Levies – Common Traps Part 3

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 previous articles, we focused on discounts and penalties (click here  to view), enforcement and recovery of levies (click here  to view), and this article will focus on recovery costs and application of monies received.

Recovery Costs

The legislation provides that recovery costs are a body corporate debt which are payable by the lot owner or mortgagee in possession. This position is supported by that court cases (such as Westpac Banking Corporation v Body Corporate for the Wave Community Title Scheme 36237 [2014] QCA 73). Even though at law recovery costs are recoverable from the lot owner, there will always be continuing arguments on the reasonableness of the recovery costs. Bodies Corporate need to ensure that any recovery costs incurred are reasonable in all of the circumstances. It is therefore vital that reminder notices are sent out to owners and that there have been attempts to contact the owner prior to debt recovery proceedings being commenced.

Currently the law is unclear as to whether recovery costs are to be disclosed in information certificates and contribution notices. It is recommended that the Body Corporate ensure that any information certificate and contribution notices disclose the amount of any outstanding recovery costs at the date of being prepared and include a note that the costs are continuing to be incurred.

 Application of monies received

It is important that owners and committees remember that the legislation provides that monies received from a lot owner are to be deemed to have been paid to the Body Corporate in payment of debts owing on the lot as follows:

(a) first, towards the penalty; and

(b) second, in reduction of the outstanding contribution or instalment; and

(c) third, towards any recovery costs for the debt.

If any penalties, contributions or recovery costs are unpaid and the Body Corporate has not waived the penalty or recovery costs, then the owner is what is commonly referred to as “not financial” and the legislation provides that an owner loses the right to:

• vote on any motion in general meetings of the Body Corporate (except on a resolution without dissent); and
• nominate for, or be appointed to, a committee position

Due to this, it is important that levy notices include any recovery costs for the debt, so that a lot owner is aware of the exact amount they need to pay in order to be “financial”. As a lot owner, it is therefore important to ensure that you carefully read the levy notices and pay the full amount owing in order to maintain voting rights.

This article was contributed by Shaun Briffa, Senior Solicitor from McKays NQ Pty Ltd A.B.N 85 604 643 709 (Solicitors in Mackay).