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Currently our scheme is sitting on a levy compliance rate this year of just 48% for a block of 12 units.
In prior years it was always around near the 80-90%, but I have noticed in the last half a dozen years it slowly becoming worse which leads to liquidity issues in paying bills.
I do wonder whether this is just a sign of the times or whether our scheme has a lot of slack people.
Interestingly the non compliance rate leans very heavily to the one bedroom units in the block. The two bedders(who pay near double more) are pretty good for the most part. We have to take one lot to court to retrieve levies which they seem to feel like they are exempt from.
Is anyone else experiencing this phenomenon?
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For over 20 years I have lived in a large SP that has a consistent default rate of 25-30% of owners and this has resulted in a situation where as of today the arrears, $134000+, constitute 55% of the SPs assets.
The owners seem happy with it.
We haven’t had cash flows issues because the OC horribly over levy the lots leading to very large surpluses accruing in the admin fund. The owners seem happy with that as well.
I was once given a figure of 1.5% default rate as the average rate across NSW.
Sounds like half your owners are in arrears.
Might be time to consider the very slow and expensive legal channels to pursue arrears before you start paying extra in levies to carry the defaulters and head-off the cash shortfalls that arrears can generate.Haven’t heard of it anywhere else bar the odd dissenter who soon swings back. You’re plain unlucky. Be careful who you take to court. Make sure they can afford to pay otherwise bankruptcy proceedings could result badly for you – you would be an unsecured creditor.
We have been advised NOT to go to the bankruptcy route but go with a writ of levy of property through the sheriff. Its a technical legal thing
We have over the last several years gone down the legal channels to recover outstanding levies (very time-consuming and costly (which they pay for))
In both cases they end up paying instead of having the property seized
For the OP, it’s also perhaps a situation where it’s now seen by a growing number of owners in your property to be an acceptable practice to not pay fees simply because “others are allowed to do it, so why can’t I?”.
Once lot owners come to realize how complacent their OC might be in managing defaulters and how difficult it can be to chase/recover debts it becomes an easy choice for some.
Once this evil genie is allowed out of the bottle it becomes very difficult to put it back in.
An OC is not a bank or a lender of last resort. It’s the good lot owners – the compliant, fee paying lot owners – who end up having to fund these quasi-banking activities by paying higher levies to fund the shortfalls, placing more financial pressure on these good lot owners. This could ultimately lead to more good lot owners deciding to not to participate in paying higher levies and instead joining the list of defaulters who seem to be enjoying an easy ride at the expense of others. So the problem just gets worse and worse over time.
Firm action should be taken at the outset rather than letting the problem grow.
Maybe one answer is to tell all owners before any of them get into debt that there could be serious consequences for falling too far behind in their levies.
In that case, they can talk about a payment plan before things get too serious
OR
- Be hit with 10 per cent mandatory penalty interest rates, as dictated by strata law.
- Face having to pay what they owe plus ALL the costs of debt recovery (and there are specialist strata debt recovery firms out there who will do that for you).
- Possibly have their rent income garnisheed (diverted to the strata scheme) until the debt is paid off.
- Possibly have to sell their property as a “distressed” sale if they can’t meet all their financial commitments.
This may sound like a threat but it’s only fair to all owners – including those who pay on time – that everyone knows that not paying your levies is not the free ride that it may seem.
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.
Reply from Vic
In my old strata scheme (luckily escaped it now), there was a public car park with each space owned individually. Nation-wide Parking Company X decided to overquote so the car park owners decided to dump Nation-wide Parking Company X (silly decision) and nobody else wanted a bar of it – just too difficult to manage. Over 100 individual car parks owned by mum-and-dads. Now the $20,000 car parks are worthless and the owners refuse to pay levies. Because they are so small in $ and so many in number, it is next to impossible to get them to VCAT. A couple do pay their levies and I think that is just so they can cause hassle at AGMs and in general be disruptive. They had the gall to try and sack the committee a few years ago. Impossible to solve I think. The debt is almost a write-off.
Levy Recovery Stage 1-issue reminder 35 days after due date
35 days! Our previous strata manager sent the Stage 1 notice after ONE day. Now that we’re self-managed, we send the first notice after one week. I assume you’re in NSW. Please read Strata Schemes Management Act 2015 (NSW) Section 86 for accurate information about the debt recovery procedure.
You could cut this down to two stages:
Levy Recovery Stage 1: send this letter one day after levies are due. This letter should also give them 21 days’ notice of impending recovery action.
Levy Recovery Stage 2: initiate recovery action 22 days after levy is due.A debt recovery plan is voted on at every annual general meeting. Our scheme follows the Strata Schemes Management Act 2015 exactly. Our letters carefully outline how interest is calculated if they are more than 30 days late. In the past, we bankrupted one owner for long term default of levies. It cost them thousands of dollars in legal fees.
I tried a google search of “industry standard strata levy” and found nothing. My previous two strata managers had processes which were not as lengthy as yours. They were similar to the process outlined in Strata Schemes Management Act 2015 (NSW) Section 86 “Recovery of unpaid contributions and interest”.
Remember: the owners are in charge of the strata plan, NOT the strata manager. We were told at an NCAT hearing that the owners corporation is ultimately responsible for everything that goes on with the strata plan. The owners corporation delegates its responsibilities eg levy collection to the strata manager. If the owners corporation wants something done differently, the strata manager has to listen.
As an individual owner, you are not the whole owners corporation. You will need the support of other owners. Try talking to the other owners, specifically the ones who actually pay their levies. You need to find out who would vote with you to change the overdue levy collection rules.
If you get 50% of the owners to draft a new set of rules for levy collection, call an extraordinary general meeting. You don’t have to involve the strata manager in this. In my strata plan, we followed the rules as outlined in the Strata Schemes Management Act and called a meeting to change some things we didn’t like about our strata manager (excessive repair costs, unnecessary tax returns).
It is possible that your strata manager will be very unhappy if you do this. Just remember that the strata manager is your slave, not the other way around.
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