Three things to know about recovering levies:
- A body corporate is obliged by law to recover levies from lot owners who haven’t paid
- Engaging with late-payers is the best first step
- Exhaust all avenues for payment before pulling the legal trigger
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In a rising interest rate and higher inflation environment (again!), body corporate levies are often one of the first bills that people don’t pay.
Much of the time it’s not because they don’t want to pay – it’s because they can’t.
So how should a body corporate respond?
Legal requirement to recover unpaid levies
While there may be sympathy for those who can’t afford their levies, that’s not to say that the body corporate can sit on their hands about the issue.
It’s a very rare piece of legislation that actually obliges someone to commence a legal proceeding, but that’s what the Body Corporate and Community Management Act does.
The Act says that if a levy has been outstanding for more than two years and two months, the body corporate must commence a proceeding to recover it.
There’s obviously a lot of water that can go under the bridge between that two years and two months and when the levy was first due.
From our perspective, when it comes to acting reasonably, a body corporate should engage with its owners when they’re not paying their bills.
Body corporate finances and unpaid levies
Ultimately, if an individual owner is not paying their levies, the rest of the body corporate is effectively subsidising them.
Equally, if someone doesn’t pay it doesn’t result in an insolvency for the body corporate the next day – cash flow knocks around, payments are due at different times, money comes in, money comes out.
Unless a whole lot of people aren’t paying, it’s very rare to see an administrative fund in deficit.
But good financial hygiene means making sure that you’re staying on top of things – and there is a human element to this as well.
If someone is struggling to pay, lawyering up straight away, sending letters of demand and charging recovery costs simply isn’t nice.
And it is unnecessary when there are other ways to achieve payment.
What this means for you
Engaging with people when they’re late is worth doing.
Offering payment plans that are on reasonable terms is worth doing.
Not pinging people with the interest if you can avoid it is worth doing. Under statute, body corporate levies accrue at 2.5% per month, which is 30% per year, which by any definition is an eye-watering interest rate.
There are certainly businesses out there that charge headlong and do these things and, for want of a better phrase, belt the daylights out of people from day one.
We don’t think that’s necessary.
To the extent you can engage with people, you should do so.
Ultimately, some people aren’t going to pay bills and you’ve got to do what you’ve got to do because the legislation requires you to do that.
But there is a window for other ways to approach people who aren’t paying and those should be exhausted before you embark on legal action.
This post appears in Strata News #792.
Frank Higginson
Redchip Strata Law
E: FrankH@redchip.com.au
P: 07 3193 0500
This article has been republished with permission from the author and first appeared on the Redchip Strata Law website.
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