1. Introduction 

  • On 30 November 2016 a suite of new laws relating to strata schemes will come into force including the Strata Schemes Management Act 2015 (“SSMA 2015”), the Strata Schemes Development Act 2015 (“SSDA 2015”) and the Strata Schemes Management Regulation 2016 (“SSMR 2016”).
  • This paper is limited to the operation of the new legislation in relation to the recovery of contributions (levies). The paper will deal with the key changes that have been made relating to the recovery of contributions, interest and expenses.

2. Analysis of key provisions of the old Act and new Act

The following table identifies the relevant provisions of the Strata Schemes Management Act 1996 and the provisions of the SSMA 2015:

SSMA 1996 SSMA 2015
78           Manner of levying contributions

(1)           An owners corporation levies a contribution required to be paid to the administrative fund or sinking fund by an owner of a lot by serving on the owner a written notice of the contribution payable.

(2)           Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and section 77) by the owners in shares proportional to the unit entitlements of their respective lots.

(3)           If, at the time a person becomes owner of a lot, another person is liable in respect of the lot to pay a contribution, the owner is jointly and severally liable with the other person for the payment of the contribution and interest on the contribution.

(4)           A mortgagee or covenant chargee in possession of a lot (whether in person or not) is jointly and severally liable with the owner of the lot:

(a)           for any regular periodic contributions to the administrative fund or sinking fund together with any interest on those contributions, and

(b)           for any other contribution together with interest on that contribution if the mortgagee or covenant chargee has been given written notice of the levy of the contribution.

(5)           Subsection (4) does not affect the liability of an owner of a lot for any contribution levied under this section.

(6)           Regular periodic contributions to the administrative fund and sinking fund of an owners corporation are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not served on the owner.

83           Levying of contributions

(1)           An owners corporation levies a contribution required to be paid to the administrative fund or capital works fund by an owner of a lot by giving the owner written notice of the contribution payable.

(2)           Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and section 82) by the owners in shares proportional to the unit entitlements of their respective lots.

(3)           Any contribution levied by an owners corporation becomes due and payable to the owners corporation on the date set out in the notice of the contribution. The date must be at least 30 days after the notice is given.

(4)           Regular periodic contributions to the administrative fund and capital works fund of an owners corporation are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not given to the owner.

 

 

 

 

 

 

 

 

 

79           Interest and discounts on contributions

(1)           Any contribution levied by an owners corporation becomes due and payable to the owners corporation in accordance with the decision of the owners corporation to make the levy.

(2)           A contribution, if not paid at the end of one month after it becomes due and payable, bears until paid simple interest at an annual rate of 10 per cent or, if the regulations provide for another rate, that other rate.

(3)           However, an owners corporation may by special resolution determine (either generally or in a particular case) that a contribution is to bear no interest.

(4)           An owners corporation may, by special resolution, determine (either generally or in a particular case) that a person may pay 10 per cent less of a contribution levied if the person pays the contribution before the date on which it becomes due and payable.

 

 

 

 

 

 

 

 

 

 

 85        Interest, discounts on contributions and payment plans

(1)           A contribution, if not paid when it becomes due and payable, bears until paid simple interest at an annual rate of 10% or, if the regulations provide for another rate, that other rate.

(2)           Interest is not payable if the contribution is paid not later than one month after it becomes due and payable.

(3)           However, an owners corporation may by resolution determine (either generally or in a particular case) that a contribution is to bear no interest.

(4)           An owners corporation may, by resolution at a general meeting, determine (either generally or in a particular case) that a person may pay 10% less of a contribution levied if the person pays the contribution before the date on which it becomes due and payable.

(5)           An owners corporation may, by resolution at a general meeting, agree to enter into payment plans, either generally or in particular cases, for the payment of overdue contributions.

A payment plan is to be limited to a period of 12 months but a further plan may be agreed to by the owners corporation by resolution.

(6)          The regulations may prescribe requirements for payment plans.

(7)           The existence of a payment plan does not limit any right of the owners corporation to take action to recover the amount of unpaid contributions.

(8)          The Tribunal may, on application by an owner, order that no interest is chargeable on a specified contribution if the Tribunal is satisfied that the owners corporation should reasonably have made a determination not to charge interest for the late contribution.

