A "Strata" is a form of real property ownership where self contained units have shared common areas on a single parcel of land. In order to 'manage' those common areas and to ensure that owners' properly contribute to maintenance and insurance, a corporation is established which functions to ensure that the rules (Bye-Laws) of the Strata are implemented and complied with. The corporation is usually funded by way of monthly Strata fees paid by each owner which collectively, fund the duties and responsibilities of the Strata.
Unfortunately, not all proprietors pay their apportioned share of strata fees. Not only may this impact on the ability of the Strata to meet its own obligations under the byelaws but also leaves the burden unfairly on neighbours.
property law in the Cayman Islands
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The 'four pillars' of Strata law
The collection of strata fees involve all four pillars of the strata corporation:
1. the Strata Titles Registration Law (2013 Revision) (the "Law");
2. the Strata Titles Registration Regulations (2006 Revision);
3. the registered Bye-Laws of the Strata; and,
4. the registered strata plan.
The Strata Corporation is akin to a company; it is capable of bringing legal proceedings and equally, can be sued. The Strata Law sets out the respective duties and rights of both the Corporation and the proprietors, and is the starting point for any analysis of such obligations.
Section 6 of the Law (under Part iii) sets out the powers and duties of a corporation which may be summarised as follows:
(a) insure strata buildings to their replacement value and pay material premiums;
(b) maintain the common property in a state of good and serviceable repair;
(c) to establish a fund for administrative expenses and the general control, management and discharge of associated expenditure;
(d) determine the amount of respective strata fees by way of an assessment in accordance with the unit entitlement of each proprietor;
(e) to recover by way of legal proceedings if necessary, any such outstanding strata fees from a proprietor.
Strata Enforcement means the duties, rights and remedies in relation to the collection of monies owed to a Strata Corporation
recovering unpaid strata fees
The Strata Bye-Laws
The Strata Bye-Laws act in conjunction with the Strata Law. These are a further layer of rules which are comprehensive and cover matters such as:
3. indemnities to those serving on the Executive Committee;
4. the role of the Executive Committee;
5. the appointment of the strata corporation as receiver of income
6. rental pools; and,
7. the ability to make rules and regulations in relation to the common property.
In short, the primary function of the bylaws is to set out the details of the power to control, manage and administer the strata corporation.
In reality, the Bye-Laws are the most critical and practical tool in relation to strata enforcement. They should be drafted to ensure that the strata corporation has all the necessary powers to collect delinquent accounts, to appoint receivers and to add interest and legal fees to a proprietor’s strata account for any collection efforts.
If a proprietor is in breach of his or her obligation to pay assessments or otherwise in breach of his or her obligations, the strata corporation must first consider sending a demand letter; this will usually prompt payment by the offending proprietor.
If the demand letter is not complied with, the strata corporation can issue a receivership notice if the property is generating income and/or sue in the Summary Court or the Grand Court to ensure compliance with the Strata Law and the bylaws and recover the debt owing to the strata corporation.
Most legal actions occur in respect of unpaid strata fees but can include non-compliance with bylaws on issues ranging from pet problems to insurance disputes and the proper use of common property.
The remedies at court to collect funds owed to the strata corporation include:
(a) obtaining judgment and/or a receivership order;
(b) conducting a judgment debtor examination to determine the debtor’s assets and ability to pay;
(c) issuing an application for an attachment of earnings order to collect the debt from the proprietor’s employer if he or she is working; or.
(d) obtaining a charging order to sell the property to satisfy the debt.
Should the Cayman Islands adopt a similar provision to the UK's Section 36 Administration of Justice Act 1970?
For the overwhelming majority of people, buying their own home and using mortgage finance facilities is the single biggest financial commitment during their lifetime. As such a loan is generally re-payable over a long period, it is not surprising that for some people, their circumstances may change over time - whether it be through ill-heath, unemployment, divorce etc - which causes them to have difficulties in making the repayments due under the terms of their mortgage.
Arrears in mortgage account payments are likely to lead to foreclosure unless the Bank has been quickly informed of any financial difficulties and has come to an arrangement with the defaulting borrower. It should be noted that once a borrower falls into arrears, the Bank’s right to foreclosure usually crystallises and remains exercisable even upon any subsequent repayment of the arrears.
Although the Chief Justice issued Grand Court Practice Directions in 2012 and 2014 in respect of the necessary procedures to be applied in foreclosure proceedings and the methods to be adopted by Banks in selling ‘foreclosed property’, the reality is that there is little in the court’s discretion to prevent a Bank’s ‘right to sale’ where those procedures have been followed. Consequently, where there are genuine personal circumstances, already anxious homeowners will have the additional worry and concern of losing their homes.
In the UK, it was recognised that repossession of one’s home should be a last resort; wherever possible, lenders should be open to the idea of helping borrowers in temporary financial difficulty. Equally, it was acknowledged that lenders had a contractual right to enforce their security otherwise a stricter application of lending criteria would be applied which would affect the ability of prospective homeowners to obtain funding.
As a result, the UK enacted Section 36 of the Administration of Justice Act 1970 (as amended). In essence, this section provided the court with a range of statutory powers including the ability to suspend orders for possession and stay execution of warrants of possession. The section is most frequently relied upon by borrowers who may be in arrears with their mortgage instalments but can reasonably offer to pay off those arrears over a period of time; in appropriate circumstances, the Court would be invited to suspend any order for possession on the basis of ‘terms’ as opposed to the defaulter suffering an immediate order for possession.
To succeed in such an application, it must appear to the Court - based upon reliable evidence - that if it suspends the order on terms, the borrower is likely, within a reasonable period, to pay the balance on the arrears and correspondingly, the mortgage instalments as they fall due.
In practice, the English Courts will often gauge a reasonable period for payment of arrears over the balance of the mortgage term. However, the power to stay or suspend enforcement of an order for possession under Section 36 is cautiously exercised; each case will turn on its own facts and circumstances.
A typical Order may be: Possession in 28 days suspended on payment of:
(a) the current monthly instalments; and,
(b) a monthly ordered amount paid towards the arrears going forward.
Such an Order serves the purpose of the Legislation; firstly, it affords the appropriate borrower with an opportunity to keep their home and pay off any mortgage arrears; and, secondly, provides a degree of protection to the lender: if the arrears are cleared but there is subsequent default by the borrower, they will be in immediate breach of part (a) of the suspended order, and the lender should be able to proceed straight to enforcement in the normal way.
What must be acknowledged, is that there is a distinction between the provisions of the indigenous Registered Land Law and that of the position in the UK; in Cayman, the Bank has a right to sell the property as opposed to taking possession of it. Consequently, any consideration of introducing similar Section 36 type legislation to Cayman would require some modification. However, extending the discretion of Judges in the Grand Court may assist those defaulting borrowers in circumstances where they could demonstrate a likelihood in paying off their arrears over a reasonable period of time and, being capable of discharging their remaining borrowing in a conventional manner. It would not help everybody but for some, it may provide timely relief.