Anyone expecting genuine improvement to notorious strata debt collection practices will be disappointed in the amendments to the Strata Schemes Management Act introduced to NSW parliament today, says the Financial Rights Legal Centre.
“Once again, the needs of people struggling to pay their strata levies have come second to aggressive debt collection – a problem we have been raising with Fair Trading for over a decade now”
Karen Cox, CEO of Financial Rights Legal Centre.
Strata debt collection is notoriously quick and aggressive, because – unlike credit or essential service providers – there are simply no consumer protections that can be invoked to allow a person to get help and consider their options without the addition of even more fees and charges. The quick addition of large legal costs very quickly saddles people with large debts well in excess of their original levy arrears -, and those “debts” are then used to institute court proceedings which puts people at risk of forced bankruptcy.
“The reality is that sometimes people can’t pay or need extra time to pay their levies. This legislation green lights the continuation of debt collection and legal cost loading even while a payment plan request is being considered – even though pausing collection and restricting the addition of costs is standard practice for most other sectors of the economy. It beggars belief that this has been allowed to continue” she said.
Financial Counselling Australia says that a whopping 16% of forced bankruptcy proceedings in NSW relate to strata arrears. Our financial counsellors attend court to provide information to people without legal representation. Recently, over a third of people facing bankruptcy proceedings are related to strata debt. “We understand that strata levies ultimately have to be paid, and some people will need to sell their unit, but diverting the limited funds of owners in hardship” to pay legal fees and trustee in bankruptcy costs does not help struggling owners or their neighbouring unit holders.”
“The most common story we hear from people is that they tried to negotiate with their owners’ corporation or strata manager and were either ignored, or told they just had to pay. This legislation does nothing to address that failure to engage with genuine disputes”.
The legislative amendment explicitly allows for a payment plan to be reasonably refused although lot owners will be able to appeal this decision, but debt collection will not be paused in the meantime, allowing costs to continue to mount. Rules around payment plans will be developed at a later date in separate regulations. Given that the meagre protections lot owners in arrears could gain from these reforms hinge on having their payment plan accepted, it is disappointing that the legislation focuses on the ability to refuse a plan.
We are pleased to see that the proposed reforms will stop the insidious current practice of legal fees being prioritised when a lot owner makes a payment toward their arrears. This leaves overdue levies technically in arrears, and subject to further debt collection enforcement activity and costs. Another reform allowing 9 additional days before recovery action can commence would be more effective if it also obliged schemes to prompt owners to pay or reach out for help.
Ultimately, strata lot owners experiencing hardship remain without any real options to put pause to the addition of fees and charges while they seek legal or financial counselling services. NSW strata lot owners who are in financial distress have been let down by this timid legislative reform, and we will continue to advocate for effective reforms.
Lot owners in arrears are urged to seek urgent advice on their arrears. Visit: Strata Levies - National Debt Helpline or call the National Debt Helpline on 1800 007 007.
Contact
For further information contact media@financialrights.org.au
About Financial Rights
The Financial Rights Legal Centre is a community legal centre that specialises in helping consumers understand and enforce their financial rights with consumer financial products and services, especially low income and otherwise marginalised or vulnerable consumers. We provide free and independent financial counselling, legal advice and representation to individuals through our following channels:
- Credit and Debt Legal Advice Line 1800 844 949 for those needing legal advice in NSW;
- National Debt Helpline 1800 007 007 – for people needing to talk to a financial counsellor (please note this line is answered by a number of different services around Australia, Financial Rights is one of those services);
- Financial Rights Legal Centre - https://financialrights.org.au/;
- Mob Strong Debt Help 1800 808 488 – our national service for Aboriginal and Torres Strait Islander callers https://financialrights.org.au/mob-strong-debt-help/;
- Insurance Law Service 1300 663 464 – our national service focusing on problems with insurance or debts to insurers.
