Negative Interest on a Lot Owner Ledger
Negative interest on Owner Cards is caused by -
- grace days or interest free periods being changed to a greater period
- interest rates on overdue levies being decreased without using the 'Adjust Levy Interest Rate' button
Grace Days / Interest free period
From time to time, a change to grace days or interest free period may be voted by an Owners Corporation. Changing these figures for any other reason is not recommended.
If you go to the Corp screen > financial tab > and simply change the grace days or interest free period, this will affect levies due from previous due dates. Owners who have debt recovery in place due to overdue levies, will gain from an increase in grace days from 34 to 40 for example. They will gain because the interest due and owing will change.
Changing grace days or interest free period can result in an owner showing negative interest if they have been paying interest.
We suggest you review this article regarding interest rate changes, Interest Rate Changes - WA Legislation Update 1 May 2020 | MRI Knowledgebase (rockend.com) as it will also guide you to checking reports for interest accrued prior to a change of number of days and then checking the report after the number of days change. You can then process miscellaneous invoices to Lot Owners who interest has reduced or provide Credit Lot where Lot Owners interest has increased as result of the change.
From version 12.0.4, a function was introduced to allow interest rates to be changed from a set date. This will overcome any negative interest arising.
Select edit and click the button 'Adjust Levy Interest Rate'.
If your Strata master is an earlier version, and you do not have the 'Adjust Levy Interest Rate' button as above, you will need to read on.
Although the interest rate can be changed in Corp > Financial tab, be aware that simply editing the rate button 'Levy interest rate %' to a lower rate will adjust historical interest arrears. This means that the full amount of interest accrued per lot will be adjusted which will result in some owners having a negative interest figure. Please refer to this article for information on how to account for the change in interest that will result from a % change -
Interest Rate Changes - WA Legislation Update 1 May 2020 | MRI Knowledgebase (rockend.com)