Levies – Common Traps Part 2 (QLD)
Part 2 – Enforcement of Body Corporate Debts
Striking levies is one thing; getting paid on time is another. Recovering levies from owners is an important role for the Body Corporate and one that should be taken seriously by the committee, taking into account any special circumstances that may arise. The timely collection of levies enables the Body Corporate to comply with its statutory obligations, be financial, pay its debts on time, pay insurance premiums and undertake timely maintenance as required under the legislation.
There are various powers given to the Body Corporate to enforce collection and incentivise owners. Incentivising owners through early payment discounts and timely debt collection procedures are important tools available to the Committee under the relevant legislation.
In our last article, we focused on discounts and penalties (click here to view). This article will focus on enforcement and recovery of levies. Our final article will focus on recovery of costs incurred by the Body Corporate to recover unpaid levies and how monies received are to be applied.
Enforcement of Body Corporate Debts
Recovery of levies, penalties and recovery costs from owners is permitted under s145 of the Standard Regulation Module (and equivalent sections of the other modules). In schemes where the lots have a low market value, timely collection of levies is of utmost importance. We often see that committees tend to shy away from recovery action against owners who are significantly in arrears, taking the back seat approach “letting it accrue”, hoping they will eventually get paid. In a lot of circumstances, this is true; however it does not mean this is the best course of action.
Committees and body corporate managers must be mindful that the legislation provides recovery proceedings must be commenced if any contribution instalment is not paid in full by two years and two months from its due date for payment. In the current property and financial market, there are many current examples where Body Corporate Committees letting levies accrue has caused significant financial problems and recovery issues. We recommend that the body corporate committee regularly review levy arrears and commence debt collection processes at an early stage before the debt becomes unmanageable, or worse case potentially exceeds the value of the lot.
In Sunshine Tower {2016] QBCCMCmr 65 (18 February, 2016), a body corporate failed to institute proceedings for debt recovery before the debt levels became unmanageable and the debts owing greatly exceeded the sale price of the unit.
The good news for the body corporate is that the legislation provides that a body corporate debt for a lot is enforceable against the owner(s) of the lot when the debt became payable and any person who becomes the owner(s) of the lot before the debt is paid. Upon sale of a lot the majority of buyers are keen to have all the outstanding body corporate debts paid up to date of the sale, so that they do not become liable, however if they do not, then the body corporate can enforce the debt against the buyer.
If there are any debts owing for levies, we always recommend that the body corporate attempt to make contact with the non paying lot owner in person (if possible), by phone, email and post. Sometimes an owner may be unwell, away, failed to receive the contribution notice(s) for various reasons or they may be going through temporary financial difficulty. Communications with a lot owner can lead to a positive outcome, reducing unnecessary tension and the cost of commencing recovery proceedings.
If attempts to liaise with the non paying lot owner are unsuccessful or do not result in payments being made, we then recommend the body corporate issue formal default notices requesting payment. If the formal default notices are not complied with, the body corporate can then commence formal recovery proceedings.
We recommend that the body corporate engage legal advisers to attend to the recovery proceedings including issuing the letter of demand, lodging the claim with the Queensland Civil and Administrative Review Tribunal / Court, obtaining judgement, and if the debt is still not paid following judgement, attending to enforcement proceedings such as obtaining a warrant for the seizure and sale of a unit or winding up of the company owner (if applicable).
In our final article, we will discuss recovery of costs incurred by the Body Corporate to recover unpaid levies and how monies received are to be applied.
This article was contributed by Shaun Briffa, Senior Solicitor from McKays NQ Pty Ltd A.B.N 85 604 643 709 (Solicitors in Mackay).
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Well worth reading , the 2 years 2 months deadline for unpaid levies to be acted on should be highlighted .