BODY CORPORATES MUST SECURE AGREEMENT BEFORE EXTRA COSTS
Three things to know about recovering costs:
- Only levies and levy-related charges (like interest) can be included in a levy notice to lot owners.
- Payment for extra services should be agreed with lot owners before the service is provided.
- Signed agreements are best administrative practice.
▶️ Watch the 3-minute explainer video below
Levies are to benefit everyone
Recovering costs from lot owners that are not usual body corporate levies requires careful consideration.
When a lot owner pays a body corporate levy, the money should be used towards purposes that are common for everyone – not just to individual lot owners.
It’s not uncommon for bodies corporate to arrange bulk supplies of services to both the common property and individual owners at the same time.
The body corporate funds should be used to pay for the services provided to common property, and the services provided to individual owners should be paid for by those individual owners, not by the body corporate.
Recovering non-levy costs from lot owners
A common issue is pest control or termite inspections. The body corporate arranges for the treatment of termites across the common property, and they offer an option to people individually to have that same termite inspector inspect and treat their lot at that point in time.
The method to recover those costs is not in the by-laws. By-laws cannot impose monetary liabilities, despite many of them trying to do so.
A body corporate also can’t recover costs by simply adding it to an owner’s levy statement. That’s simply unlawful. What goes on levy statements is clearly set out in the legislation itself.
The only way to recover extra costs like this is by agreement with that individual lot owner, in writing, in relation to that particular service.
While that might be an administrative burden, that’s what the legislation requires.
A well-advised committee would be saying to people, ‘We’re going to get this service. This is the benefit that’s being offered to owners from the provider. If you engage them on the same day, here’s the paperwork and payment terms which you need to sign and return.’
That’s contrary to how it is often done, where the body corporate will arrange the complete service and then invoice people afterwards.
What you can do
Just remember, if you are providing services to individual owners through a body corporate you need to lock down that agreement to recover the cost before you start.
If you need any advice about this issue, feel free to get in touch.
This article was contributed by Frank Higginson, Partner, Hynes Legal
This content relates to buildings regulated by the Body Corporate and Community Management Act 1997 and not the Building Units and Group Titles Act 1980.
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Hi
Our managers have lost the master key on a number of occasions the body corporate had to pay for the replacement but a warning went to management that if this occurred they would be footing the bill hit did happen again after the manager separated so one has agreed to pay the other is not willing can the committee put a lean on there properly they are trying to sell with the management writes
I don ‘t think you can have a lien for something like this but the right to a claim depends on the management rights agreements
Hi Frank, thanks for the video.
I have a related question.
Our body corporate is dealing with a number of hot water tempering valve problems.
We have traditionally thought of the tempering valves as being lot-owners responsibility
But when the valves fail, allowing hot and cold water streams to mix, they can cause problems for other lot owners.
We are planning to have the body corporate become responsible for maintenance and replacement of these valves.
We think that this may be justified by arguing that the correct operation of a valve provides a service/benefit not just to a single unit, but to others.
The body corporate would use its admin (or sinking) fund to pay for maintenance & replacements.
There wouldn’t be a separate specific charge sent to owners, but of course they would be funding the work through the levies.
Can you see any problems with this approach?
Would a by-law or general meeting resolution help in any way?
If you do have an agreement in place and the lot owner doesn’t pay does this mean they are ineligible to vote because they have a ‘body corporate’ debt’, even it it’s not a levy?
They do lose the right to vote if the debt is pursuant to an agreement