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August 09 Edition Cover

Owners’ Corporation Law - July 2014

03 Jul 2014

A better way: Incentivising owners to pay levies on time

6.09 per cent is the magic number.

Taken from the Strata Community Australia (SCA) Benchmarking Survey, 6.09 per cent is the Victorian average of strata owners that have their levies in arrears for greater than 30 days.

While this may not seem like a large number – what this does mean is that, in any given building in Melbourne, owners’ corporations ought to be setting budgets that are in excess of 100 per cent of planned expenditure, to account for late payers and the prospects of paying (sometimes substantial) legal professional fees to chase the late payers in VCAT and the courts.

It can take between six to 12 months to obtain a judgment for levy arrears in VCAT, and to enforce that judgment via the Sherriff’s office (for individuals) or via the Federal Court (for companies).

However, it occurs to me that owners’ corporations could be doing more to incentivise lot owners to pay their fees and levies as they fall due and payable. Apart from setting budgets at 110 per cent of actual planned expenditure, an owners’ corporation could adopt a discount for those that pay on or before the due date. Similar to the methods employed by utility companies for gas and electricity bills, a prompt payment discount would reward those owners that do the right thing and pay their fees on time.

The other message is for the owners that do fall behind on their levies: the most common reason for non-payment of fees on time is because lot owners don’t receive a copy of the quarterly levies in the post. Not surprisingly, this is no defence for not paying the fees, and if the owners’ corporation has incurred fee collection charges for sending letters of demand and final fee notices, then the owner will need to pay those charges and any interest in addition to the levy amounts. So, if you change address, ensure that the owners’ corporation manager is given notice of the new contact details.

And if owners know that they don’t have sufficient funds to pay the levies, the best thing to do is to pick up the phone and tell the owners’ corporation manager, so that a payment plan can be drafted. There is no shame in admitting that you can’t pay on time. All of us experience cash flow issues at various times in our lives.

An agreement to catch up the quarterly levy by paying a few hundred dollars per month will mean both the owner and the owners’ corporation can avoid incurring the late payment collection fees charged by many management companies and law firms.

Tom Bacon is the principal lawyer of Strata Title Lawyers.
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