Strata Managers Beware: Postal service deeming provisions have changed!

Strata managers need to be aware of this key change if serving notices by post. Section 160 of the Evidence Act 1995 (NSW) has recently been amended. Instead of being deemed served four working days after the item has been posted, the item is now deemed served after seven working days after it has been posted.

This change reflects the new “priority” mail system established by Australia Post which meant regular mail now takes longer.

What does this mean? Essentially, if you are sending out any sort of notices by ordinary post you now need to allow seven working days for it to be deemed served.

Consider the following scenarios where a strata scheme still sends some or all meeting notices by ordinary post:

Strata committee meetings: 72 clear hours’ notice + 7 working days for postage of the notice
General meetings: 7 clear days’ notice + 7 working days for postage of the notice
Initial general meetings: 14 clear days’ notice + 7 working days for postage of the notice
General meetings

(where strata proposal is put to lot owners)

 

14 clear days’ notice + 7 working days for postage of the notice

Remember to allow for weekends and public holidays when setting your meeting schedules.

Important Changes to NSW Levy Recovery

The owners corporation is responsible for recovering unpaid contributions levied against owners. The Strata Schemes Management Act 2015 (the Act) came into force after 30 November 2016 and introduced some important changes to the levy recovery process.
Pursuant to section 86 of the Act the owners corporation must not commence legal proceedings to recover an unpaid contribution unless it has first provided the defaulting owner with 21 days notice of the action. When recovering contributions the owners corporation must firstly issue a letter of demand to the owner which takes into account the 21 day notice period.
A letter of demand must also include specific information which is prescribed by the Act and the Strata Schemes Management Regulations 2016 (the Regulations). The letter of demand must set out:

  1. The amount of the contribution, interest or expenses sought to be recovered;
  2. The recovery action proposed;
  3. The date the amount was due to be paid;
  4. Whether a payment plan may be entered into; and
  5. Any other action that may be taken to arrange for payment of the amount.

It is important that any letter of demand meets the requirements of the Act to avoid delays or unnecessary costs incurred by commencing proceeding without taking the important preliminary steps.
As part of the recent changes to NSW levy recovery the owners corporation can now commence proceedings in the NSW Civil and Administrative Tribunal or the in a Court of competent jurisdiction. The Tribunal cannot enforce judgments once orders have been made. Therefore if levy recovering proceedings are commenced in the Tribunal the order will have to be filed in the Court of competent jurisdiction before enforcement proceedings can commence. The jurisdiction of the Court is determined by the amount of the claim. Amounts up to $100,000 fall within the jurisdiction of the Local Court.

If you require any assistance or have any questions on the above, please contact Kerin Benson Lawyers on (02) 8706 7060 or email enquiries@kerinbensonlawyers.com.au 

Applications are open for the City of Sydney’s Smart Green Apartments Scheme

Strata schemes with a minimum of 50 lots or 6 stories have one month to apply to be part of the City of Sydney’s 2016 Smart Green Apartments scheme.

This scheme sees consultants review the energy and water usage in your building and to develop a plan to implement cost effective improvements to save money and create a greener building. According to the City of Sydney’s website the scheme has already provided benefits to several apartment buildings such as:

  • Aria, a 15-storey apartment building in Waterloo is now saving $61,000 each year through lighting upgrades and adjusting timers on car park exhaust fans.
  • Cleveland Mews, a 66-unit apartment building in Redfern is saving 82% in power use through lighting upgrades and installing heat pumps for the swimming pool and spa.

Applications are open for one month from today. See the link below for more details:

 

https://www.cityofsydney.nsw.gov.au/live/residents/sustainable-city-living/sustainable-apartments/smart-green-apartments

NSW FACT SHEET 4: Compulsory Strata Management: How does it affect you and your scheme?

The NSW Civil & Administrative Tribunal (NCAT) has the power under section 162 of the Strata Schemes Management Act 1996 to appoint a compulsory strata managing agent to a strata scheme. This power is also contained in section 237 of the Strata Schemes Management Act 2015 which, but for part 11, will commence on 30 November 2016. The sections, which differ slightly, empower the NCAT the make an order that either all, or part, of the functions* of the owners corporation are delegated to a strata manager.

What does compulsory strata management mean?

