Strata levies, just like death and taxes, are a fact of life for strata lot owners. These levies are crucial to the ongoing successful management of the property. So, what happens if people don’t pay on time?
Here’s what you need to know about the importance of paying strata levies on time.
When are strata levies payable?
Usually, strata levies are payable each quarter. Owners are given notice in advance of the due dates, and the onus is on owners to pay on time. In some circumstances, strata owners may dispute with the Owners Corporation regarding payments, but this dispute does not preclude them from paying on time and in full.
What do strata levies cover?
The levies paid by lot owners in a strata housing scheme are used for the ongoing management of all properties and common areas. Depending on how the scheme is arranged, these levies might even be split into two separate two components. The first is the general administration fund which covers day-to-day costs such as building insurance, electricity, gardening, maintenance and cleaning. Secondly, levies contribute to the capital works fund. This is used for larger projects such as upgrades to common areas, major repairs, or to cover unexpected costs.
What happens if you don’t pay on time?
If you don’t pay strata levies on time, the impacts are felt by many stakeholders. Firstly, the Owners Corporation needs these funds to manage the strata scheme. While one owner being a bit late with a payment probably won’t break the bank, it can be more serious if several owners don’t pay on time. Strata management requires the timely payment of utilities, contractors such as cleaners and maintenance crews and more. So, if the Owners Corporation can’t pay the bills, it puts the whole scheme at risk.
Naturally, if the Owners Corporation doesn’t have the necessary funds, the standard of living can decrease for all residents. Repairs and maintenance may take longer, gardens may become untidy, and other benefits that strata owners enjoy may not be available. Service providers who service the building may refuse service due to late payment.
Then, of course, there are more severe impacts for the person who doesn’t pay their fees on time. These can include:
- Interest: Generally, unpaid fees attract daily interest of 10% until they are paid. The interest won’t become payable until a month after the original fee due date, however, it can be backdated to the fee due date.
- Debt collection: If the Owners Corporation is unsuccessful in obtaining the payment, the matter can be handed over to a debt collection agency. This can cause marks on people’s credit history, which impacts their ability to borrow from banks and lenders.
- Legal action: Owners who don’t pay fees can also be the subject of litigation, whereby a court can order them to make payment. They can also be ordered to pay the accumulated interest and debt recovery costs incurred by the Owners Corporation.
- Being made ‘unfinancial’: If a strata owner is made unfinancial, they can’t vote at general meetings. They can also be made involuntarily bankrupt, which could further lead to the sale of their property by a Trustee. Unpaid fees would be taken from the proceeds of the sale.
More Than Strata is a professional strata management company that can take the stress away from Owners Corporations. We actively monitor levy arrears and make appropriate recommendations to lot-owners and the committee to ensure funds are collected per the budget approved. If you have difficulty chasing unpaid strata fees or need a better way of doing things, contact us today.
