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Pay back for strata slackers

(SEE UPDATE AT END OF COLUMN)
There should be a special word for the selfish few who sponge off their neighbours by not paying their levies until the bailiffs come knocking. Levy-swervers, perhaps? Levy leeches? Strata-slackers? Whatever they’re called, you can make them pay – if you’re determined.

QUESTION: Our strata managers have informed us that, as a result of unpaid levies by other owners, there’s going to be a special levy on the rest of us to cover the losses. What can be done with the owners who do not pay their levies?

ANSWER: First of all, imposing special levies to cover others’ unpaid dues is just about the worst thing you can do. Your unpaid levies will be recoverable – at the very least when the defaulter sells their unit – but money you’ve paid in a special levy can’t legally be repaid to you, the responsible owners, without a unanimous vote (and that’s not likely to happen).
If you have a shortfall in funding your executive committee should consider taking out an unsecured loan through strata specialists like Lannock or Strata Finance. They can pay it off when the levies are recovered.
Meanwhile they should aggressively pursue the bad debtors who, on top of their unpaid levies, will be liable for penalty interest of up to 10 percent plus the entire cost of pursuing the bad debt, including legal fees.
In short, it will cost your Owners Corporation nothing and the 10 percent interest should be just about enough to cover the cost of the loan.
Admittedly there are cases where apartments are abandoned and no one can find out who owns them so levies notices go unanswered but this is rare.
That aside, unless someone stuffs up the paper work, you will eventually recover unpaid levies. Get a good specialist levies recovery firm or an experienced strata lawyer to make sure all your paperwork is in order. And remember, your tight-fisted neighbour pays the legal fees, not you and the other owners.
A couple of years ago the Supreme Court slammed a levy dodger who tried every legal trick to get out of paying their share. The laws are watertight on levies so use them.
UPDATE – A LAWYER WRITES

I refer to your article “Levy-Headed” appearing in last Saturday’s Domain (21/06/08).

You may be interested in a relatively recent decision of the NSW Supreme Court, dealing with the claiming of legal costs pursuant to s 80 of the Strata Schemes Management Act (“the Act”). That case is Dimitriou v Owners of Strata Plan 36131 [2008] NSWSC 116 (27 February 2008).

The Austlii link is:- http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/nsw/NSWSC/2008/116.html?query=^dimitriou

In this case, Associate Justice Malpass favoured the view that “if Parliament had intended that ‘expenses’ be read to include legal costs and disbursements it would have clearly said so…” He thought that the recovery of legal costs and disbursements was not covered by s 80 of the Act, but rather, should be “dealt with in the usual way” – by way of costs order made in the proceedings.

In light of this decision, the Act may not provide the protection for Owners Corporations which we once thought. Without the benefit of s 80 being read to include legal costs and disbursements, there is a significantly greater risk that an Owners Corporation will only recover a proportion (if any) of its legal costs incurred during levy litigation. This is likely to have some impact on an Owners Corporation’s decision to litigate in the first place, particularly where it is likely that proceedings will be strongly defended.

I understand that the decision is currently on appeal to the Court of Appeal, though I am not yet aware of the status of that litigation. I would be happy to keep you updated.

Regards,

AF

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