By Susan McCann
Most bodies corporate and owners corporations collect levy contributions three to four times per year, but in today’s economic climate many lot owners still find it increasingly difficult to pay their body corporate contributions by due date. In some circumstances the committee can approve reasonable payment plans to assist owners who find themselves in financial hardship. However, there are a number of pitfalls owners should be aware of before entering into a payment plan.
Firstly, you must be aware of that the discount given for on-time levy payments will not be applicable for owners on a payment plan. Secondly, overdue interests will also accrue over the course of the arrangement.
This may seem harsh; however committees cannot be seen to offer such arrangements without some consequence. Understandably, if such payment arrangements were allowed without these penalties, a lot more owners would request payment plans and ultimately create a cash flow problem for the body corporate.
Normally, a strata community has capacity to manage a small number of payment plans, but owners should carefully consider the financial penalties before applying. Most other creditors, such as a mortgagee, council, electricity supplier etc are in a much better position to allow payment plans or extensions because they are profit making groups, as opposed to bodies corporate and owners corporations who operate as not-for-profits.
So, why enter into a payment plan at all? What are the benefits? In reality, the only benefit is that a payment plan may give you some leeway to get on top of your contributions, for example if you are awaiting a tax return or lump sum payout of some sort. It will also ensure that the account does not become subject to costly legal action while you adhere to the agreed payments.
The overall lesson is that payment plans should be viewed as an absolute last resort by owners and not an easy option. Try some other less costly avenues first, before requesting a payment plan.