Special Levy Disputes

Every lot owner in a strata complex is required to pay strata levies. A strata levy is a mandatory payment made to the owners corporation to cover the costs of maintaining and running the strata property.

In addition to a strata levy, the owners corporation may charge a one-time ‘special levy’ to cover unexpected costs not covered by the regular budget. This can include upgrades like a new pool, or emergency repairs for burst pipes or electrical issues.  

A special levy is mandatory once it has been raised at the owners corporation general meeting and receives a majority vote. There are limited circumstances in which a unit owner may refuse to pay a special levy. We’ll explore special levy disputes in strata schemes below and discuss ways to address them, including valid grounds for refusing to pay levies. 

Understanding Special Levies

A special levy is a type of fee that property owners must pay in addition to their regular strata fees. 

Unlike a strata levy, special levies aren’t used for regular maintenance or operating expenses. They are used when there are insufficient funds in the administrative or capital works funds to cover unexpected or major costs. 

An owners corporation may require a special levy for the following:

• Emergency repairs: Addressing urgent issues like electrical faults, equipment malfunctions, or burst water pipes.
• Major upgrades: Installing new facilities such as a pool or gym. 
• Renovations: Overhauling common areas and shared facilities to improve function and aesthetics. 
• Improving safety: Such as fire safety upgrades, fixing elevators, etc. 
• Legal fees: Covering fees associated with legal disputes or legal compliance. 

Under strata by-laws, special levies are raised at the owners corporation general meeting and require a majority vote to pass the motion. If passed, the levy is calculated based on the unit entitlement of each owner. 

All lot owners have the right to voice their opinions in the general meeting and are entitled to dispute the special levy if they believe it to be unreasonable or excessive. 

Legal Grounds for Refusing to Pay

Valid Disputes

Lot owners may encounter special levy disputes in the strata complex, with some even refusing to pay the strata levy. 

There are only a couple of valid reasons for refusing a strata special levy payment. These include:

Non-compliance with strata rules: If the strata levy was not raised in accordance with strata by-laws, lot owners may have the right to dispute. For example, if the body corporate failed to conduct a general meeting or did not secure a majority vote before imposing the levy. 

Incorrect charges: Lot owners can dispute a special levy if they believe the fees have been miscalculated or are not fairly allocated based on unit entitlements. 

Financial hardship: While financial hardship is not legal grounds to refuse special levies, lot owners do have the right to ask for options like a payment plan or temporary deferral. 

It’s important to understand that refusing to pay a special levy that has been approved by a majority vote can lead to penalties and legal action from the body corporate or owners corporation.

Legal Risks of Refusal 

It is a lot owner’s legal obligation to pay strata levies. Therefore, if an owner refuses to pay their levies, the owners corporation can take legal action. The legal risks of refusing a strata levy or special levy include:

• Penalties and fines: The owners corporation can initiate court action to recover any unpaid debts and may add a debt recovery fee to the accumulated interest. 
• Loss of voting rights: Lot owners may lose their right to vote at owners corporation meetings and be excluded from sitting on the strata committee. 
• Penalty interest: The owners corporation can charge a penalty interest on levies not paid by the due date. This rate typically sits at 10% per annum.
• Loss of standing as a financial member: Lot owners may become a ‘non-financial’ member, limiting their ability to participate in any decisions regarding the management and maintenance of the strata property. 

The laws about strata levies and debt collection vary in each state and territory. If you wish to dispute your levy payment, it’s important to be aware of your rights and obligations as a lot owner and ensure any dispute is resolved in compliance with your strata laws. 

How to Address Disputes

Steps to Dispute a Special Levy

1. Carefully review the levy

Review the levy details to ensure it complies with strata by-laws and legislation. Check for any errors, miscalculations, or inadequate notice/lack of prior meeting approval.

2. Seek an informal resolution

Contact the owners corporation or body corporate to discuss the dispute. Many special levy disputes can be resolved informally without the need for further escalation. For example, if you’re struggling to pay the levy you may negotiate a formal repayment arrangement. 

