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Hello Jimmy
Can someone tell me the best procedure to recover unpaid levies?
We have an owner in our building whose levies have not been paid for coming up to 12 months. The Strata Manager has put the matter in the hands of a Collection Agency incurring fees for solicitors, Local Court Writs, judgements bankruptcy petition etc. However, still to no avail.
Are we going down the right track? Does this legal process actually achieve anything or should we be doing something differently? The Strata Manager has said that, depending on this owner’s financial situation, we may eventually have to write off this debt, which seems incredible and grossly unfair?
Any information greatly appreciated!
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Firstly. the costs of recovering the debt – including the legal fees – are all payable by the non-paying owner so no need to worry about that.
The next step, if it hasn’t already happened, would be to place a caveat on the title of the unit so that if the owner sells, you get your money before he gets his.
I’m not sure if pursuing for bankruptcy is a good idea or not. Your legal advisers might tell you.
If your owners Corps is suffering financially as a result of this non-payment and you need the funds now, consider taking a strata loan out – the interest on that would be covered more or less by the penalty interest chargeable on the unpaid levies.
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.
@Minty said:
Hello JimmyThe Strata Manager has said that, depending on this owner’s financial situation, we may eventually have to write off this debt, which seems incredible and grossly unfair?
This SM dosn’t even know the rules of his own business, the debit is not against the owner it is against the lot, and unless he pays the debit, penalties that have accumulated (10% interest per year), the cost of the debt collection agency you can as a last resort seize and sell the lot to recover ALL your money.
The longer it goes on the larger the debit the lot OWNER HAS to pay eventually. (shame it’s not in QLD as their the penalty rate is 30% so it’s a great little earner for the Strata).
Yes it is recoverable against the property. For example, if an owner has a mortgage and is declared bankrupt, then the mortgagee takes over ownership of the property, together with the strata debt. When the mortgagee sells the property, then the strata debt has to be paid at settlement.
Your strata manager is not correct re writing off the debt.
Note that bankruptcy proceedings can be very expensive, and it isn’t clear whether all those are recoverable by the owners corporation. I would keep a close eye on what proceedings the strata manager is taking.
The debit is against the lot so even if they sell the lot on the quiet the debt (overdue fees and 10% interest) passes to the new owner.
BUT
The collection costs are against the owner. Do a search on ‘Strata debt collection”
To recover the collections cost you need a court order but it’s a formality and the owner will get hit for ALL the costs.
I agree don’t go the bankruptcy route as if he is not paying strata fees he most likely is not paying other fees as well so let someone else do this.
You should go the route of if he dosn’t pay get your lawyer to seize and sell the property (that should get his attention) for whatever they can get and he is liable for all costs.
Minty – I think that your Strata Manager is going down precisely the right track by perusing the unpaid levies via a Collection Agency who will use the established procedures of the Local Court (Small Claims Div for amounts < $10K in NSW). If the Court finds entirely in favour of the Owners Corporation (O/C), and that’s likely provided the fees of the Agency and the Strata Manager for chasing the debt (as opposed to for the unpaid levies) can be substantiated, then even if the Owner has insufficient funds to pay they’ll be required by the Court to enter into a payment plan. Other posts about the debt attaching to the Lot are correct, so even in the unlikely event that the Court process fails or is abandoned by the Agency, when the Lot is eventually sold the S109 Certificate that the Strata Manager will provide to a purchaser’s solicitor after exchange of contracts must list the levy and other amounts in arrears, and those will be paid in full to the O/C via an adjustment between the vendor and the purchaser at settlement.
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