The document provides 5 recommendations for more effective strata levy collection: 1) Budget for inevitable unpaid levies and recovery costs; 2) Reward on-time payments and charge interest for late payments; 3) Develop a collection policy for consistency; 4) Pursue delinquent debtors swiftly through the legal process; 5) Operate within debt collection guidelines while firmly enforcing court judgements. Following these recommendations can help strata communities avoid being out-of-pocket on recovery costs and ensure levies are collected in a fair but stringent manner.

1. Effective levy recovery The StrataSessions webinar 28 October 2010

2. The new threat to strata finances in Australia

3. USA has the opposite problem but the results are the same View later at http://www.youtube.com/watch?v=NU-VLp3lYDc&feature=email

4. A quick quiz on this story to focus our discussions Why do people like Mr and Mrs Pilot pay their mortgage before their strata levies? What should the Pilot’s have done when they decided to pay the mortgage first? What is the downside to the lawyer calling and demanding a cheque by 5.00 pm to stop foreclosure?

5. On loosing the debtors war on fee recovery Owners are fighting back against strata management and legal fees billed to owners ledger without legal authority. Courts have backed the owners in NSW (Dimitriou), QLD (Liberty) and VIC. Only VIC has legislated for greater cost recovery effective 1 January 2011.

6. 5 suggestions for more effective levy recovery

7. Recommendation 1 - Budget for the inevitable

12. Maintenance costs increase when preventative measures slip

13. Personal legal liability risk of owners increases

14. Convince owners to increase the levy budgetSell

16. Recommendation 2 – Reward good behaviour and punish bad “When changing bad habits and driving peak performance, its handy to have both a carrot and a stick. In strata levy collection, the carrot is the discount and the stick is interest.” Michael Teys “The strata guide to levy collection without being out of pocket 2010”

17. The carrot …

18. The stick … An OC at an AGM strikes a levy of $4,000 to be paid in four installments of $1,000 each due on the first day on the following months of October, January, April and July. An owner pays the October levy on 7 December. The interest payable is $91.66 calculated as $1,000 x 10% x 11/12 = $91.66. In NSW calculate interest from date due plus one month i.e. the first month is interest free

19. Recommendation 3 – Develop a collection policy to hide behind De-personalises unpleasant consequences of delinquencies Educates owners about responsibilities and consequences Provides a roadmap to guide executive committee and strata manager Answers that the committee is proceeding in a selective or discriminatory way Protects committees and managers against claims of negligence

21. Recommendation 4 – Stop the dance of the delinquent debtor The owner is late in paying, The strata manager issues an arrears notice (and another, and another), The committee resolves to get tough, so they instruct the strata manager to write a letter, Then the solicitor gets involved, and writes another letter (same stick – different dog!), Another quarter goes by and a new set of levies comes around, go back to the beginning and repeat until everyone is exhausted and the costs of collection are more than the levies, then pay, then start the dance again.

22. When you have had enough of the dance, do this … Be consistent with your collection policy Be seen to be consistent with your collection policy Do exactly what the policy says when the policy says Don’t do things that are not in the policy Once solicitors are involved, let them do the(barking)

23. Recommendation 5 – Be firm but fair in collections 5.1 Operate within ASIC debt collection guideline Privacy laws apply to debt collectors and solicitors Statements that additional fees or charges will be added where there is no contractual right to add these will constitute misleading and deceptive conduct under fair trading and trade practices laws

24. Recommendation 5 – Be firm but fair in collections 5.2 Move to judgement swiftly to recover costs Court assessed costs are now the only costs recoverable These costs plus court awarded interest bridge the gap between actual costs and recoverable costs

25. Recommendation 5 – Be firm but fair in collections 5.3 Enforce judgements by forcing sale of apartments For judgements over $5,000 including court assessed costs bankruptcy proceedings are most effective For judgements under $5,000 warrants of execution against property are more difficult but get the same result Other forms of enforcement are useless

26. Today’s 5 suggestions for more effective levy recovery Budget for the inevitable. Reward good behaviour and punish bad. Develop a collection policy to hide behind. Stop the dance of the delinquent debtor. Be firm but fair in collections.

27. Learn more with Teys Lawyers www.teyslawyers/facebook for daily updates on advice given Enroll for next StrataSession webinar on building defect rectification Read our next StrataGuide– “The strata guide to levy collection without being out of pocket” due out 1 November 2010.

28. Teys Lawyers Pty Ltd Suite 73 Lower Deck Jones Bay Wharf 19-32 Pirrama Road Pyrmont NSW 2009 p: (02) 9562 6500 f: (02) 9562 6555 w: www.teyslawyers.com.au e: service@teyslawyers.com.au