Covid19 and options for Sectional Title levy relief

There are several actions that Sectional Title trustees can take now to ease the financial pressure on owners who may be struggling to pay their levies as well as their home loan instalments and other debt commitments.

That’s the word from Andrew Schaefer, MD of national property management company Trafalgar, which has already received hundreds of calls from owners seeking levy relief in the light of the Covid19 financial fallout.

“We are of course also getting many enquiries from trustees worried about the financial future of their Sectional Title schemes if owners just stop paying levies because they are not receiving any income during the lockdown and possibly afterwards as well.

“However, there are certain steps they can take and they should do so as quickly as possible. Meanwhile owners should not just unilaterally decide to stop paying levies but should communicate with their trustees or managing agent to find out if there are any measures already in place to assist them.”

The first thing that trustees can do, he says, is decide to allow owners to catch up their arrear levies by a certain date later in the year and not take any legal action against them for the arrears until that date, so there won’t be any extra costs added to what is owed. They just need to sign an amended handover resolution to this effect and instruct their managing agent accordingly

“Similarly, they can decide not to charge interest on the specified arrears and pass a trustee resolution to this effect. These decisions will then need to be communicated to the owners, and should of course only apply to those whose levy accounts were up to date before the lockdown.”

Secondly, says Schaefer, the trustees can decide to draw up and sign a new levy resolution which states that levies are only payable in certain months or periods of the financial year, and give owners a payment “holiday” now for April and possibly May.

“The amount outstanding for the skipped months can then be divided by the number of months remaining in the financial year and the levies for those months increased accordingly.

“They will need to take into account, though, that this will affect the scheme’s cashflow as they will still have expenses to cover, and make sure they have sufficient reserves to cover any shortfall.”  

Thirdly, he says, the trustees can draw up a new annual budget for the scheme with reduced expenses and thus reduced levies for the remainder of the financial year.

“However, this is really a ‘worst case’ scenario and not what we would recommend if it can be avoided, as it could easily result in the scheme falling behind on proper maintenance and other work needed to protect the value of owners’ investments.

“In addition, this measure can only by approved by ordinary resolution at a meeting of all the owners, so it would mostly likely take quite some time to implement.”

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