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Here is our story. Our strata has 123 lots all townhouses. In financial year 13/14 the owners corporation manager charged us twice for insurance premium. Once through a special levy which is for the current year; a second time through general levies which is for a future year (paying one year in advance). The reason why they are doing this is because we have so many accounts in arrears the owners corporation doesn’t have enough fund the pay insurance. However, none of this was disclosed to us by the manager until I questioned and reviewed their accounts. I am an accountant so I am a bit sensitive to the numbers. This is where it upsets me. The manager had no intention to tell us what they are doing, if this was not uncovered by us, what would they do with the extra many raised? Essentially we are the employer of them, not the other way around. Also, can insurance premium be raised through special levy? Does anyone else in the same situation paying insurance one year in advance? Or the owners corporation manager’s company is covering for the timing difference?
Thank you.
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I would strongly suspect that why they are paying in advance is because they get paid a commission on the insurance premium.
What they should be doing is handing the 5 largest debits over to a debt collector to recover the money and any penalty interest accrued. The cost of recovering the debit is borne by owner in debit.
Once these have been collected go for the next 5 making sure all owners are aware of the process especially the extra cost the debtors will incur once its handed over to the debit collector.
You might need a motion passed for this to occur but those in debit cannot vote anyway so shouldn’t be a problem.
Yes you are correct the SM works for the owners and the owners decide whether to raise a special levy or not via voting on a motion.
KP, what you say about chasing the bad debts is absolutely right but you lost me on your argument that the reason for the special levy is so that the strata manager can earn commissions.
Why would the special levy make any difference? It sounds like the Owners Corp doesn’t have the funds to meet its statutory obligations to insure the building and that money has to come from somewhere.
However, if some people aren’t paying their levies, then the special levy is only transferring the payment to those who are (and that’s money they won’t get back without a unanimous vote – which clearly ain’t going to happen).
I agree that the correct procedure is to chase the debt and there are plenty of companies that will do that for you without any extra charges being incurred by the Owners Corp.
In the meantime, the OC should be looking at a loan, rather than a special levy, so that the backsliders will eventually have to pay their fair share.
But, all said and done, I think we can leave the kneejerk insurance commission reaction out of this one.
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.
@Jimmyt53 said:
KP, what you say about chasing the bad debts is absolutely right but you lost me on your argument that the reason for the special levy is so that the strata manager can earn commissions.I read it as though they are paying insurance (to the insurance co) for the next 2 years ie in advance and if so the SM earns a commission from the premium.
Maybe they mean they are collecting the premium in advance and holding it in the admin fund which would be ok and no commission would be due the SM until it was paid to the insurance company (which sounds more likely on reflection).
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