PROPERTY

What to do if you can't afford your strata fees because of COVID-19

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If you are struggling financially to pay your regular strata levies because of COVID, what are your options? Is there any chance of relief from the levies?

Your fate rests with your building's owners' corporation or body corporate. You must contact your strata committee and advise them of your financial circumstances.

But don't assume it will be sympathetic to the financial hardship of struggling owners. Many body corporates have taken a hard line with owners who can't afford the levies, arguing that the strata scheme can't afford to run out of money.

cant afford to pay strata fees

Strata levies pay for the ongoing management and maintenance of properties - electricity, insurance, repairs, cleaning and strata management. In COVID times, some apartment building costs have increased as more people work from home such as more cleaning.

If you can't pay, it does have an impact. If numerous owners in the one block can't pay, it could lead to the worst scenario - bankruptcy - where there is no money for maintenance and repairs.

At the same time, body corporates are having to face the fact that job losses due to COVID has meant that some apartment owners and landlords who can't evict tenants in severe financial hardship, don't have the funds to pay levies.

While some body corporates will be charging higher interest on unpaid levies as well as sending out a debt collection agency letter demanding payment, others will be empathetic and negotiate a payment plan or interest deferred or dropped.

The Strata Community Association (SCA) of Victoria recommends apartment owners should write to their owners' corporation to explain their circumstances and outline their request to have a payment plan put in place, penalty interest deferred or waived. If your request is considered by the committee, the SCA advises that any discussion be followed up in writing so there is clarity on what was agreed, including start date, end date, the dollar amount payable, what fees are deferred and or waived for what time period, and what is the consequence if the agreement is not upheld.

cant afford to pay strata fees

In Australia there are 316,227 strata schemes as 2.58 million people or 9% of the population live in apartments.

Most owners' corporations have two different funds, one to pay for ongoing costs and another that is a sinking fund for rainy day or scheduled capital works. There has been discussion around owners' corporations taking some funds from the capital works or sinking fund to use to cover the levies until people are back on their feet. But the problem is that some apartment buildings don't have much of a sinking fund, preferring to keep strata levies low.

Also each state has its own strata laws so it is impossible to generalise about whether owners' corporations can transfer funds from the sinking fund to the general administration account. For example, in Queensland, the law is very strict that it cannot be moved from one fund to another. But in NSW the administration fund can borrow from the capital works fund, but it must be paid back in a set period of time.

As well some states have passed legislation that is designed to help with owners' financial hardship due to COVID and says schemes should consider owners' individual circumstances and the current economic spirit of supporting temporary arrangements without causing long-term financial detriment or insolvency. It is worth checking with your state government to see what is on offer.

In NSW there is legislation that enables schemes to enter into instalment plans, to apply discounts or to waive interest or defer capital works, according to strata lawyers, Bannermans Lawyers. Under the Strata Schemes Management Amendment (Covid-19) Regulation 2020 and the Community Schemes Management Amendment (Covid-19) Regulation 2020 which came into effect on 5 June 2020, Bannermans says that owners' corporations by resolution at a general meeting can enter into a payment plan for overdue contributions. The payment plan is limited to a 12-month period.

NSW owners' corporations can also resolve at a general meeting to reduce contributions by 10% if they are paid before their due date. Bannermans says that levy contributions in arrears accrue interest at a rate of 10%. The interest is payable if the contribution is not paid within one month of the contribution being due and payable.

Also, strata schemes in NSW with more than two funds can transfer or use the money of one fund for the purposes of the other fund. But within three months of transferring or using the money, the owners' corporation must determine how to reimburse the funds transferred or used.

The Queensland government has also introduced amendments to the Body Corporate and Community Management Act, 1997 to assist financial issues arising from COVID. The fee relief is similar to those available in NSW with extending the due date for levies, reducing the sinking fund budget, no penalties for unpaid levies. The special measures continue up to December this year.

We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.
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