The simple answer is that it means different things in different cases. For instance, NCAT may order that all the functions of the owners corporation are to given to the strata management agent or, it may order that only a certain power or function is given to the strata managing agent.

If all the powers of the owners corporation are granted to the strata managing agent meetings of the owners corporation are not necessary. Instead of you, as a lot owner, voting to decide matters the strata manager will exercise their delegated power. If they do so they can raise levies, pass resolutions on behalf of the owners corporation and pass by-laws pursuant to section 65A. A by-law could also be passed pursuant to section 52 by the compulsory strata manager with the prior written consent of the lot owner granted the exclusive use right or special privilege.

On the other hand if the strata manager were only granted the powers of the executive committee, they could call meetings, pay invoices (unless restricted by the owners corporation at general meeting from doing so) and conduct the day to day affairs of the owners corporation but could not pass any resolutions that are required by the Act to be passed at general meeting. This would include resolutions to pass by-laws, to accept an easement or to alter or amend the common property.

Who can apply for an order for compulsory management?

A wide variety of people can obtain an order to appoint a compulsory strata manager and it need not be a lot owner. They are:

  • anyone with an interest or estate in a lot in the scheme or if the scheme is a leasehold scheme, a lease of a lot;
  • anyone who has obtained an order under the 1996 or the 2015 Act that has not been complied with and that imposed a duty on the owners corporation, executive/strata committee or an officer of the owners corporation
  • an authority that has the benefit of a positive covenant requiring a duty of the owners corporation; or
  • a judgment creditor to whom the owners corporation owes a judgement debt

When can the NCAT make an order for compulsory management?

Both the 1996 and 2015 Acts provide that the NCAT may make an order only if satisfied that:

(a)  the management of a strata scheme is not functioning or is not functioning satisfactorily, or

(b)  an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under the Act, or

(c)  an owners corporation has failed to perform one or more of its duties, or

(d)  an owners corporation owes a judgment debt.

What does “not functioning or is not functioning satisfactorily” mean?

CTTT (the predecessor to the NCAT) Member Moore in Coote v Sharpe, Wentzel & Owners Corporation Strata Plan 55434 stated that imposing a compulsory strata manager upon an owners corporation is a “draconian” measure as it “removes the democratic process which has been established” under the Act. As such, the reasons for a finding of dysfunction must be based on objective evidence. For this reason, these orders are not lightly granted.

Instances where an order for compulsory strata management has been made show that the following behaviour can be a sign of a failure to function when affects the management structure of the scheme:

–          a failure (or inability) to pass resolutions to raise contributions;

–          a continued failure to carry out required maintenance and repairs

–          a long history of acrimony, deep seated discord and or violence in the scheme;

–          the presence of a voting block, for instance, where divisions within the scheme see a 50/50 stand off meaning resolutions cannot be passed;

–          a pattern of strata managers terminating their appointment; and

–          a pattern of improper decisions making (i.e. decisions not made in accordance with the Act)

* The Dictionary to the Act defines “function” as “function includes a power, authority or duty.”

Any further questions about strata or community titles law?

Call Kerin Benson Lawyers on 02 8706 7060 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

NSW: the Strata Schemes Management Regulation 2016 has been released

The final version of the Strata Schemes Management Regulation 2016 (NSW) has now been released. It will soon be available on www.legislation.nsw.gov.au and Fair Trading’s website however it can also be found here: Strata-Schemes-Management-Regulation-2016

For more information keep an eye out for updates on our website and for Allison Benson’s next NSW Law Society Journal article.

Is bankruptcy the best option? Considerations when contemplating bankruptcy proceedings against debtor lot owners

Once judgment is obtained against a debtor lot owner, there are various enforcement options that may be canvassed by the owners corporation. If the judgment debt (which includes interest and legal costs) is $5,000 or more, one of the enforcement options open to owners corporations is issuing a bankruptcy notice with a view to commencing bankruptcy proceedings against the debtor lot owner.

If the debtor is subsequently made bankrupt and a trustee in bankruptcy is appointed, it is possible that the trustee in bankruptcy may sell the debtor’s property in order to raise funds to distribute to creditors.

As strata managers would be aware, payment of levies (and any other debt recorded on the section 109 certificate) are usually paid out of the proceeds of settlement when a lot owner sells his or her property. Otherwise, the new owner will be stuck with an obligation to pay the previous owner’s strata debts.

