Strata Levies – FAQ’s
What is a unit entitlement?
(a) define the proportion of levies paid by each lot owner in the strata scheme;
(b) determine a lot owner’s voting rights at general meetings of the owners corporation;
(c) determine the proportion of levies or fees a lot owner pays; and
(d) are set at the date of registration of the strata plan.
How is a unit entitlement calculated?
A developer sets the unit entitlements for the lots in a strata scheme and they must reflect the market values of the lots. Accordingly, it is not uncommon for unit entitlements to be different for each lot and some may be higher than others.
Section 183 of the Strata Schemes Management Act 1996 permits any lot owner to seek to have unit entitlements reallocated. The test is that the allocation of the unit entitlements were “unreasonable”.
What are strata levies?
Strata levies, also known as levies or contributions, represent the payments lot owners must make towards the owners corporation’s administrative fund and sinking fund to cover the costs of running the scheme. Strata levies are paid quarterly and are set at each annual general meeting when budgets are approved for the next 12 months.
Do I have to pay a special levy?
If the money in an owners corporation’s sinking fund or administrative fund is running low or runs out, the owners corporation must raise a special levy to restore liquidity to these funds. A special levy usually represents a one off payment spread over two or more quarters which is payable by lot owners in proportion to their unit entitlements. A special levy contribution must also be approved by the owners corporation in general meeting.
Is there GST on strata levies?
According to the ATO’s rulings, strata levies are liable for GST. Therefore, if your owners corporation is registered for GST then the owners corporation’s strata levies will have GST added to them. The GST component can be found on the levy notice issued to the lot owners in the scheme.
Do late strata levy payments attract interest?
Yes. In New South Wales, if your strata levies are not paid when due you will pay interest at the rate of 10% per annum.
What happens if I do not pay my strata levies at all?
If you have not paid your strata levies and a considerable amount is outstanding, the owners corporation could resolve to engage a solicitor to take debt recovery action against the lot owner. For example, if the amount owing is $5,000.00, the owners corporation’s usual steps are as follows:
1. The owners corporation’s solicitor sends a letter of demand to the lot owner demanding payment of the unpaid strata levy, interest and costs within 14 days.
2. If the lot owner pays the strata levy, interest and costs, the matter is finalised.
3. If the lot owner refuses to comply with the letter of demand, the owners corporation resolves to commence legal proceedings against the lot owner.
4. The owners corporation and the lot owner may enter into negotiations for a payment arrangement. The matter may settle out of court or it may not.
5. If the lot owner does not file a defence in the proceedings or settle, the owners corporation can apply for and usually obtains default judgment.
6. If the lot owner is a natural person and does not pay the judgment debt, the owners corporation may resolve to issue a bankruptcy notice against the lot owner in an attempt to bankrupt the person in order to have the judgement debt satisfied.
7. If the lot owner is a corporation and does not pay the judgement debt, the owners corporation may resolve to issue a statutory demand against the company lot owner demanding payment of the levy, interest and costs within 21 days. If the debt remains unpaid, the owners corporation may resolve to commence winding up proceedings against the company lot owner in the Supreme Court of NSW. If the Court winds up the company lot owner, the company lot owner is normally ordered to pay the owners corporation’s legal costs of the proceedings as agreed or assessed.
If you are experiencing difficulties paying your levies on time, you should get in contact with your strata managing agent immediately to explain your difficulties and make a payment arrangement. If you do not, you might end up paying levy recovery costs.
If it is too late and legal proceedings have already been commenced against you for recovery of the unpaid strata levies, we recommend that you obtain legal advice without delay to protect your rights.
This article is not legal advice and should not be relied upon. You should seek legal advice regarding any of the issues referred to. If you have any queries, please contact our strata law specialist Michael Pobi on (02) 8710 3430.