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Topic
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Section 79 of the SSMA says:
(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.
I have conflicting answers to a question.
Does interest begin to get charged from the due date of the payment or from the end of the one month period?
I will give an example. Say a quarterly payment is due on the 1st of April. The one months “grace period” ends on the 1st of May (one month as per s79(2)).
The levy payment has not been made at some later time. Is the interest on the overdue amount determined from the 1st of April or the 1st of May?
Both my answers come from very reputable sources yet the answers lack consistency.
I have one answer that says interest is calculated from the 1st of May i.e. interest is not charged for the “grace period” and I have another answer that says interest is charged from the 1st of April i.e. the due date.
Which is it?
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Replies
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I would have thought the interest would be charged from the due date unless payment is received before the end of the grace period. Nonetheless, since there is uncertainty I would suggest the EC should start charging interest from the later date. That way an incentive for payment still exists but you won’t get tied up in arguments about which date to start from; the late payer is unequivocally in the wrong and the OC clearly right and possibly even generous. One month either way is not much difference when the real problem for some OCs are the people who don’t pay for many months.
Inclined to agree with Peter C
If in any doubt, always charge interest from the later period specified.
In this instance, the OC will act like any other corporate body which does not specifiy credit provision/default terms above and beyond the minimum ‘interest payable’ clauses.
The general tests for charging ad-hoc fees and interest payments is whether the business (in this case the OC), by going about collecting the unpaid monies, actually incurred a cost in doing so. As you would not normally have started collecting monies during the grace period, then the answer is that you would not be in a position to charge for it.
Dear All,
I believe that you may find that interest is calculated from the due date of the levies, ie 1 April.
I believe that there has been plenty of legal precedent on this matter especially in relation to the collection of outstanding levies and from my experience interest has always been calculated on this basis.
Mr S
that simply reads to me that you can’t take action to recover levies within the 30-day ‘grace’ period. it doesn’t necessarilly mean that interest isn’t applicable should that period be exceeded. These are two entirely different issues.
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.
This topic is going round and round in circles and is becoming pointless. So, for anyone who wants to know, here is what we have established so far.
1. There is nothing in strata law that specifically says when penalty interest kicks in — the due date or the end of the grace period.
2. The simplest way to avoid trouble is, as many strata managers do, to err on the side of safety and start calculating interest at the end of the grace period.
3. Some strata managers calculate the interest from the due date – that fact that they do this and no one seems to care is an indication of how relatively unimportant this is.
4. By not charging penalty interest for the grace period of an overdue levy payment of, say, $1000, the strata manager is ‘costing’ the owners corp approximately $8.50. How much the owners corp would have to pay in additional fees if an owner challenged paying interest from the due date at the CTTT could be 100 times that or more.
5. Therefore even if logic suggests otherwise, and the law is unclear, common sense dictates that you are better off charging penalty interest from after the end of the grace period.
THIS TOPIC IS NOW CLOSED
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.
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