Firstly, there are 2 fees or charges being discussed here:
- The interest charged by the Owners Corporation to a Lot Owner who hasn’t paid their Levy Notice owed to the Owners Corporation after having been given sufficient time and notice to do so.
- The administrative fee for sending payment reminder notice(s) charged by the Owners Corporation Manager.
Penalty interest on arrears
Section 29 of the Owners Corporations Act 2006 states that:
- An owners corporation may charge interest on any amount payable by a lot owner to the owners corporation that is still outstanding after the due date for payment.
- The rate of interest charged must not exceed the maximum rate of interest payable under the Penalty Interest Rates Act 1983.
- The owners corporation may waive the payment of interest in a particular case
Per the above, Owners Corporations in Victoria have the ability to charge penalty interest to Lot Owners for levies still owed and unpaid after the due date.
The penalty interest rate (as set by the Attorney-General pursuant to the Penalty Interest Rate Act 1983) has remained unchanged since 1 February 2017 and it currently sits at 10% per annum. More information about the penalty rate can be here and here.
This fee or charge (penalty interest) goes to and belongs to the Owners Corporation.
Administrative fees and charges for sending a payment reminder notices
Owners Corporations will typically employ the professional services of an Owners Corporation Management Company (or Manager) because there can be a lot of work that needs to be done in the running and operating of an Owners Corporation.
The document that governs the relation between the Owners Corporation and the Owners Corporation Management Company is the management agreement or contract of appointment. This document spells out the services and additional services that the management company performs – with additional fees and charges being applicable for some of the additional services.
Each individual Owners Corporation Management Company will have their own contract of appointment with its own set of fine print.
The below ‘Sample Lengthy Owners Corporation Management Agreement’, we can see that there defined charges for OCM to send administrative follow-up notice(s) for unpaid levies:
This fee or charge goes to and belongs to the Owners Corporation Management Company.
Fair Shake of the Sauce Bottle
- Owners Corporations and Committees in considering the matters of unpaid levies and penalty interest should, generally, try to strike a balance between the Lot Owner’s individual circumstances and the necessity that the Owners Corporation collects levies.
- Penalty interest is intended to compensate the Owners Corporation for unpaid levies – and hopefully it acts as a disincentive for Lot Owners when it comes to delaying payment of levies to the Owners Corporation.
- Administrative fees for follow-up reminder notice(s) can also potentially act as a disincentive Lot Owners when it comes to delaying payment of levies to the Owners Corporation.
- Owners Corporation Management Companies are service professional and should be paid additional work that they perform, including the chasing up of unpaid and overdue levies.
- Whether certain administrative fees for sending follow-up reminder notices are fair and reasonable will be adjudged by the Committee (or should be) when it comes appointing or changing owners corporation management companies – ‘the devil’s in the detail’ as they say.
- Probably, however, the harshest critique of whether certain administrative fees are reasonable or not will be adjudged by those on the receiving end of such charges.
- We have had a Committee inform us of $500 and $1,000 ‘administrative’ fees that their management company slugs owners with for sending such levy reminder notices and also breach notices… which of course – as mentioned above – goes into the owners corporation manager’s pocket.