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Body Corporate Debts – Part 2

Last time we wrote about how a monetary liability in a by-law is unlawful. Click here for a link to that article if you want a refresher.

The question was – if we can’t recover the QFRS costs under the by-laws, how do we get them back?

One simple answer for a lot of committees is to simply lumber the lot owners levy account with the amount paid to the QFRS. This is also wrong.

A body corporate debt

To take this though to conclusion we need to look at what a ‘body corporate debt’ actually is. A body corporate debt is an amount owed by a lot owner to the body corporate which is:-

  1. a contribution or instalment of a contribution;
  2. a penalty for not paying a contribution or instalment of a contribution by the date for payment;
  3. another amount associated with the ownership of a lot.

When an owner owes a body corporate debt there are consequences. The owner is unfinancial and:-

  1. is potentially going to get sued for the recovery of the amount;
  2. loses their right to vote on most general meeting motions other than on resolutions without dissent;
  3. is not eligible to nominate someone to be on the committee; and
  4. cannot be elected to the committee.

Even a semi -qualified bush lawyer can see that the QFRS charge is not a body corporate debt for the purposes of the Act. It is not associated with the ownership of the lot just because it happened in the lot – these types of things are payments like those required under an exclusive use by-law. If the QFRS costs were debited against the owners account the owner would be notionally unfinancial. It would be impossible for a body corporate to justify their position in front of any adjudicator for that decision.

So what do you do?

According to decisions of adjudicators, whether the costs can be recovered depends on who or what set the alarm off. If the alarm system is utility infrastructure and therefore common property (which it is in most building format plan buildings) the body corporate is responsible for its maintenance.

If the alarm goes off in an owner’s lot because the system is somehow faulty, then the body corporate can not pass the cost onto the owner.

However, if it was the owner’s fault that the alarm was triggered (by burning a midnight snack) the costs can be passed on. In Ocean Sands [2006] QBCCMCmr 587, the adjudicator said:

“I consider that the applicant’s actions (albeit indirectly, through tradesmen engaged by him) caused or contributed to the body corporate having to incur expense in fulfilling its maintenance obligation. On this basis, I do not believe it would be just and equitable for the body corporate to bear this expense. I believe the body corporate acted reasonably in passing on the Wormald account to the applicant and the applicant is liable to pay it.”

Accordingly, whilst fire alarm and other costs can be passed on to owners where appropriate, the body corporate needs to make sure it is doing it on the right basis. The right basis is to determine why the alarm went off and recovering the cost in the most appropriate forum (which might not always be the Commissioner’s Office).

As just some examples:

  1. utilities should be recovered through service agreements (which bodies corporate should enter into before providing them anyway);
  2. damage to common property can be recovered through the courts in the same way any person would recover damage to their own property; and
  3. unpaid levies should be recovered through the statutory procedure set out in the body corporate legislation.

What are the options?

There are going to be circumstances where the body corporate is responsible for particular costs that are incurred. That is a by-product of community living.

The golden rule is that a body corporate cannot rely on by-laws as a catch all to recover monies.

This article was contributed by Frank Higginson from Hynes Legal.

Leave a Reply

  1. Gary Northern

    Plainly and simply can you please answer the following:

    Situation: a strata holiday apartment is let for a week during which time the occupiers (not the owner) experience a fire alarm which is sourced to their apartment.

    Finding: The fire alarm was triggered by a sensor within the apartment. The sensor was not found to have been faulty, instead the ‘firies’ attributed the sensor’s activation to a specific action by the occupiers (typical and common among them would be tampering with/ removal of/ smoking in the apartment/ burnt toast or other forms of cooking smoke – take your pick).

    Who pays: for each of the above causes the occupier is guilty of negligence. Obviously the BC would settle the ‘firies’ bill in the first instance and endeavour to recover costs from the occupier. Is this the way to proceed, is it supported by precedent, etc because I don’t see why the owner should bear any responsibility for costs in such cases?