However, in the case of a sale of property by the trustee in bankruptcy, there is no guarantee that debts recorded on the section 109 certificate will be paid automatically from the proceeds of sale. This is because strata levies do not fall within the scope of priority payments (pursuant to section 109 of the Bankruptcy Act 1966) and are not classified as debts owed to a secured creditor. This means that a secured creditor, such as a caveator (someone who has lodged a caveat on the title of the debtor’s property) or a mortgagee (usually a bank) both take priority to owners corporations in order of payment.

Creditors may decide, by special resolution at a creditor’s meeting, that the owners corporation should be given preference in receiving payment above other creditors or classes of creditors, subject to certain statutory priorities set out in the Bankruptcy Act. However, there is no guarantee that the then-available settlement funds will be adequate to pay the whole of the debt owed to the owners corporation.

Prior to commencing bankruptcy proceedings, we recommend conducting a title search on the debtor’s property to ascertain if there are any mortgages and/or caveats registered on title. Further searches of any mortgages and caveats can then be undertaken at minimal cost, to provide the owners corporation with more information as to the pecuniary position of the debtor and to assist in the making of an informed choice when it comes to taking enforcement action.

To discuss bankruptcy proceedings or enforcement options available to owners corporations, please contact either:

Allison Benson –

Legal Practitioner Director
Ph: (02) 4032 7990
E: allison@kerinbensonlawyers.com.au

Angie Rennie – 

Lawyer
Ph: (02) 8706 7060
E: angie@kerinbensonlawyers.com.au

Attention to Detail: The Importance of Compliance when Issuing Creditor’s Statutory Demands

The recent cases of Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWCA 262 (Kisimul) and In the Matter of EGE Foods Australia Pty Ltd [2014] NSWSC 983 (EGE Foods) serve to emphasise the importance of compliance with legislative requirements when issuing and seeking to rely upon creditor’s statutory demands to wind up a company.

The Cases

In Kisimul, the petitioning creditor had failed to comply with s459E(3) of the Corporations Act 2001 (the Act) by failing to include a statement in the affidavits verifying two statutory demands that there was no genuine dispute about the debts owed by the debtor.

The creditor in EGE Foods had both failed to annex supporting documents to the statutory demand and to the affidavit verifying the statutory demand (though ultimately this was not found to be fatal to the creditor’s case) and had failed to comply with the requirements of the form prescribed by the Supreme Court (Corporations) Rules 1999 (NSW) by stating, in the affidavit verifying the statutory demand, that the debt was due and payable and that there was no genuine dispute as to the debt. The Court also discussed the issue of service, finding that ordinary pre-paid post encompassed registered post, and confirming the well-established precedent that the onus is on the debtor company to raise a doubt relating to the service of a statutory demand.

In both cases the statutory demands were set aside and the creditors not entitled to proceed with winding up proceedings against the debtor companies.

Reasons to Set Aside Statutory Demands

In Kisimul, the debtor company made an application pursuant to s459G of the Act to set aside the statutory demands on the basis that there was a genuine dispute in relation to the debts, that the debtor company had an offset claim, and for “some other reason” (being the lack of a proper affidavit) in accordance with s459J(1)(b) of the Act. The debtor company in EGE Foods had not made an application to set aside the statutory demand but the Court invoked its discretion under s467A of the Act to dismiss the winding up application that ensued.

In both cases, the Court found that whilst the absence of a properly completed affidavit did not of itself make the statutory demand defective, it prevented the creditor from relying upon the presumption of insolvency that automatically follows from non-compliance with a valid statutory demand. The creditors were thus prevented from winding up the debtor companies on the basis of non-compliance with the statutory demand.

To learn more about creditor’s statutory demands or legislative compliance with court documents, please contact either:

Allison Benson Angie Rennie
Legal Practitioner Director Lawyer
Ph: (02) 4032 7990 Ph: (02) 8706 7060
E: allison@kerinbensonlawyers.com.au E: angie@kerinbensonlawyers.com.au

Debt Collectors v Lawyers – When is it time to call in the Legal Professionals?