84           Liability of persons other than owners for contributions

(1)           If, at the time a person becomes the owner of a lot, another person is liable to pay a contribution in respect of the lot, the owner is jointly and severally liable with the other person for the payment of the contribution and any interest on the contribution.

(2)           A mortgagee or covenant chargee in possession of a lot is jointly and severally liable with the owner of the lot:

(a)           for any regular periodic contributions to the administrative fund or capital works fund together with any interest on those contributions, and

(b)           for any other contribution together with interest on that contribution taken to recover unpaid contributions, if the mortgagee or covenant chargee has been given written notice of the levy of the contribution, and

(c)           for any costs payable as a debtor in respect of enforcement action to recover unpaid contributions.

(3)           Subsection (2) does not affect the liability of an owner of a lot for any contribution levied under this section.

80         How does an owners corporation recover unpaid contributions and interest?

(1)           An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.

(2)           Interest paid or recovered forms part of the fund to which the relevant contribution belongs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 86           Recovery of unpaid contributions and interest

(1)           The Tribunal may, on application by an owners corporation, order an owner of a lot in the strata scheme, or other person, to pay any of the following that are payable by the owner or other person under this Act:

(a)           a contribution not paid at the end of one month after it becomes due and payable,

(b)           any interest payable on an unpaid contribution,

(c)           the expenses of the owners corporation incurred in recovering any such amounts.

Note : Section 78 of the Civil and Administrative Tribunal Act 2013 provides for the recovery as a judgment debt of amounts ordered to be paid by the Tribunal.

(2)           An owners corporation may, without obtaining an order under this section, recover as a debt in a court of competent jurisdiction any of the following:

(a)           a contribution not paid at the end of one month after it becomes due and payable,

(b)           any interest payable on an unpaid contribution,

(c)           the expenses of the owners corporation incurred in recovering any such amounts.

(3)           Interest paid or recovered forms part of the fund to which the relevant contribution belongs.

(4)           An owners corporation must not take action to recover an amount under this section unless it has given the person against whom the action is to be taken at least 21 days notice of the action.

(5)           The notice of the action must set out the following:

(a)           the amount of the contribution, interest or expenses sought to be recovered,

(b)           the recovery action proposed,

(c)           any other matter prescribed by the regulations for the purposes of this subsection.

3.  Key differences

  • Section 78(1) of the SSMA 1996 provides that an owners corporation levies a contribution required to be paid to the administrative or sinking fund by an owner of a lot by serving on the owner a written notice of the contribution payable. Section 83(1) of the SSMA 2015 is in similar terms but rather than using the word “serving” it uses the word “giving”.  There is no material difference.
  • Section 83(3) of the SSMA 2015 provides that any contribution levied by an owners corporation becomes due and payable on the date set out in the notice of the contribution and such date must be at least 30 days after the notice is given. However, section 83(4) of the SSMA 2015 provides, in similar terms to s 78(6) of the SSMA 1996, that regular periodic contributions are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not given to the owner.
  • Therefore, the new provision that provides that the date that a contribution levy becomes due and payable must be at least 30 days after notice is given will not have any material effect on regular periodic contributions however it will effect the raising of special levies. An owners corporation will need to be careful to ensure that if a special levy is required to be raised to meet expenses that the resolution raising such contributions allows for a due date at least 30 days after the meeting (but probably longer because notice will then need to be given to each of the owners in order to be properly levied and recoverable).
  • The provisions relating to the accrual of interest on contributions have been slightly revised. Section 85(1) of the SSMA 2015 provides that a contribution, if not paid when it becomes due and payable, bears until paid simple interest at an annual rate of 10% or such other rate that may be prescribed by the regulations.  Section 85(2) of the SSMA 2015 provides that interest is not payable if the contribution is paid not later than one month after it becomes due and payable.  These provisions are consistent with the provisions that exist in s 79(1) and (2) of the SSMA 1996 however the ambiguity surrounding when interest runs from (whether it runs from the date that the contribution became due and payable or a date at the end of one month after it becomes due and payable) has been resolved.
  • There is more flexibility for an owners corporation to determine that a contribution is to bear no interest. Under s 85(3) of the SSMA 2015 provides that an ordinary resolution is required whereas under the SSMA 1996 (s 79(3)) a special resolution is required.

