[While i was writing this post, Whales’s post (immediately below) came in – we are basically saying the same thing but I would start with his post as it lays out what can and can’t be charged very clearly and I don’t think I disagree with any of it.]
OK, the relevant sections of the Act for NSW (below) compels the Owners Corp to charge interest on unpaid levies but is less clear on the costs of debt collection which it says the Owners corp “may” recover. The Owners Corp (not the Executive Committee) is allowed to waive the interest and other charges by a special resolution vote (requiring 75 percent support). The sympathetic Chairman was actually over-stepping the mark by trying to get the EC to waive the additional charges – that can only be done by the Owners Corp by a special resolution at a general meeting.
Little Voice can’t be charged interest or for debt collection unless the payment was more than a month overdue so we have to assume that was the case. But it only has to be one day over for these penalty charges to kick in. If you then refuse to pay the interest or the cost of debt collection, you get yourself into this accumulating interest and debt recovery fee cycle.
The charges seem excessive but once the Owners Corp and the strata manager have crossed the line where interest is mandated by strata law and debt collections are allowed by your own by-laws and contractual arrangements with strata managers, you are in a cycle of penalty interest payments and debt collection fees all of which are, on the face of it, valid if unfair.
The only way to break the cycle is to pay the accumulated debt. You can then wait until the next General Meeting and present a motion asking the other owners to pass a special resolution to waive the costs which could be credited to your account. If you are still ‘unfinancial’ by the time of the next general meeting you can’t even propose that motion.
If there has been some impropriety – e.g. the strata manager has jumped the gun in chargiing you for the debt collection sooner than they were legally allowed, you can raise this with Fair Trading. Otherwise the best thing to do is pay up and throw yourself on the mercy of the Owners Corp at your next General Meeting (and do some heavy duty lobbying before then).
We had a chairman in out building who stopped paying levies when he and his cronies were kicked off the Executive Committee. He took great pleasure in running up a $20,000 hole in our finances – but the smile disappeared when it turned into a $40,000 debt for unpaid levies, penalty interest, debt recovery and court costs.
My advice, pay the bill and argue the toss later.
Here’s what the strata Act says:
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.