Body Corporate Levy Debt Recovery – by Wayne Davis Lawyer
Miller Sockhill Lawyers is the leading law firm on the Sunshine Coast specialising in all areas of Body Corporate law.
We have special experience in and regularly act for Bodies Corporate when attempting to recover unpaid levies from owners in arrears.
Across Australia, there are now in excess of two million individual lots belonging to thousands of Bodies Corporate.
A Body Corporate is a legal entity and is responsible to maintain, manage and control its common property on behalf of all of the owners in the building.
In order to fund Body Corporate expenses, all owners are required to make contributions throughout the year to the Body Corporate’s Administrative and Sinking Fund.
Maintaining good cash-flow is a priority for a Body Corporate and when only one owner fails to make payment of their Body Corporate levies, this has the potential to cause some serious operational and financial issues for a Body Corporate.
We find that when owners fail to make payment of their Body Corporate levies all sorts of issues can arise, including:
- The Body Corporate’s budget and maintenance plan is effected;
- Cash-flow issues arise;
- Owners and the committee become irritated; and
- The debt can prevent the Body Corporate from taking out adequate insurance coverage and from carrying out its maintenance obligations under the Body Corporate and Community Management Act 1997 (‘the Act’).
We find that many Bodies Corporate use discounts and late payment penalties as an incentive for owners to pay their Body Corporate levies on time.
Should a Body Corporate wish to set discounts or apply penalty interest to levies, an ordinary resolution of a general meeting is required in order to do so.
Penalty interest must consist of simple interest at an agreed rate or no more that 2.5% per month for each month that the levy is in arrears.
Section 145(2) of the Body Corporate and Community Management (Standard Module) Regulation 2008 (‘the Standard Module’) provides that:
If the amount of a contribution or contribution instalment has been outstanding for 2 years, the Body Corporate must, within 2 months from the end of the 2-year period, start proceedings to recover the amount.
This same requirement arises in section 143(2) of the Accommodation Module and in section 104(2) of the Commercial Module.
In order to commence debt recovery proceedings against an owner who is in arrears, a Committee resolution authorising the commencement of those proceedings is the required formality.
Section 229A(1) and (2) of the Act provides that the Body Corporate can lodge a debt dispute claim before QCAT as a minor civil dispute or alternatively can commence proceedings in the Courts. Claims for debts up to an amount of $150,000.00 are commenced in the Magistrates Court.
A Body Corporate is not required to pursue debts through the Office of the Commissioner for Body Corporate and Community Management (‘Commissioner’s Office’).
Section 229A(3) of the Act provides that Adjudicators appointed by the Commissioner’s Office do not have jurisdiction to hear debt disputes.
Section 145(1) of the Standard Module allows a Body Corporate to recover not only the amount of the unpaid levy contribution, but also any penalty interest and any costs reasonably incurred by the Body Corporate in recovering the amount.
This can include, but is not limited to, Court filing fees, solicitors’ fees and administrative expenses. The same provision arises in section 143(1) of the Accommodation Module and in section 104(1) of the Commercial Module.
It is important to note that a liability to pay a Body Corporate debt is enforceable jointly and severally against each of the following persons:
- A person or a company who was the owner of a lot when the debt became payable; and
- A person or a company (including a mortgagee in possession) who becomes an owner of the lot before the debt is paid.
If there are two or more owners of a lot within a Body Corporate, the co-owners are jointly and severally liable to pay a Body Corporate debt in relation to the particular lot that they own.
The purpose of commencing legal action is to be given an enforceable money order by the Court or Tribunal.
Enforcement of Money Orders
Once a body corporate has enforceable money order, it can enforce this order to recover the order debt.
Obviously, the first choice would be a warrant for seizure and sale of the debtor’s property.
This is a warrant from the Court directing the Court bailiff to attend at the property, seize and auction the real property to satisfy the judgment debt.
There are a number of other enforcement options including further warrants, statutory demands, and bankruptcy for example – but a warrant enabling the sale of the property is the go-to enforcement option when enforcing body corporate debts.
Miller Sockhill Lawyers can assist Bodies Corporate in the entire debt recovery process from issuing initial letters of demand all the way through to enforcing judgments of the court over the debtors personal and real property.
Please contact our commercial litigation and debt recovery solicitor Wayne Davis should you have any queries in relation to the recovery of Body Corporate debts.
Located in Maroochydore on the Sunshine Coast, Miller Sockhill Lawyers regularly advise clients on debt recovery matters.