then what can be said.
Stay financial – stay in credit.

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[Jimmy-T]

Let's not be coy about this – fees for letters and late payments are, to some extent, de facto fines (except ECs can't impose fines).

The unwritten decision not to collect debts may be OK but that doesn't mean those debts aren't accruing interest.  The two relevant sections of the Act seem to allow some leeway but not much.

 

79   Interest and discounts on contributions

(1)  Any contribution levied by an owners corporation becomes due and payable to the owners corporation in accordance with the decision of the owners corporation to make the levy.

(2)  A contribution, if not paid at the end of one month after it becomes due and payable, bears until paid simple interest at an annual rate of 10 per cent or, if the regulations provide for another rate, that other rate.

(3)  However, an owners corporation may by special resolution determine (either generally or in a particular case) that a contribution is to bear no interest.

(4)  An owners corporation may, by special resolution, determine (either generally or in a particular case) that a person may pay 10 per cent less of a contribution levied if the person pays the contribution before the date on which it becomes due and payable.

80   How does an owners corporation recover unpaid contributions and interest?

(1)  An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.

(2)  Interest paid or recovered forms part of the fund to which the relevant contribution belongs.

I may be wrong but it reads to me like you can collectively decide not to pursue debts (or not decide to collect them) but if you want to waive interest payments it has to be by special resolution.

If you want to be alerted when anyone replies to your posts or responds to this topic, please register and login, then you will be able to subscribe to the topic. 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. NB: Longer threads may spill over to additional pages - look for the numbers on the bottom right, under the last post.

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[Mr Strata]

Levy arrears charges need to be the fine balance between encouraging owners to pay their levies on time and covering the OC’s costs in chasing delinquent payers.

It is funny how when people buy into strata they expect everyone else to be responsible for everything, including those things that they as owners can only be responsible for.

Levies are very simple… They should be the same amount each quarter and only varied at the AGM or an EGM. With the benefit of Internet banking it is so easy to set up your direct deposits for the year in advance.

In a past life I personally delivered a good portion of levy notices to local buildings, where there were owner occupiers. It was very interesting to get those phone calls from owners when they received the levy reminder notice and stating that they never received the original levy notice.

If you look at the impact on the OC’s cash-flow in having outstanding levies, especially when you have a building manager and strata manager trying to get repairs done, but limited by late levy payers, how do you account for this cost, and or on charge same to the delinquent owners??

One option for OC’s is to look at offering the 10% discount on levies if paid before the due date per s79(4). If an OC does this responsibly they would need to budget for the amount of the discount, but again, this relies on owners realizing that they need to pay their bills on time.

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