Can Owners Withhold Levy Payments Because They Are Unhappy?
Can Owners Withhold Levy Payments Because They Are Unhappy? Understanding Your Legal Obligations as a Sectional Title Owner
Andre Tap
6/25/20265 min read
Can Owners Withhold Levy Payments Because They Are Unhappy? Understanding Your Legal Obligations as a Sectional Title Owner
The Short Answer: No
One of the most common misconceptions in sectional title schemes is that an owner may stop paying levies if they are unhappy with the Body Corporate, Trustees, Managing Agent, maintenance standards, or a decision that has been made.
While frustrations and disputes do arise from time to time, withholding levy payments is generally not a lawful solution and can have serious consequences for both the owner and the Body Corporate.
The obligation to pay levies and the right to raise concerns or disputes are two completely separate matters under the Sectional Titles framework.
Why Levies Are Essential
Levies are the primary source of income for a Body Corporate and are used to fund the day-to-day operation and maintenance of the scheme.
These expenses typically include:
Municipal services and utilities.
Insurance premiums.
Security services.
Cleaning and gardening services.
Common property maintenance and repairs.
Professional services.
Administrative expenses.
Reserve funds for future maintenance projects.
Every owner benefits from these services and therefore shares in the responsibility of funding them.
When owners withhold levies, the Body Corporate still remains responsible for paying these expenses, which can place financial pressure on the entire scheme and ultimately affect all owners.
Common Reasons Owners Withhold Levies
Owners sometimes stop paying levies because they believe:
Maintenance issues have not been addressed.
Trustees are not fulfilling their responsibilities.
The Managing Agent is providing poor service.
They disagree with a special levy.
They are involved in a dispute with the Body Corporate.
Rules are not being enforced consistently.
They believe the Body Corporate owes them money or explanations.
While these concerns may be valid and deserve attention, they do not remove an owner's legal obligation to pay levies when due.
What Does the Law Say?
The Sectional Titles Act and Management Rules provide clear guidance regarding the collection and payment of levies.
Management Rule 28 – Collection of Contributions
Management Rule 28 places an obligation on Trustees to raise and collect levies from owners.
The Rule states:
"The trustees must levy contributions on the owners of sections concerned and must collect the contributions from the owners."
This means that Trustees are legally required to ensure that levies are collected and that arrear accounts are addressed.
Management Rule 29 – Liability to Pay Contributions
Management Rule 29 provides that owners are liable to contribute towards the expenses of the Body Corporate.
The Rule empowers Trustees to determine and collect ordinary levies and, where necessary, special levies to meet the financial obligations of the scheme.
The obligation to pay levies therefore exists regardless of whether an owner is involved in a dispute with the Body Corporate.
Consequences of Withholding Levies
Many owners are unaware that the legislation specifically provides remedies to the Body Corporate when levies are not paid.
Interest on Arrear Levies
Management Rule 29(6) provides that:
"The trustees are entitled to charge interest on arrear amounts at the rate determined by the trustees from time to time."
This means that unpaid levies may continue to increase over time.
Legal Costs
Management Rule 29(5) provides that:
"An owner of a section is liable for and must pay all legal costs, including costs as between attorney and client, collection commission, expenses and charges incurred by the body corporate relating to the recovery of arrear levies..."
In practical terms, this means that owners who withhold levies may become liable not only for the outstanding levies but also for collection costs, legal fees, and associated expenses.
Furthermore, Rule 73 provides that owners may be held liable for legal costs incurred by the Body Corporate in obtaining compliance with the owner's obligations under the Act and Rules.
Loss of Voting Rights
Many owners are surprised to learn that arrears can affect their ability to participate in Body Corporate decisions.
Management Rule 62(1)(a) states that an owner is not entitled to vote at a general meeting if:
"all contributions payable by the owner in respect of his or her section and his or her undivided share in the common property have not been duly paid."
This means that owners who are in arrears may lose their voting rights until their accounts are brought up to date.
Delays When Selling Your Property
Outstanding levies can also create complications when selling a unit.
A levy clearance certificate is generally required before transfer can take place, and arrear amounts, interest, and legal costs must usually be settled before transfer can proceed.
This can result in unexpected delays and additional costs during the sale process.
The Impact on the Entire Community
When one owner stops paying levies, the financial burden does not disappear.
The Body Corporate must still pay:
Municipal accounts.
Insurance premiums.
Security providers.
Maintenance contractors.
Cleaning and gardening services.
Professional service providers.
As a result, levy arrears can negatively impact:
Cash flow.
Maintenance projects.
Service delivery.
Reserve funds.
Future budgets.
Ultimately, compliant owners often end up carrying the financial burden created by those who fail to meet their obligations.
What Should Owners Do Instead?
If an owner is dissatisfied with any aspect of the scheme, there are appropriate channels available to address those concerns.
These may include:
Communicate with the Trustees
Trustees are elected to make decisions on behalf of the Body Corporate and should be the first point of engagement regarding concerns.
Submit a Formal Written Complaint
A written complaint allows the matter to be properly recorded, investigated, and addressed.
Attend Meetings
Annual General Meetings and Special General Meetings provide owners with opportunities to raise concerns, ask questions, and participate in decision-making.
Request Information
Owners are entitled to request relevant information relating to the affairs of the Body Corporate through the proper channels.
Propose Resolutions
Where appropriate, owners may submit proposals for consideration by Trustees or owners at a general meeting.
The correct approach is to pursue the issue while continuing to meet levy obligations.
The Role of the Managing Agent
A common misconception is that the Managing Agent is responsible for every issue that arises within a scheme.
In reality, Managing Agents act on instructions and authority granted by the Trustees and the Body Corporate.
A Managing Agent cannot:
Approve expenditure without authority.
Authorise special projects independently.
Make governance decisions.
Override Trustee resolutions.
Change budgets without approval.
Their role is to administer, advise, coordinate, and implement decisions made by the Trustees and Body Corporate.
How Chili Property Management Promotes Transparency
At Chili Property Management, we believe that informed Trustees and owners create stronger communities.
To support effective governance and decision-making, we provide:
Monthly Financial Reporting
Trustees receive comprehensive monthly financial reports detailing:
Levy collections.
Arrear accounts.
Cash flow position.
Outstanding supplier invoices.
Budget performance.
Financial commitments.
This enables Trustees to make informed decisions regarding the financial management of the scheme.
24/7 Online Portal Access
Trustees have continuous access to our online management platform, providing real-time visibility of:
Financial information.
Outstanding supplier invoices.
Maintenance requests.
Work orders and progress updates.
Levy accounts.
Scheme documentation.
Information is available at any time, allowing Trustees to monitor matters between meetings and make timely decisions.
Professional Guidance and Support
Our team provides practical guidance, administrative support, and professional recommendations to assist Trustees in fulfilling their responsibilities and managing their schemes effectively.
Final Thoughts
Living in a sectional title scheme involves both rights and responsibilities.
Owners have every right to question decisions, raise concerns, request accountability, and seek solutions when problems arise. However, withholding levy payments is not the correct remedy and may expose the owner to interest charges, legal costs, recovery action, loss of voting rights, and delays when selling their property.
The law is clear: levy obligations remain payable regardless of disputes or dissatisfaction.
The most successful Body Corporates are those where owners, Trustees, and Managing Agents work together constructively, communicate openly, and use the appropriate channels to resolve concerns while ensuring the financial stability and long-term sustainability of the community.