Financial shake-up for owners’ corporations

Following an announcement by Minister for Consumer Affairs Nick Staikos, significant changes are coming for Victorian owners’ corporations (OCs) — and they may have far-reaching impacts on financial management.

The most publicised change relates to financial hardship procedures.

Minister Staikos stated, “we’re making sure apartment and unit owners can get the advice and support they need – when they need it.”

From the time of the minister’s announcement, when issuing fee notices, OCs must now provide detailed advice on owners’ rights, including clear information about payment plans, how to access dispute resolution, and where to seek financial counselling.

Also, part of the reform, owners can now access the National Debt Helpline for free financial advice (call 1800 007 007 or visit ndh.org.au). The National Debt Helpline – debt problems – strata levies page provides a step-by-step guide.

Added to this, OCs need to be aware that late payment fees are no longer a tool in their arsenal for prompting timely payment from owners. This is because late fees cannot be passed on in full to lot owners. Instead, the amount recoverable must be based on the owner’s lot liability. For example, if a lot owner holds a 10 per cent liability and the OC manager charges a $33 late fee, the owner can only be charged $3.30. The OC must absorb the remainder.

This reflects the view of Consumer Affairs Victoria that the management contract exists between the OC and the manager – not individual lot owners. Additionally, OCs are prohibited from charging other fees, such as “administration fees,” for overdue payments.

For many OCs, these changes mark a major shift in managing arrears, as previous approaches for dealing with habitual late payers have been curtailed. With limited options to promote prompt fee payment, serious questions arise about how OCs can encourage timely payments. 

Most concerningly, these changes could inadvertently lead to a rise in shared costs for all owners as OCs seek to ensure sufficient funding to cover budgeted items.

Given the significance of these reforms, OC committees should urgently ask their strata managers:

• Have our levy notices been updated to meet new legal requirements?
• Is a compliant financial hardship plan in place – and what is the anticipated uptake?
• How will late payment processes and cost allocations be handled?

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