In Too Deep: What Happens When Your Strata Levies Are In Arrears?
Levies are a fundamental aspect of community and strata living in Australia. They fund the maintenance and management of common areas, insurance, and other shared expenses. However, when these levies become unreasonably high, they can place a significant financial strain on property owners. While owners have the right to examine and challenge excessive levies, it's crucial to understand the serious consequences of failing to pay them.
Understanding Strata Levies
Levies are typically determined by the owners corporation during Annual General Meetings (AGMs). They are calculated based on the unit entitlements of each lot, which are often tied to the size and value of the property. While owners can question and vote on proposed levies, the final decision is made collectively during these meetings.
The Dangers of Refusing to Pay
Refusing to pay levies is not a viable solution, even if you disagree with their amount; they are still due and payable. The scheme has legal avenues to recover unpaid levies, and non-payment can lead to severe consequences.
1. Interest and Additional Charges
Unpaid levies accrue interest, often at rates specified in state legislation governing schemes, usually 10% per annum. The scheme can recoup its costs incurred in recovering the debt, including legal fees and administrative expenses, which can quickly add up.
2. Legal Action and Court Orders
If levies remain unpaid, the scheme can initiate legal proceedings to recover the debt. This may result in a court order against the owner, leading to further legal costs and potential damage to the owner's credit rating.
3. Forced Sale or Bankruptcy
In extreme cases, unpaid levies can lead to the registration of a lien over the property. This legal claim can result in the forced sale of the property to recover the debt. In some instances, owners have faced bankruptcy due to unresolved strata debts.
Strategies to Address High Levies
While refusing to pay is not advisable, there are constructive steps owners can take to address high strata levies:
1. Review the Budget and Financial Statements
Examine the budget and financial statements to identify areas where costs can be reduced. Look for overpriced contracts, unnecessary services, or excessive administrative expenses.
2. Engage with your scheme
Attend AGMs and participate in discussions about the levies. Propose alternative solutions or cost-saving measures. Engaging with fellow owners can lead to collective action to reduce expenses.
3. Negotiate with Service Providers
If certain services contribute significantly to high levies, consider negotiating with service providers for better rates or exploring alternative providers.
4. Seek Professional Advice
Consult with a specialist lawyer or financial adviser to understand your rights and options. They can provide guidance on challenging unjustified levies and navigating the legal aspects of strata and community living.
The Importance of Timely Payment
Paying strata levies on time is essential to maintain the financial health of the owners corporation and ensure the upkeep of common areas. If you're experiencing financial difficulties, it's crucial to communicate with the strata/community manager or the committee as soon as possible; ignoring the problem won’t make it go away. Many schemes are willing to discuss payment plans or temporary deferrals to assist owners in financial distress.
A Great Tip to Remember
High strata levies can be burdensome, but refusing to pay them can lead to severe financial and legal consequences. Instead, owners should actively engage with the owners corporation, scrutinise budgets, and seek professional advice to address concerns constructively. Remember, timely payment and proactive involvement are key to ensuring a harmonious and financially stable strata community.
Looking for Help?
If you’re struggling to pay your levies or facing financial pressure, help is available.
Many schemes are open to discussing payment plans or short-term arrangements if they know you're doing your best to stay on top of things. You can also access free and confidential support through the following services:
You can also contact the Legal Services Commission in your state for guidance on your rights and responsibilities regarding strata debt. Reaching out early can help you avoid further stress and take control of the situation.
Disclaimer:
This article is intended for general educational purposes only and does not constitute legal or financial advice. Readers should seek independent legal and professional guidance relevant to their specific circumstances and jurisdiction
