Levy defaults. Calls for Government Intervention. - More Than Strata

Levy defaults. Calls for Government Intervention.

The Owners Corporation Network (“OCN”), the leading advocacy group in the Country for strata owners, have released a policy paper calling on the Government to assist owners who cannot pay strata levies during the Covid-19 recession.  You can access the paper here.

OCN rightly point out in their paper that the residential strata sector is facing the perfect storm for an onslaught of levy defaults. OCN are predicting an even higher number of potential default rates, up to 50%, compared to the position paper published by Strata Communities Australasia. Whether the number is 20% or 50%, default rates in levies will impact every strata owner.

The paper published by OCN explains that unlike taxes and mortgages, strata levies cannot be waived or given an extended ‘holiday’ as the services they pay for are ongoing and essential.  Yet of course, if people simply cannot pay, the cost is ‘kicked onto’ those who can.  Loans may be an option –  however all owners will be burdened by interest, even those who would prefer to pay upfront.

As quoted ‘in effect those who pay levies subsidises those that do not. If there is no mechanism to break the cycle and defaults remain high, all owners are paying and debt increases. This in turn also increases financial pressure on other owners, many of whom are already on fixed or reduced income…’

OCN have put to the Government that financial assistance, in the form of a low, or no interest loan would be appropriate. Two suggestions –  individual loans to owners to pay levies, or alternatively, cash flow loans to the Owners Corporation have been put forward.

Unfortunately, despite the large number people of living in strata, the entire sector seems to continually ‘fly under the radar’. We support the position put forward by OCN, but fear it is an unlikely outcomes. Owners are going to have  trust their strata managers to provide a high level of financial acumen and understanding of cash flowing – a skill level not generally required of them. Strata Managers have a moral responsibility to step up, or to be honest if they simply do not have the expertise required.