This article about interest charges on overdue strata fees in QLD has been supplied by Myles Holley, Hynes Legal.
Question: How much time do I have to pay before interest is charged on overdue strata fees? Can I pay within the month the levies are due without incurring charges?
We have a unit in far North Queensland and our next levy is due 1st December. How much time do I have to pay before interest is charged on overdue strata fees?
We also have a unit in NSW and I know we can pay within the month that the levy is due before interest and other charges are incurred.
Answer: You will need to check with your body corporate to confirm how penalty interest is calculated in your scheme. It may only be incurred one month after the due date or it may accrue on a pro rata basis.
The short answer is, you will need to check with your body corporate to confirm how penalty interest is calculated in your scheme. It may only be incurred one month after the due date or it may accrue on a pro rata basis.
Timely payment of contributions and service charges by each owner is essential for the ongoing operation of a body corporate. Regardless of an individual’s personal or financial circumstances, it is unfair on all other owners if an owner does not pay on time, and in full, any amounts owed. For this reason, a body corporate can resolve to give a discount (of no more than 20%) to owners if their payment is received by the due date stated on the contribution notice. The body corporate can also resolve to charge penalty interest (of no more than 2.5% per month – equating to 30% per annum) for contributions or instalments that are in arrears.
In The Reserve  QBCCMCmr 353, an adjudicator noted that additional charges could not be penalty interest because “it is charged at the rate of 2.5% per month on the outstanding amount. The contribution was outstanding for a period of 18 days, less than one month.”
However, conversely, in Seabay  QBCCMCmr 644, an adjudicator provided that “The EGM resolution of 22 November 2000 provides for a lesser amount that being that interest is pro rata for a period less than a month. On that basis, and by my calculations, the applicant would owe $61.15 interest for March and $36.69 interest for part of April (60% of the full monthly rate).”
Accordingly, it is entirely a matter for a body corporate to determine at the AGM for how much, and how often, contribution payments will fall due and how penalties will be calculated. You may need to check with your body corporate to confirm how penalty interest is calculated in your scheme. It may only be incurred one month after the due date or it may accrue on a pro rata basis.
Where a contribution is not paid by the due date, a body corporate (but not a body corporate manager) can allow the discount or waive the penalty, in whole or part, if satisfied that there are special reasons for doing so. In one case, an owner was 12 days’ late in paying as he was unexpectedly hospitalised for emergency surgery from just before the due date until the day before the levies were paid. Other special reasons have included a body corporate computer error; payment arriving one day late through no fault of the owner; and non-receipt of levy notices.
In addition to penalty interest and discounts, a body corporate could incur recovery costs pursuing unpaid levies (e.g. legal and administrative fees). Reasonable recovery costs are also payable by the lot owner. This was confirmed in Westpac Banking Corporation v Body Corporate for the Wave Community Title Scheme 36237  QCA 73, where the body corporate incurred hundreds of thousands of dollars in legal fees pursuing unpaid levies which were all ultimately payable by the owner. For this reason, if you would like to dispute an amount claimed by the body corporate, the general rule we tell our clients is: pay on time first, argue later. This is to avoid spiralling recovery costs and penalty interest. If you are successful, you could then be reimbursed.
Have a question about interest charges on overdue strata fees in QLD or something to add to the article? Leave a comment below.
- QLD: Keeping your body corp fees down: Here’s what you can do!
- QLD: Is it defamatory to call someone unfinancial?
- QLD: Q&A Levy Increases – As Lot Owners, Can We Refuse?
This post appears in Strata News #296.