3. Submit a formal notice and evidence

If the dispute is still unresolved, you can submit a written notice to the owners corporation. In your letter, you should include the reasons for your dispute along with any relevant evidence to support your claims. 

4. Take legal action

If the dispute remains unresolved despite informal and formal notice, you may take the matter to a tribunal or court. Some states and territories also offer mediation services where a moderator helps both parties find a solution.

Mediation and Resolution Processes

When facing a special levy dispute or strata levy disagreement, mediation and external legal advisories can offer effective solutions. 

An external mediator helps both parties reach a mutually agreeable solution. The strata manager should have access to strata mediation tips and local mediation services to help resolve the dispute efficiently.  

Another option in the resolution process is to seek legal advice. This may be an option if other resolution efforts fail or if the lot owner believes their rights are being infringed. 

State-Specific Guidelines

Here is a guide on how special levy disputes are handled across key states:

• Queensland (QLD)

Under the Body Corporate and Community Management Act 1997, special levy disputes in QLD can be resolved through voting, challenging the levy with the Commissioner's Office, adjudication, or applying for QCAT. Mediation and negotiation are also options to achieve a solution.

• New South Wales (NSW)

The Strata Schemes Management Act 2015 outlines that special levies can be resolved through the NSW Civil and Administrative Tribunal (NCAT). To challenge a levy, lot owners must provide evidence proving the levy is unreasonable or excessive. If unsuccessful, the lot owner may be required to cover costs. It's generally better to attempt resolution within the owners' corporation first before escalating to NCAT.

• Western Australia (WA)

Strata levy disputes in WA fall under the Strata Titles Act 1985. In the 2018 amendments to the Act, the State Administrative Tribunal (SAT) was named as the sole forum for the resolution of strata disputes.

• Victoria (VIC)

The Owners Corporations Amendment Act 2021 governs strata levy disputes in Victoria. Special levy disputes can be resolved through the owners corporation's internal complaints process, the Dispute Settlement Centre of Victoria (DSCV), or by applying to the Victorian Civil and Administrative Tribunal (VCAT) if the matter remains unresolved. 

• South Australia (SA)

The South Australian Strata Titles Act 1988 provides guidance on special levy disputes. The first step in the resolution process is to try and reach a solution through negotiation or mediation. If either fails, an application to the Magistrates Court may be required to decide the matter. 

• Tasmania (TAS)

The current Tasmanian law regulating strata disputes is the Strata Titles Act 1998. Resolution can be achieved through the body corporate’s internal complaints process. While most disputes can be resolved through communication, the Act appoints the Recorder of Titles to determine strata disputes. 

• Australian Capital Territory (ACT)

The Unit Titles (Management) Act 2011 and the Unit Titles (Management) Regulation 2011 provide guidelines for strata disputes in the ACT. Special levy disputes can be resolved through the ACT Civil and Administrative Tribunal (ACAT) if informal and formal notices fail to achieve a resolution. 

Tips for Owners

Documenting Disputes Effectively

Owners should maintain a ‘paper trail’ of all correspondence relating to strata disputes. 

Note down times and dates of phone calls and keep copies of correspondence with the owners corporation including letters, emails, levy notices, financial documents like receipts, and any evidence relating to your claim including photos and videos. 

This will help to strengthen your case, provide detailed evidence of your claims, and ensure transparency throughout the resolution process.

Maintaining Compliance While Disputing

To avoid legal penalties during a dispute, continue paying what you can afford including any undisputed levies or fees while the dispute is being resolved. 

Maintain open lines of communication with the owners corporation and ensure you follow the formal dispute procedures as outlined in your state’s strata title and strata by-laws. 

If you have any concerns about strata disputes and compliance, contact your strata manager to discuss these issues. 

Contact Your Strata Professional for Assistance

Special levies are essential for ensuring the proper maintenance and management of a strata property. In some instances, a special levy may be disputed if a lot owner believes it is unreasonable or non-compliant with strata regulations.

Before initiating a dispute, owners should familiarise themselves with state-specific strata laws and seek professional guidance whenever possible. 

Explore our resources to navigate strata laws and best practices.