QLD: COVID-19 and Strata Levies When Dealing With Financial Strain

This article about strata levies during the COVID-19 pandemic has been updated in April 2021 after the announcement that the COVID-19 emergency arrangements for bodies corporate have been further extended to 30 September 2021. You can read more about this on the QLD Government site here: COVID-19 in bodies corporate.

In the midst of the COVID-19 pandemic, the strata sector is facing some big issues. Perhaps the biggest challenge (this week at least) is how to manage body corporate levies and other financial issues at a time when people are under all sorts of financial pressure. It can be hard enough to get people to pay strata levies when they have the money, let alone when they do not.

We think it is essential to identify the pain points for everyone in the sector when it comes to levies and then identify what can be done about it.

GET NOTIFIED WHEN WE PUBLISH NEW Q&AS, NEWS AND ARTICLES TO THE SITE

There are a few points to make, before anything else:

Even though these times are challenging and like nothing we have seen in our lifetimes, we can’t lose sight of humanity and compassion. People are under severe health, financial and emotional stress. Everyone is suffering in some way. Displaying empathy will hold everyone in good stead.

While the body corporate income may stall as people slow in paying their levies, body corporate expenses don’t. Bodies corporate usually have very little discretionary spending in their budgets. As a simple example, insurers are hardly likely to discount their policies when they come up for renewal over the next 12 months because of what is happening now. Levy holidays won’t work for that reason. Not dealing with the financial issues now as they arise may just mean kicking the can down the roads for six months and having an issue then.

Bodies corporate have not come up for any direct form of government relief and may not get any. That means committees are going to be left to navigate on their own.

We’ve tried to capture what we think are the main financial points in this matrix for Queensland bodies corporate. We’ve not cited sections of legislation here, even though all these points originate from legislative provisions – instead, we’ve kept it very high-level:

	Issues	Options
Committees	Understanding the body corporate’s cash flow Must collect levies but some owners will struggle to pay Body corporate still needs money to pay for expenses Cannot waive / delay owner’s contributions	Look to adjust budget (particularly sinking fund spending in future years) – call an EGM Negotiate genuine payment plans case by case Can waive interest, penalties and recovery charges. Important to do so case-by-case while acting reasonably Look to arrange some form of cash flow funding for the short term
Owners	Obliged to pay their levies Interest, penalties and charges may accumulate on late or no payment Loss of means to pay through job loss / investment loss / tenant issues Being unfinancial affects some body corporate rights	Enter into discussions with the committee as soon as circumstances change – negotiate genuine payment plans Make sure your contact details are up to date on the roll Contact your bank to see if they will defer interest
Occupiers (tenants)	Can’t make rent payments Landlords under pressure to pay levies may in turn place pressure on tenants to pay	Seek advice from the Residential Tenancies Authority or state government support in Queensland or equivalent in other states and territories Queensland government has announced measures in relation to eviction from 29 March, but there is still detail to come
Strata managers	Need to provide accurate advice and options to committees in a pressure cooker environment Collect levies from owners who can’t pay Distressed owners calling them seeking levy relief	Work with committees on buildings likely to be more financially affected to get clear picture Provision of accurate and timely information to schemes – including policies for committees on levy management Get clear, written instructions on any issues Ensure self-care and set clear parameters. Strata managers cannot solve all problems and certainly cannot waive levies
Caretakers / letting agents	Exposure to COVID-19 in completion of their day-to-day caretaking functions Likely complete loss of business in short stay rental schemes with challenges in paying their employees / contractors Dealing with distressed long stay tenants Worries about payment of caretaking remuneration	In short stay buildings, work on business improvement strategies for when ‘normal’ returns In long stay complexes, negotiate (on instructions) and document tenancy changes via this RTA form Assist the committee in communications with all occupiers Get clear, written instructions on any issues

Regardless of which of the above categories you fall into, here’s what we think are the key issues:

Communication: start discussions early. Get the issues on the table and start a dialogue. Show respect and compassion, particularly respect for privacy. Keep appropriate notes. Explain why things are happening to those affected.