  2. Sally C

    The only answer to the question you gave was to look up the legislation. a waste of my time to read your article!

  3. Terry

    Dear Mr Higginson,
    I’d have thought that after the reaction to the first instalment, in which you were criticised for sneering at firefighters, you’d have been more careful this time.

    Your reference to “a semi -qualified bush lawyer” is once again a sneer.

    Bush lawyers probably treat their clients or audience with a lot more respect.

  4. Ray

    A typically superficial coverage of a very common problem for Body Corporates, where costs are incurred as a direct action or omission by occupiers.
    Such costs may be relatively minor, eg under $500, however they should not dismissed as something that should be absorbed by other owners….it’s NOT part of “normal community living”.
    Would a court throw such matters out as being trivial, possibly awarding costs against the Body Corporate.
    Clearly the Act needs to be changed to address the fairness & equity of this issue.

  5. Sandra

    A common cause of fire call outs is dust/ damage during renovations. Owners correctly advise the BCM, committee and/or caretaker of the reno but the caretaker fails to isolate the lot from the fire system. Who should pay the call out fee? The owner is not been the person at fault.

  6. Frank Higginson

    A bush lawyer is not a lawyer from a rural area. A bush lawyer is someone without legal qualifications trying to pretend they know everything.

    1. Jana Koutova

      So how can you be semi-qualified bush lawyer?

      Attempting to keep up and understand BCCM legislation is rather tiresome necessity when you enter strata via ownership then pastime for owners. As much as unit living is acclaimed for its ‘no worries’ status, we see on daily basis the evidence of it becoming a full time job laced with extra expense, unwanted conflict, stress, confusing rules and clashing of personalities who would under normal circumstances not be ‘having a cuppa together’ at all.

      Dismissing it as a “by-product of a community living” should not be acceptable.

      Unit owners are often thought of as meddling know-it-alls who should leave the decisions to ‘professionals’. What is, however, overlooked, is the fact that they are the sole underwriters of the whole strata industry, and the decisions made on their behalf by ‘professionals’ (who does not need to be professional at all, as has been proven many times) are funded only by owners. To add insult to injury, their home – their sanctuary – is the one influenced. All the other parties go home after work. They already are at home!

      We believe that the legal profession should be consulted when necessary, and have always been encouraging owners to do so. We also believe that once you ask qualified solicitor for their advice, one should not presume to know but let themselves be informed.

      We also believe in supporting the owners with information, knowledge and understanding of the strata rules. To place the onus of following the rules on the owners but mocking them when they try to do so is not helpful.

      And let us not forget, statistically, there will be a similar percentage of unhelpful individuals in any given group of people.

      Thank you for your informative articles and this website.

      Jana Koutova
      Executive Officer, Unit Owners Association of Queensland Inc.

  7. Frank Higginson

    and answers to everyone else’s comments:-

    To Ray

    We can never go into all of the detail here Ray because there are so many variances. The very topic means it has to be a superficial otherwise it would run for pages. What I would say though is what courts regard as trivial is suing over $500 and in the Commissioner’s Office, costs are never awarded unless the claim is vexatious or frivolous, which this type of argument wouldn’t be.

    To Gary

    Those circumstances are not dissimilar to the case discussed in our second article where an adjudicator seemingly made the occupant responsible for the costs. Having said that we don’t think the BCCM Act actually allows them to make an award like that. The first thing you would have to make out is that the occupant was negligent. Did they owe a duty of care? Was that breached? Were they warned? Was the fire alarm set really lightly? Have there been other instances where it has happened? Should anyone have been aware of that? Who told what to who about what they had to do?

    So it is seemingly supported by precedent but we don’t think it would stack up if appealed.

    To Sandra

    Have a look at the answer I gave to Gary Sandy. To me is it the same sort of thing. There are so many variable that go into these things, and in terms of the caretaker, are the qualified or expert enough to mange that? More grey – that’s what happens sometimes.

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