What are Owners Corporation levies and what happens if a lot owner falls in arrears?

In Victoria, Australia, an Owners Corporation (formerly known as a Body Corporate) is responsible for managing and maintaining common property within a multi-occupancy building or development, such as an apartment complex or townhouse community.

Owners Corporation levies, also referred to as fees or contributions, are regular payments made by lot owners to cover the costs associated with the management and maintenance of the common property.

 Lot owners are required to pay levies as part of their obligations outlined in the Owners Corporation Act 2006. These levies are necessary to fund various expenses incurred by the Owners Corporation, including:

1.  Administrative costs: Levies contribute to the general administration and management of the Owners Corporation, which involves tasks such as organizing meetings, preparing financial statements, and maintaining records.
2. Maintenance and repairs: The levies cover ongoing maintenance and repair work for common property areas, such as hallways, staircases, roofs, gardens, and common facilities like swimming pools, gyms, or elevators. These funds ensure that the property is kept in good condition and compliant with relevant regulations.
3. Insurance premiums: Part of the levies is allocated towards insurance coverage for the common property, including public liability insurance and building insurance. This protects lot owners from potential liabilities and covers the costs of repairing or rebuilding damaged property.
4. Essential services: Levies may also contribute to the costs associated with essential services, such as garbage collection, water supply, gas, electricity, and fire safety measures within the common property.

When a lot owner falls into arrears and fails to pay their levies, the Owners Corporation has several options to address the situation:

1. Reminder notices: Initially, the Owners Corporation will typically issue reminder notices to the lot owner who is in arrears, reminding them of their outstanding payments and requesting immediate payment.
2. Imposing interest and fees: If the arrears persist, the Owners Corporation may impose interest charges and additional fees on the outstanding amount as per the Owners Corporation rules or relevant legislation. These charges aim to encourage prompt payment and compensate for the additional administrative work involved.
3. Debt recovery action: If the lot owner continues to be in arrears despite reminders and added charges, the Owners Corporation may take legal action to recover the outstanding levies. This can involve engaging debt collection agencies or pursuing legal proceedings to obtain a judgment and enforce payment.
4. Withholding services or taking legal action: In certain cases, the Owners Corporation may decide to withhold certain services or amenities from the lot owner who is in arrears until the outstanding payments are settled. This can include restricting access to common facilities or amenities like parking, gyms, or swimming pools. In extreme cases, the Owners Corporation may even seek a court order for the sale of the lot to recover the unpaid levies.

It’s essential for lot owners to fulfill their levy payment obligations in a timely manner, as failure to do so can result in financial penalties, legal consequences, and strained relationships within the Owners Corporation. Clear communication and adherence to the payment terms outlined by the Owners Corporation are key to maintaining a harmonious and well-functioning community.

If your Owners Corporation would benefit from professional management services to improve its administrative, financial and compliance obligations, including the timely collection of fee levies, speak to SELECT today.