Levies shortfall plan where everyone’s a winner

There is a lot of genuine angst around about the payment of levies or, more to the point, the inability to pay them.

Just to be clear, there are no circumstances under which owners can expect not to have to pay their levies or fees, eventually.

Even if you default irretrievably now, your strata scheme could have first dibs on the money you get if and when you have to sell your unit.

If it comes to debt collection you will have to pay the reasonable costs, as well as the levies and any penalty interest.

But that’s a worst-case scenario. When owners temporarily can’t pay, the simple answer for schemes that have a healthy capital works fund is to borrow from that money and pay it back when the funds eventually come in.

It’s all perfectly legal and, if they have that financial buffer, sympathetic schemes might also waive the otherwise compulsory 10 per cent penalty interest (in NSW and other states).

However, the “unfinancial” owner then loses their vote – although that’s perhaps not a major priority when money is too tight to contemplate.

Also, if the scheme has budgeted for a discretionary work that can be delayed, they might also agree to put that on hold, and reduce the levies accordingly.

But the fact is that many if not most strata schemes operate on budgets tighter than a millennial’s jeans, and they just don’t have that leeway. 

And, if they have consistently re-elected committees on a platform of keeping levies low, they won’t have anything in the capital works (sinking) funds either.

So what can they do when some owners simply can’t pay their share?  The strata scheme still has to pay its bills.

They could apply for a loan, but that means everybody has to pay their share of the interest (although that would eventually be covered by the penalty interest from the late payers.)

But there is a much simpler solution that the government and banks could arrange with a couple of phone calls.

Lenders should be encouraged to take over mortgagees’ levies payment and add them to their mortgages.  The interest on that would be a lot less that a 10 per cent penalty rate.

This would be so easy to do and would save a lot of grief.  The owners would take their levies statement to the bank, the bank would pay the levies, the strata schemes could meet their commitments, and the cost would eventually go back to the apartment owners who would also not lose their right to vote.

How do we make this happen?  If you are struggling with your levies, tell your bank and your local MP how they can make everyone’s lives easier. It’s one of those rare occasions in these critical times when everybody wins.