Seek qualified advice: from government, legal practitioners, accountants, brokers and whomever you need to – just make sure they are qualified to provide the information you need to make good decisions.

Act within your boundaries: know your role and what you can and can’t do. Be clear in communicating that and confirm your understanding with other parties you deal with.

Be reasonable: in Queensland, bodies corporate must act reasonably. This varies according to each situation but can mean things such as not adopting a blanket policy without considering the specifics, or not simply refusing a request without good reasons for doing so.

Take action: at some point you will have to take action. Don’t be afraid of decision-making, especially if that is your contracted or legislated obligation. If you need to initiate proceedings, do so knowing you have exhausted other options to resolve the situation

Be flexible: These challenges are unprecedented and ever changing. Retain the ability to adapt as things evolve.

Find the silver lining: What could you do now that would otherwise be disruptive? We are talking to some body corporate clients about accelerating building works in short stay schemes to take advantage of the lack of guests.

Make sure you thoroughly investigate what financial options might be available via the various financial assistance measures that have been announced. Click here: Coronavirus (COVID‑19) for the Federal Government and here: COVID-19 economic relief package – $4 billion to support Queenslanders’ health, jobs and businesses from the Queensland Government.

Hynes can provide you with advice around all of these issues. We take an holistic, pragmatic view to strata issues and, at this time of uncertainty and stress, that approach is more important than ever. Body corporate legislation does not deal with pandemics. If you want more detail about issues other than what we are seeing with levies, you can look at some of our Facebook live chats.

Chris Irons
Hynes Legal
E: [email protected]
P: 07 3193 0500

Frank Higginson
Hynes Legal
E: [email protected]
P: 07 3193 0500

If you have a question about strata levies and COVID-19 or something to add to the article, please leave a comment below.

Embed

This post appears in Strata News #341.

Visit Your Strata Levies, COVID-19 and Strata Strata Legislation QLD.

Looking for strata information concerning your state? For state-specific strata information, try here.

After a free PDF of this article? Log into your existing LookUpStrata Account to download the printable file. Not a member? Simple – join for free on our Registration page.

Comments

Tania says

May 4, 2020 at 12:25 pm

I own a townhouse in a block of 10 in Qld & our 3 committee members voted at the AGM end of February 2020 to increase our BC fees by $500.00. The chairpersons reason is:
To re-coup a deficit of $2023.00 from 2-3 years ago & an increase in the insurance from $5500.00 to $6700.00 in actual fact the insurance came in at $4800.00. 3 other owners agree this increase is unjust & extreme as the complex has no pool, no lifts, no tennis court & no gardens. Can they hike up the fees that much in 6 months from our last rates bill? Our fees are now $2044.00 half yearly.

- Liza Admin says
  
  May 5, 2020 at 3:08 pm
  
  Hi Tania
  
  The following response has been provided by Chris Irons, Hynes Legal:
  
  There is no cap on how much levies can increase each year and your levies are unconnected to your rates bill. At each AGM, the budget is presented to all owners and then you vote on it.
  
  Voting is a numbers game.
  
  You might not like the outcome of a vote but unless you can demonstrate the outcome was unreasonable or unlawful, that’s no reason to challenge it and if the vote properly passed, then the outcome stands.
  
Hilary Beck says

April 22, 2020 at 7:04 am

Thanks for your timely advice, however, you don’t specify the roles of the Caretakers beyond self-interest issues such as remuneration. What about them carrying out their normal duties during this time like contracted lawn mowing, cleaning, etc? Can you please advise on these aspects of continuation.

- Liza Admin says
  
  April 23, 2020 at 11:40 am
  
  Hi Hilary
  
  The following response has been received from Chris Irons, Hynes Legal:
  
  I’m not entirely clear what you are asking, but I assume it is about the contracted duties of the caretaker. The keyword being ‘contracted’. A caretaker is appointed under contract with their duties and remuneration part of the terms of the contract. As is the case with any contract, if the body corporate has queries about its interpretation or application they would generally need to seek legal advice.