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).