Levy recovery important for all in body corporate management roles
Paying levies or contributions is a fundamental part of living in a strata scheme and a recent Queensland legal case has decided that each owner should pay their share and when they cannot pay, the contributions and the reasonable recovery costs run with the land so that the other owners are not out of pocket.
Owners who pay their levies on time and in full are an important asset to those responsible for the maintenance and management of the body corporate. However, it is a fact that some owners face difficulties to pay. These owners suffering difficulty should be treated with respect and courtesy and allowed to set the matter right. However, they must eventually pay, as where there are levies overdue or only paid in part, it can have significant consequences for the rest of the body corporate community.
Without sufficient funds, certain repairs may be neglected, health and safety issues may arise and the appearance of the building may suffer. Disharmony may be felt throughout the community when certain works are unable to proceed or when other owners are required to cover the deficit in the short term. When the body corporate accounts are insufficient to carry out essential works, a special levy may be raised. However, the chances of owners already in arrears contributing to an additional collection are unlikely.
Liability of levy arrears and recovery costs (as clarified by the recent decision of Body Corporate for the Wave CTS 36237 v Prins) are also linked to the lot, assuring the body corporate is not out of pocket should the lot be sold. A build up of levy arrears results in unhappy owners, buildings losing value and committee members and building managers unable to effectively perform their roles. For these reasons, the timely and effective recovery of levies is paramount.
What does the legislation say?
The Body Corporate and Community Management Act states that a body corporate may recover the amount of the contribution, any applicable penalty and any costs reasonably incurred in recovering these amounts, as a debt. If recovery action has not been previously started, it must be started within two months of the debt being outstanding for two years.
Does the responsibility for levy recovery fall to committee members to keep track of in their spare time? Levy recovery can be a complicated process. Interest on late payments must be calculated, legislation must be respected and solicitors may be required. On top of this, it is important to ensure that relationships between lot owners, committees and building managers are not damaged.
The recent and high profile case regarding unpaid owner levies in the Queensland Court of Appeal (Body Corporate for the Wave CTS 36237 v Prins) is an example of how complex and stressful levy recovery can be for a body corporate. This was an unusually drawn out situation of an owner not paying levies and then going to extraordinary lengths in tribunals and courts to avoid the obligation. It shows, however, that it is necessary to have a specialised and knowledgeable team to support your body corporate through the process of levy recovery.
For example, the legislation states that levy recovery action must start within two years and two months of the date when the levy was due. Does this mean your body corporate should ignore the debt until that date? Or will the debt have grown in this time to an unmanageable amount, and legal action seem like the only option?
This is where it becomes important to have a dedicated team on your side experienced in levy recovery. Your body corporate management company should have a uniform and proactive approach to levy arrears, including regular reviews of lot owner’s accounts, and prompt actioning of recovery processes. The use of a team that has a proven success rate in dealing with arrears matters outside of court is an asset to any community.
