Hi, everyone, it’s Allison Benson here from Thoughts from a Strata Lawyer. I am talking to you today about payment plans and recovering of strata levies. Now, I’ve flagged this in an earlier post when I was talking about the reforms that had been brought in by the Strata Schemes Legislation Amendment Act.

Some of those changes have come in. The changes that I’m talking about, which affects levy recovery, they are going to come in very shortly. A little birdie says they will come in in October this year, October 2025.

So what are those changes and why am I concerned about those changes?

Well, I’m concerned about the changes because it allows, someone say, a wider variety of payment plans. At the moment, if an owner cannot afford to pay their levies, they can ask to enter into a payment plan for a period of 12 months. And the owners corporation has the power to refuse or to accept that payment plan.

Under the changes that are coming in, there’s going to be changes to sections 85 of the Strata Schemes Management Act (and also to the Community Land Management Act) effectively saying, yes, you can enter into a payment plan or agree to enter into a payment plan for overdue contributions. Those payment plans are limited to a period of 12 months, but further plans can be agreed to after that 12 months and that an owners corporation cannot pass a resolution to refuse to enter into payment plans plans generally for the payment of overdue invoices – overdue contributions, I should say, not invoices.

The part that really does concern me, though, is that an owners corporation can refuse to enter into a payment plan in particular circumstances, but it can only reasonably refuse payment plans.

Okay, so what that means is it cannot unreasonably refuse a payment plan. The Act it has set down that the regulations will prescribe what constitutes a reasonable refusal in relation to payment plans. The drafts that I have seen are extraordinarily light on on information and basically all that’s going to be required is a statement to say, I’m suffering from financial hardship and I can’t afford to pay my contributions. There will not necessarily be any requirement to establish any basis for your inability to pay or to ask for any reasons. And that’s that’s it. So the lot owner submits a request for a payment plan with a statement that “I’m unfinancial and I am going to suffer financial hardship and for that reason, I need to enter it into this payment plan”.

The issue I have with that, as I said, is that it cannot be unreasonably refused by an owners corporation, but the owners corporation is not going to necessarily have the power to ask for further information beyond the lot owners statement that they’re in financial hardship. It’s going to make it difficult for people (think strata committee members) or for owners corporations to refuse payment plans.

On that basis, what do I think the reasonable bases to refuse a payment plan?

Well, if the payment plan does not absolve the debt or – I shouldn’t say absolve, that’s the wrong word. If the payment plan does not mean that the debt will be paid within 12 months, I think that’s a reasonable reason to refuse the payment plan. If the person who wants the payment plan does not agree to keep their current levies current, so as levies fall due and payable during the term of the payment plan, they should be agreeing to pay those levies as well, and to keep those current.

Why? Because if they don’t, they’re just going to fall further and further into debt. The issue being then, is that the owners corporation’s not recovering the funds, it needs, and it is budgeted for to pay for the expenses it has budgeted for.

It’s going to be a wee bit more difficult if you’re going to, as an owners corporation, want to recover, your unpaid contributions and interest. You need to send a notice with giving them 30 days notice of the debt (and recovery action). And you cannot take action to recover an amount of unpaid contributions or interest if the amount is being dealt with under a payment plan and the payment plan is being complied with by the owner. If there’s a payment plan, remember, you can’t unreasonably refuse them and the person is keeping up to date with that payment plan. You can’t take action in a court or in NCATto recover that debt. Okay?

Payments by owners that are in arrears have to be applied in this order. First, to contributions in order of their due date. Secondly, to interest, and then to expenses of the owners corporation, in recovering contributions, but only if they have been subject to an order of the Tribunal or the court saying that the owner owes the owners corporation, it’s recovery expenses .

So a few things there to look out for. Owners corporations should also be taking any charges that they have put on the ledgers of the debtors account, the ledger account, and they should be taking those charges off. Why?

Because they are not payable unless there has been a court order saying that they are payable. So it’s going to be interesting. Let’s say six to 12 months while we work through this process, but owners corporations, you need to start getting prepared now. You need to consider if you’re going to have payment plans, what are the terms of the payment plans that your owners corporation would find to be reasonable. Remember, they cannot be unreasonably refused.

My suggestions are debt has to be paid within 12 months and the debtor, so the lot owner who’s in arrears, needs to keep all future levy’s current during the term of the payment plan.

Hopefully, this has helped everybody.

Please seek legal advice that is tailored to your situation because as always, the devil is in the details and these sort of things.

So thank you for your time.