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Hi everyone
I just wanted to get some advice on a situation I’ve found my strata scheme in.
On closer examination of the books of our scheme (78 lots, 3 commercial and 20 utility), our EC has found out that the Strata Manager has been providing lots with Payment Plans. For the past few years our building has been recovering from the effects of unintentional neglect of previous committees. We’re just finishing a fire order and lift upgrade now, so the committee is actually getting time to look at the processes that are actually in place. It appears that somewhere along the lines, the previous EC made a decision that the strata manager could arrange for lots that owed money to our scheme to go on a ‘payment plan’. We have generally had a fairly high level of unpaid lots with the total amount owed being between 20 and 30% of annual administration fund contributions.
The lots would still owe money but the 10% interest wasn’t calculated. I believe that it was a verbal agreement and the SM had control over the process. Our EC has had a hard time accessing records as to who actually has a payment plan, and whether these are actually legal, and if they are entered into shouldn’t the EC and owners have access to these records. From my overview I can’t see a way where this could possibly be fair to other owners.
I wanted to get some advice on how people think our EC should proceed, given that this has apparently been going on for some time. If an owner finds out about this process and complains, are we required to act a certain way?
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The 10% late payment levy is mandatory in NSW unless a special resolution has been approved to forgo the penalty.
From the Strata Act
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.I suggest you tell your SM to start implementing the penalty immediately on any current unpaid levy contributions. He should be also asked to provide a list of owners whose fees are overdue.
Ensuring levy payments are received is a basic function of a SM and if they cannot do this simple task you should consider changing SM’s.
You should also get the SM to send out to all owners a letter explaining the new system. Bare in mind any owners who are owing money to the Strata are ineligible to vote until the debit is cleared.
Under the Strata Schemes Management Act, an Executive Committee and/or Managing Agent has no discretion to relieve any owner of their obligation to pay interest on overdue levies, which is prescribed at 10% per annum. Relief from paying interest can only be granted by passing a Special Resolution at a General Meeting of all the owners. You are correct in that it isn’t fair to the other owners.
You are entitled to see the records of these payment plans. I’d be after the Managing Agent’s scalp, and would be retrospectively charging interest on the plans which are invalid, and follow up with debt recovery action where unpaid. Suggest get a new managing Agent pronto.
David
I agree with all of that, and that zerotwoalpha’s Owners Corporation (O/C) should have been advised of and approved their Strata Manager’s arrangement to collect some unpaid levies without charging the prescribed interest, but in fairness the matter was at least discussed with and endorsed by a previous Executive Committee, and whilst it may not be equitable to those Owners who pay on-time, isn’t a payment plan one of the key strategies that a debt collection agency would use if the O/C had gone down that path?
The records of the arrangement together with amounts currently outstanding should be and are available to the current E/C, and must in fact be made available to individual Owners under Sect 108 of the NSW Strata Schemes Management Act should that be necessary, but in the meantime zerotwoalpha’s E/C should immediately instruct its Strata Manager in writing to make those records and the terms of the so-called payment plan available.
Don’t leap to judgement though, because IF the Strata Manager’s arrangement is working, it’s a damn sight easier and cheaper for the O/C than anything that may be employed by a debt collection agency.
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