4. Payment plans

  • There are new provisions relating to payment plans. Payment plans were not formally recognised or specified under the SSMA 1996 but it was not unusual for owners corporations to agree to enter into payment plans with lot owners whereby outstanding contributions, interest and expenses were paid by instalments.
  • Section 85(5) provides that an owners corporation may, by resolution at a general meeting, agree to enter into payment plans, either generally or in particular cases, for the payment of overdue contributions. A payment plan is to be limited to a period of 12 months but a further plan may be agreed to by the owners corporation by resolution.
  • Section 85(7) provides that the existence of a payment plan does not limit any right of the owners corporation to take action to recover the amount of unpaid contributions.
  • The SSMR 2016 contains requirements for payment plans. Clause 18 provides that a payment plan for the payment of overdue contributions is to be in writing and is to contain the following:
    • the name of the lot owner and the title details of the lot,
    • the address for service of the lot owner,
    • the amount of the overdue contributions,
    • the amount of any interest payable for the overdue contributions and the way in which it is calculated,
    • the schedule of payments for the amounts owing and the period for which the plan applies,
    • the manner in which the payments are to be made,
    • contact details for a member of the strata committee or a strata managing agent who is to be responsible for any matters arising in relation to the payment plan,
    • a statement that a further plan may be agreed to by the owners corporation by resolution,
    • a statement that the existence of the payment plan does not limit any right of the owners corporation to take action to recover the amount of the unpaid contributions.
  • Clause 18(2) also provides that the strata committee must, at the request of the lot owner who has entered into a payment plan, give the lot owner a written statement for each calendar month (or any longer interval specified by the lot owner) of the plan that sets out the payments made during that month and the amount of unpaid contributions and interest owing.
  • We have developed a template for payment plans that complies with clause 18 of the SSMR 2016, which is available by contacting our office.
  • The Courts will still have the power to allow lot owners to pay by instalments with a right of review.

5. Recovery of unpaid contributions and interest

  • There are now two ways in which unpaid contributions, interest and expenses can be recovered but only at the end of one month after the contribution becomes payable:
    • an application may be made to the NSW Civil and Administrative Tribunal (NCAT);
    • an application to a court of competent jurisdiction for recovery as a debt.
  • Under the SSMA 1996 there was no power for the Tribunal (or an Adjudicator) to make an order for the payment of contributions, interest and expenses and therefore recovery of those amounts had to be pursued in a court of competent jurisdiction.
  • We do not see any advantage in pursuing recovery of those amounts through NCAT for a number of reasons. Firstly, there is presently no means of obtaining default judgment in NCAT (where the lot owner fails to pay or file a defence within 28 days of service of a statement of claim) whereas this is the usual course in proceeding through the Courts. Secondly, any order made by NCAT would need to be enforced through the courts in any event (requiring the issue of a certificate by NCAT that then needs to be registered in the court by payment of a fee).
  • There is an important new provision requiring the giving of a notice to the lot owner (or mortgagee in possession) at least 21 days’ notice before the action. Section 86(5) provides that the notice of action must set out the following:
    • the amount of the contribution, interest or expenses sought to be recovered;
    • the recovery action proposed;
    • any other matter prescribed by the regulations for the purposes of this subsection.
  • Clause 19 of the SSMR 2016 provides that a notice of proposed action must also include the following:
    • 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;
    • any other action that may be taken to arrange for payment of the amount.
  • We have developed a notice of proposed action template which is available by contacting our office.

Conclusion

  • There are some key changes to the requirements for levying contributions and recovery of contributions that require a systematic approach to ensure that owners corporations properly raise and levy contributions and have the right to recover those contributions.
  • This is a summary paper only and is not necessarily a detailed analysis of all of the implications of the new legislation. If you require legal advice about these matters, please contact David Edwards.
  • Please note that the information contained in this article is not legal advice and should not be relied upon. You should obtain legal advice before you take any action or otherwise rely upon the contents of this article.