When seeking to recover unpaid strata levies, it is natural for Owners Corporations to want a fast result with as little money spent as possible. For this reason, many may shy away from enlisting the assistance of lawyers, fearing excessive legal fees will result in more money being spent than saved. But this is not always the case.

Acting as Agent

Debt collectors act as agents for Owners Corporations. This means that Owners Corporations may be held responsible for the actions of their debt collectors. If improper conduct is alleged against the debt collector, the Owners Corporation may quickly find itself embroiled in legal proceedings instigated by the very debtor from whom the Owners Corporation is trying to recover levies.

If Owners Corporations use debt collectors, they should carefully monitor the actions taken by the debt collectors and should familiarise themselves with the Debt Recovery Guidelines. (For more information on the Debt Recovery Guidelines, see our article “Debt Recovery Guidelines: Are You Following Appropriate Procedure?”)

Paying Double?

If debt collectors are unsuccessful in recovering the debt, the Owners Corporation may refer the matter to lawyers for legal action. This means the Owners Corporation may have to pay the debt collector fees for recovery attempts as well as paying legal fees to the lawyers.

Quite often a letter of demand from a law firm carries more weight than a similar letter issued by debt collectors. If lawyers are approached from the outset, Owners Corporations can save money by not paying two different businesses to do the same job. Whereas many debt collection agencies charge commission on successful levy recovery, Kerin Benson Lawyers does not, so Owners Corporations may end up with more money in their pocket.

It’s Complicated

If a debtor disputes a debt, puts forward a settlement offer or wants to negotiate a payment arrangement, there are certain pitfalls that must be avoided to ensure the interests of the Owners Corporation are properly protected. Kerin Benson Lawyers provide Owners Corporations with practical, sound advice on resolving disputes and recovering unpaid levies, ensuring Owners Corporations are legally protected in the event that the debtor defaults or challenges the debt.

For cost-effective, pragmatic advice on debt recovery, please contact:

Allison Benson Angie Rennie
Legal Practitioner Director Lawyer
Ph: (02) 4032 7990 Ph: 02 8706 7060
E: allison@kerinbensonlawyers.com.au E: angie@kerinbensonlawyers.com.au

 

New Debt Collection Guidelines: Are you following the appropriate procedure?

In July 2014, Australian Security Investments Commission (ASIC) and Australian Competition and Consumer Commission (ACCC) jointly released a publication entitled “Debt Collection Guideline: for collectors and creditors” (the Guideline). The Guideline is a timely reminder to Owners Corporations that certain practices must be observed when chasing a recalcitrant debtor for non-payment of levies.

Respect thy debtor

Owners Corporations should ensure any communications with the debtor regarding unpaid levies are made in an appropriate manner and with the debtor only. Owners Corporations should:

  • Ensure contact addresses (e.g. postal address, email address) are current prior to revealing details of the debt by that medium
  • Avoid contacting the debtor at the workplace where possible
  • Not broadcast details of the debt to tenants, co-workers, family or friends of the debtor
  • Respect the debtor and avoid using discriminatory, aggressive or threatening language and/or behaviour towards the debtor

Failure to respect the privacy of the debtor can constitute a breach of the Privacy Act and end up causing more problems for the Owners Corporation. Similarly, aggressive language or unnecessarily frequent contact may be perceived as harassment or coercion.

Documentation is key

Owners Corporations should maintain accurate records in respect of their correspondence and/or attempted communication with the debtor. Records should include:

  • The date, time and location of any discussion, including the names of people present
  • The exact terms of any payment proposal or settlement discussion
  • The date(s) and method(s) by which instalment payments are made to reduce the debt

Honesty is the best policy

Misleading a debtor as to the creditor’s intentions or misrepresenting the potential consequences of non-payment of a debt can constitute misleading conduct and breach Commonwealth consumer protection laws. If a lot owner disputes the debt, Owners Corporations should obtain legal advice.

For assistance with recovering unpaid levies or for more information on debt recovery services, please contact Kerin Benson Lawyers.

Newcastle Sydney
 Ph: (02) 4032 7990  Ph: 02 8706 7060
E: enquiries@kerinbensonlawyers.com.au E: enquiries@kerinbensonlawyers.com.au
Canberra  
 Ph: (02) 6140 7061
E: enquiries@kerinbensonlawyers.com.au