Can’t pay, won’t pay

We’ve had a couple of questions about unpaid levies and what you can do about them.

“Is there anyone in the real world who thinks a large strata plan with one third of owners levy defaulting is functioning satisfactorily,” asks Billen Ben on the Flat Chat Forum. “Can anyone top a 33% default rate?”

And what happens if nobody does anything?

“When repairs and renovations are needed, can it get to a pile of crumbling rubble with no-one able to live in the place at all?” asks FlatChatFan.

First of all, the Owners Corporation has a legal obligation to maintain and repair common property.  If the building is literally falling down and owners won’t raise the money to fix it, any owner can go to the CTTT and request the appointment of a statutory manager to make the tough decisions, whether owners like it or not.

It rarely gets as bad as that  but sometimes owners aren’t able to pay special levies.  Then an Owners Corporation could look at a specialised strata loan from companies like Lannock or Strata Finance to pay for repairs.

That way they can get the work done without big hits on family finances  (although they’ll need to increase levies to pay off the loan).

In the case of owners who can’t or won’t pay normal levies, there’s statutory 10 percent penalty interest and the cost of debt collection falls to the defaulters so there’s no excuse for Executive Committees doing nothing.

As Mr Strata (a strata manager) says on the Forum, most strata budgets are run pretty tightly to keep levies down, but that means they don’t have a lot of leeway for late payers, and that can cause significant cash flow problems.

“Having a hard and fast levy collection process is essential otherwise before you know it one quarter behind becomes a year behind,” he says. “An Owners Corporation can bankrupt a non-paying owner which is sad, but if the owner won’t sort out their finances then they’re left with few options.”

There’s much more on this HERE.