Can we charge penalties for late payment of levies?

Andy,

I can’t answer for NSW, but in the ACT, our Act specifies 10% simple interest to be charged on overdue levies. This statutory default can only be changed to an amount less than 10% or up to 20% by special resolution. Perhaps your act has a similar provision.

By way of comparison, our levy notices include a statement:

“After levy due date             first letter  $0.00

+14 days after                       second letter $55.00

+14 days after                     final letter $110.00

+7 days after                Notice to debt collection agency $250+legal fees”

These service charges by the managing agent are included as terms in our management agreement, which are the managing agent’s default position. Since the management agreement is agreed by general meeting resolution, the OC has, in effect, resolved to agree to these service charges for overdue levies on top of the interest we are required to charge. In practice, a little bit more time tends to be left before getting heavy but our OC has not often had problems with unpaid levies.

Andy said:

Following the above I’m a bit worried our OC might be outside of requirements. A few years ago we voted to charge interest on overdue levies. I need to check but think this is legit.

Not just legit, but obligatory – unless the Owners Corp decides otherwise you must impose a 10 per cent penalty interest charge on overdue levies.

Not sure about the $70 admin fee, though

Although the imposition of penalty interest charges is the default position, under section 85 (below) the OC – and I believe this means the committee, if they have been given those powers at a general meeting – can decide not to impose the penalty interest and can also organise a payment plan.

85 Interest, discounts on contributions and payment plans
(1) A contribution, if not paid when it becomes due and payable, bears until paid simple interest at an annual rate of 10% or, if the regulations provide for another rate, that other rate.
(2) Interest is not payable if the contribution is paid not later than one month after it becomes due and payable.
(3) However, an owners corporation may by resolution determine (either generally or in a particular case) that a contribution is to bear no interest.
(4) An owners corporation may, by resolution at a general meeting, determine (either generally or in a particular case) that a person may pay 10% less of a contribution levied if the person pays the contribution before the date on which it becomes due and payable.
(5) An owners corporation may, by resolution at a general meeting, agree to enter into payment plans, either generally or in particular cases, for the payment of overdue contributions. A payment plan is to be limited to a period of 12 months but a further plan may be agreed to by the owners corporation by resolution.

JT said:

under section 85 (below) the OC – and I believe this means the committee, if they have been given those powers at a general meeting – can decide not to impose the penalty interest and can also organise a payment plan.

My reading of the section you have quoted is that the OC can’t delegate this to the committee since it is specified that the decisions must by made by the OC by resolution.

In our OC a certain function had been long believed to have been delegated to the OC. When things fell in a heap, our legal advice was that the OC did not have the power to delegate a function to the committee and the committee could not exercise a function of the OC if the Act specified that a resolution of the OC was required to exercise that function.

Unless there is something elsewhere in the NSW Act that I am unaware of that allows an OC to resolve to delegate functions, including those for which the Act specifies a resolution of the OC. The ACT act does not have any such provision.

36   Functions of strata committee

(1)  A strata committee has the functions conferred on it by or under this or any other Act.

(2)  A decision of a strata committee is taken to be the decision of the owners corporation. However, in the event of a disagreement between the owners corporation and the strata committee, the decision of the owners corporation prevails.

(3)  The following decisions cannot be made by the strata committee:

(a)  a decision that is required by or under any Act to be made by the owners corporation by unanimous resolution or special resolution or in general meeting,

(b)  a decision on any matter or type of matter that the owners corporation has determined in general meeting is to be decided only by the owners corporation in general meeting.

(4)  An owners corporation may in general meeting continue to exercise all or any of the functions conferred on it by this Act or the by-laws even though a strata committee holds office.

Sir Humphery,

The charges you mention to recover levies im your previous post may not pass the law. I noticed at our last agm the sm no longer charges these fees for sending letters such as the $110 stage 3 recovery letter.

In the case i posted , this is what the judge had to say about one of these fees;

A number of charges are exorbitant. By way of example, the managing agent has charged the sum of $143 for issuing a statutory notice which is, in effect, a pro forma letter of demand. It is an amount which does not appear to be justifiable in terms of the degree of work done or effort involved.

As an alternative to imposing fines on late levies, one of the strata in which we own has a discount system. So if your levies are due on 1st May, you get a 10% discount if you pay by COB 31st April. So if we pay our levies on time we save nearly $600!  We always pay on time 🙂