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We have had a recalcitrant owner who has not paid levies for over many years. Hooray, the unit has just been sold and we should receive $34,000 this week.
Over this time we have had to use money from the sinking fund to pay bills etc as the Admin fund didn’t have sufficient funds. This has resulted in the sinking fund being $45,000 when it should be $79,000.
At our EC meeting we voted to put all the full amount of the outstanding levies into the sinking fund and have advised our Strata Manager to do so. He says this is not “legal” and we cannot do that and we need to allocate the money to the Admin, Special Levy and Sinking funds respectively. Is this right?
I would think as owners it is our money and we have the right to put the money where we want to. Can anyone advise?
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Charlie – in the first instance, your Owners Corporation (O/C) should have approved of a method to repay those monies incorrectly expended from its Sinking Fund within 3 months of the first such payment – refer Sect 71(3) of the NSW Strata Schemes Management Act.
Whilst I can’t comprehend how your O/C or its Strata Manager could allow an Owner to fall so far behind in their Levies, now that those arrears have been paid, the funds have to be allocated in accordance with the relevant components of the contributions as originally invoiced; that is as your Strata Manager has advised.
Once those allocations have been made, if there’s still a deficit in the Sinking Fund relative to the past administrative fund expenses paid from it and the arrears to that fund as now received, then Sect 71 (3) applies, and if there’s a surplus then your O/C could resolve to leave it there as a “safety net”, or to scale-back future contributions to that fund accordingly, or resolve unanimously to transfer it the administrative fund.
Charlie’s numbers do not add up unless there are others in arrears.
The $34000 is made up of admin fund money, sinking fund money (and interest for each component). The sinking fund is not $34k short because someone owes $34k. That is for the OC to sought outSection 71
(3) The owners corporation must, not later than 3 months after the disbursement, make a determination under section 76 (1) of an amount sufficient to recoup the amount of the disbursement.I attended an OFT seminar where it was claimed the OC has 3 months to return the money. Oh no I said. The Act only requires a determination be made; it does not require the money to be repaid in 3 months, if at all. I spoke of the following SCS matter.
In SCS 12/40868 Member Goldstein was asked to deal with an SP who did not make the determination for over twelve months, and never would have had an owner not put the motion to an AGM. So much for “the OC must” as there is no consequence for failure. The use of the term must over 250 times in the SSMA is so out of order that reform really needs to address it. There is no consequence for failure except in a few special circumstances. It’s appalling language to say must when one does not really have to. I digress.
The AGM dealt with a motion to raise $72.25 per lot to repay the transfer, from 15 months earlier, which was a bit over $8300. The AGM amended a motion to pay the money back over a ten year period at $800 per year (less than $7 per lot per year).
The Member had no issue with this and dismissed the application which sought an order to hold an EGM to repay all the “missing” money in the short term.The interesting part for me is that the whole sinking fund could end up on a ten year repayment plan based on the concept expressed in this decision. And then there is the matter of if an owner sells then the new owner is left to clean up the mess, i.e. repay the money.
The 10 year plan was included in the SSMA to try to avoid owners buying into money problems left by others. Although not related to future budgetary needs I see this SCS matter as preserving the concept of inheriting money problems.
Of further interest is that the OC in that matter has not made one of the ‘installments’. The amount is absent from subsequent AGM budgets.
Personally I think the Member reduced the Section of the Act to a joke and that it was not the intent of the Section to merely require the OC, if they could be bothered, to make a decision. But we have a case to cite that says that is all that is required.
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