Levy debt collection during Covid-19 Recession. - More Than Strata

Levy debt collection during Covid-19 Recession.

It’s a big question. Proceeding with collection of levies during the Covid-19 recession.

Should it occur?

When should it happen?

How does it occur?

If a person has no income, no assets, is there any point?

Should the Owners Corporation continue to collect interest on unpaid levies.

The reality is there is no blanket answer for everyone. Committee members, with the guidance of their managers will need to consider a number of factors, including;

1.Bankruptcy proceedings require a minimum of $20,000 in judgement debt owing to proceed.

2.The financial position of the scheme – does your building have the cash available to carry defaults and still service its financial obligations.

3.The individual’s circumstances – are they are ‘problem ’debtor who was in arrears prior to the Covid-19 causing economic hardship? Have they always paid on time, and are now genuinely faced with job loss because of Covid-19? Do they have a tenant who isn’t paying rent?

In assessing the strata’s ability to carry defaults it will be necessary for a detailed cash flow to be completed, which highlights the point of defaults where the scheme can no longer pay its bills. Decisions may need to made in relation to delaying non-essential works, but this needs to occur with the realm of the Act, which imposes  strict obligation on the Owners Corporation to repair and maintain its common property. And of course, there is a common law obligation to keep people safe.

While laws have been passed that allow regulations to made to extend the period of time monies can be paid back into the capital works fund, at the time of writing, no such regulations have been made. This means that the capital works fund is a short-term cash flow management option.

Owners considering taking out strata loans to cover cash short fall may want to consider the need to continue to collect interest, to off-set if some part the interest that will be payable on the loan.

Whatever decision is made in relation to pursuing levy arrears, every owner is going to be financially impacted in some way. Whether the owner who cannot pay incurring possibly impossible debts, the owners who do pay, and are left carrying a larger burden to off-set those who are not. Sophiiscated, detailed and long-term financial planning is crucial.