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.