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It appears that where our SM receives levies in advance of the due date they are not deposited to the OC account until they become due and as a result I would expect the SM is gaining the benefit of the interest.
By way of explanation our quarterly levies for all lots is, let’s say $20,000. For the levies due by 31/8/15 we receive an invoice from the SM at the beginning of July, with a notation “Due 1/8/15”. As a result usually about 50% ($10K) of lot owners pay their levies during July notwithstanding that they actually have up to the end of August before they are overdue.
The July report received from the SM acknowledges the advanced levies in a summary of receipts and expenditure and also in another section of the report under the heading of Advanced Levies. However the receipt of the levies is not reflected in the financial statements attached to the monthly report.
Using the same figures above, the July report noted $10K received in advanced levies, but the Statement of Income & Expenditure does not record any levies received, the SI&E obviously reconciles with the Balance Sheet which records the OC bank balance. Then in the August reports remaining 50% of the levies are recorded in the summary and then the whole $20K is recorded in Statement Income & Expenditure and Balance Sheet.
On this basis it would appear that the SM is banking the advanced levies in another account, I assume their own where they receive the interest. We are not talking about huge dollars but I would still prefer the OC to obtain the benefit and I cannot find anything in our SM agreement covering this issue.
I am expecting the answer is that SMs do this to augment their income and if stopped would be reflected in fee increases. However I would request input from the experts as to the legality or ethics of this practice particularly as it is not disclosed to the OC or EC.
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I would write to your executive committee asking the why receipts don’t appear as soon as they are received into an account of the OC (from which it could derive interest, or transfer any surplus to a higher interest-bearing account). If you are on the EC, just ask the managing agent to explain. Remember the managing agent works for you, not the other way around. If the EC is being too timid, they need to politely but firmly instruct the managing agent to deposit all money received on behalf of the OK into the OC’s bank account.
Hi Cobra,
Most strata managers operate an individual bank account for each OC and so funds should be directly deposited into the individual account.
In most but not all states strata managers are allowed to operate a common trust account for all of their OCs. This may the situation with your OC.
In Victoria there can be multiple OCs for one property and these can share a bank account despite being different OCs.
Which state is your OC in? I’m curious to know which manager you are using if you wouldn’t mind sharing.
[Please restrict naming the manager to a Personal Message (PM) the button for which you can find above the post on the right – JimmyT]
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