The incentive of a discount for early payment is perfectly permissible and is used extensively in other jurisdictions, with the extent of the incentive often being set at a rate of 5 to 10 percent, although it can be up to 20 percent, which means that owners can achieve substantial savings by ensuring that they pay their levies early.

One of the first questions asked in this regard is how, from a financial perspective, the body corporate or homeowners’ association can afford to allow for discounts. The answer is that it must be budgeted for as a contingent expense, with the extent of the likely discounts being taken into account in setting the total amount the scheme needs to collect. If this sounds awfully complicated relax, it is not and in fact modern software used to manage sectional title bodies corporate and homeowners’ associations performs these calculations automatically.

If late levy payment is a problem in your scheme and you think that a positive incentive to prompt payment could reduce your levy arrears to acceptable proportions, give the issue of budgeting for early levy payment discounts serious consideration. It is certainly a very much more sensible commercial approach than having the body corporate or home owners’ association borrow money from a levy financier to make up the levy shortfall and cover its expenses.

Article reference: Volume 9, Issue 1, Page 1