The Importance of Paying Strata Levies on Time

What are strata levies?

When you buy into a strata-titled property, you will be required to pay strata levies, usually quarterly. These levies or contributions are the main source of funding in a strata scheme and are essential for the upkeep and maintenance of the building.

What do strata levies cover?

Strata levies can be broken into an administration fund levy which contributes towards the day-to-day running of the scheme such as maintenance, cleaning and gardening. A capital works  fund levy contributes towards the larger maintenance projects and unforeseen emergencies such as lift repairs, broken car park doors or major structural repairs.

Each year at the annual general meeting, the Owners Corporation will determine how much contributions will be levied on all lot owners within the strata scheme, including any special contributions. Levy notices can be received by standard mail or email and can be paid through electronic transfer or traditional banking methods.

How are strata levies calculated?

Individual levies paid by each lot is determined by the unit entitlement as set out in the schedule or the registered plan. Unit entitlement determines the proportion of ownership a lot holder carries within the whole apartment development including common areas. Generally, the larger the lot, the more entitlement it has and the higher levies for that unit.

The cost of levies is also determined by the facilities within the scheme. Owners within a smaller strata scheme may face lower levy payments if there is no lift, limited gardens or other amenities, compared to a high-rise development which might include swimming pools, gym and on-site security.

When are strata levies due?

Typically, theses levies or contributions are made quarterly and lot owners will receive a reminder of the payment dates via email or mail. Lot owners are obligated to pay on time, even if they are in dispute with the Owners Corporation about issues regarding payment.

Lot owners who pay their strata levies late or miss a payment altogether can face severe consequences.

What consequences do lot owners face when contributions are not paid on time?

Lot owners who do not pay their levies on time or miss payment altogether can place additional pressure on the strata scheme’s cashflow. This can result in poorly maintained common areas within the strata scheme and trigger the need for special levies which impact all owners.

For every day that a lot owner is unable to pay their strata levy, they will attract a daily interest at an annual rate of 10% until the levy contributions are paid. This interest starts accumulating one month after notice that the contribution is due and payable however interest is due from the date that the levy notice was due. Once a lot owner misses a strata levy payment by one month, the Owners Corporation has the authority to appoint a debt collection agency to obtain the funds or seek out legal advice or legal representation to recover the unpaid strata levy contributions along with the interest and legal costs.

Under The Strata Schemes Management Act 2015, “The Tribunal may order the owner of a lot in the strata scheme, or other person, to pay a contribution that is payable by the owner or other person under this Act that is not paid at the end of 1 month after it becomes due and payable, together with any interest payable on that unpaid contribution and the reasonable expenses of the owners corporation incurred in recovering those amounts.”

Lot owners who are unable to pay their levies will also be unable to vote at general meetings or be allowed to nominate themselves or another person as a member of the strata committee. They are also deemed as ‘unfinancial’ and could lead to involuntary bankruptcy, with orders issued from a Court for the payment of the levies and notice of bankruptcy at the Owners Corporation discretion. Typically, the threshold for a bankruptcy notice is $5,000 debt with 21 days to respond to the notice. 

This notice must set out the following:

  • the amount of the contribution, interest or expenses sought to be recovered;
  • the recovery action proposed;
  • the date the amount was due to be paid;
  • the manner in which the amount may be paid;
  • whether a payment plan may be entered into; and
  • any other action that may be taken to arrange for payment of the amount.

If a notice of bankruptcy is not responded to, the owner’s property may be sold by the Trustee in Bankruptcy on their behalf, and strata levies will be paid from the proceeds of the sale.

Is there any leniency for lot owners struggling to make payments?

If lot owners are struggling to make payments due to financial reasons, they can enter into payment plans with the Owners Corporation before filing for bankruptcy. These payment plans can last for up to 12 months. In some cases, the Owners Corporation may waive the interest which can help reduce the financial stress on lot owners who may be struggling to make payments.

We recommend NSW lot owners keep their contact details up to date with their Owners Corporations to receive notices of contributions. If you are facing financial hardship and having trouble paying your levies on time, it is best to communicate promptly with your strata manager and strata committee before payment is due to avoid falling into arrears.

Do you have questions about strata levies NSW? Contact our expert team at The Strata Collective today.

The Strata Collective

Level 3, 3 Spring St
Sydney, NSW 2000

Ph: 02 9137 2320

Strata Community Australia Member

Winner of the
SCA NSW Strata Community Awards 2018
«Small Business Award»

Congratulations to The Strata Collective and Principal, Rod Smith for winning such a prestigious award.

See the full story and photos here.

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