Lot owners from QLD have raised questions about unpaid strata levies and overdue fees at settlement. Frank Higginson and Todd Garsden, Hynes Legal + Lisa Rutland, MyBodyCorpReport.com.au have provided the following responses.
Question: I paid the vendor $500 for strata levies at settlement of my purchased unit. I’ve found out the strata company also refunded the amount and are now charging me arrears for unpaid strata levies.
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I recently purchased a strata property. At settlement, I paid the previous owner $500 for being ahead in their Strata fees.
After settlement, without my consent or knowledge, the Strata company refunded $500 from the strata account to the previous owner for ‘being ahead in fees’. They have then tacked this on to my account as unpaid strata levies, with arrears fees.
After being stonewalled and harassed with further arrears notices, after several months I found out about the ‘refund’. Is it legal for them to have done this?
Answer: A body corporate can only make decisions that are authorised by the empowering legislation.
As a creature of statute, a body corporate can only make decisions that are authorised by the empowering legislation. There is no scope to reimburse owners for overpayment in the legislation and adjudicators have generally only allowed refunds of levies when mistakes were made in relation to the issued notice. For example, in Melton Crest Apartments [2016] QBCCMCmr 212.
It might also be worth looking at the contract of sale and any agreed terms around the adjustment at settlement to try and recover the amount from the seller.
I’m not sure how any arrears fees would have accrued if it was only an overpayment that was refunded though which would have only brought the balance back to square.
This post appears in Strata News #305.
Todd Garsden
E: [email protected]
Question: Upon the sale of my unit, our Strata Manager claims I owe thousands of dollars in overdue fees many made up of legal charges. I’ve had an independent audit carried out. Where do we go from here?
I recently sold my unit. The Body Corporate manager claimed I owed approx $6000 in overdue fees. I claimed I didn’t as my accounts had been very badly mismanaged to look that way.
Upon settlement, I had the amount put into trust for a three month period to cover the new owner until we had the accounts audited. The Body Corporate manager refused any help and asked $7500 for an audit. I had an independent audit done. The only amounts were continual legal fees charged after an arrangement had been made to repay a $4400 debt, which I did.
Some of the legal fees were for contravention notices sent through their lawyer for breaching a By-Law (using power cords across common ground) which doesn’t exist.
I have been trying to resolve this matter with little success. I now have the copies of the audited accounts and a letter from the accountant stating the accounts have been mismanaged. What should I do at this point?
Answer: You should write to the body corporate confirming that the fees are not payable.
If you have been charged fees for a by-law contravention notice, you should write to the body corporate confirming that those fees are not payable – and clearly set out what part of the debt relates to those notices.
If the body corporate does not waive them – the commissioner’s office would be the place to go – but you may need the new owner to be on board with that so there is jurisdiction to accept the application.
This post appears in Strata News #202.
Todd Garsden
E: [email protected]
Question: If there are unpaid strata levies upon settlement of an apartment is a small strata scheme, who would be responsible for the payment of the overdue levies? The vendor, the purchaser, the mortgagee?
Could you please advise if a new owner buys a strata plan lot it a 3 lot building who is responsible for any unpaid strata levies…? Can a mortgagee eg bank etc be responsible for any overdue levies …?
Answer: If the levies were not adjusted on settlement or paid out then the buyer has responsibility for them.
There are a few pieces to this.
The simple answer though is that if the levies were not adjusted on settlement or paid out then the buyer has responsibility for them. They do attach to the lot – as opposed to the person who owned the lot at the time they were struck.
The standard REIQ real estate contract provides for adjustments of levies across periods and also for the seller to be responsible for levies up to the settlement date. If someone does their own deal outside that or doesn’t use the standard contract, they can be left carrying the arrears.
A bank is responsible if it is in possession of the property (i.e. has kicked the borrower out as a mortgagee can).
This post appears in Strata News #192.
Frank Higginson
E: [email protected]
P: 07 3193 0500
W: http://www.hyneslegal.com.au
Question: Were my unpaid strata levies charged in error & can I get a reimbursement?
I bought my townhouse in May and only received my first body corporate notice about a month after its due date, as it was sent to the previous owner.
I have now paid the fees as well as almost $700 in penalties because they weren’t paid by the due date. I submitted a claim form to be reimbursed for the overdue fees as it was impossible for me to have been able to pay the unpaid strata levies on time due to the delay in being issued with the notice.
I have found out that this request for reimbursement was declined by the body corporate committee in the recent meeting. No other discussion about the matter has been had the with body corporate at this stage.
I would like some advice on how to challenge this decision as I cannot see how it is legal for any organisation to charge a customer penalty fees (particularly almost $700) for not paying a bill that they didn’t receive until after its due date.
Answer: To be able to dispute the unpaid strata levies charge you will need to understand how those charges are accrued.
It’s frustrating that so much debt has accumulated in such a short amount of time, particularly since you didn’t receive the notice of contributions.
To be able to dispute the penalty charges you will need to understand how those charges accrued. I don’t have that information so instead, you’ll need to check:
- Did the account get cleared prior to settlement?
- When was the roll update form submitted?
- Is there a discount for payment by the due date?
- Was interest charged, and if so at what rate?
- Were other charges debited to the account?
Each of these things is going to impact on your potential claim.
Did the account get cleared prior to settlement?
When you buy a unit you’re agreeing to take on all the liabilities associated with that unit in relation to the body corporate.
That will include any outstanding fees payable by the previous owner.
As part of your settlement statement, your Solicitor should have calculated a pro-rata settlement with levies.
For example, if you settled on 1st May, and the previous owner had already paid the levy period 1st April to 30th June they would receive a credit for the period from settlement date to the end of the paid levy period i.e. 1st May to 30th June.
If the levies were overdue at that time then the same calculation would be made however a payment to the body corporate to clear the account would be included in the disbursement of settlement funds.
Check both your settlement statement and first levy statement to see if there was any balance carried forward from the previous owner.
Even if the account was cleared at the time of settlement there may have been outstanding charges incurred by the previous owner later charged. This happens when levies are in arrears when you settle. The collection processes may have been instigated but not charged to the account prior to settlement.
The only way to ensure these are cleared is to obtain a section 205 certificate from the body corporate immediately prior to settlement. It’s effectively a guarantee if you pay this amount it will clear the account.
If there are carried forward amounts, discuss this with your Conveyancing Solicitor to find out why it wasn’t cleared.
When was the roll update form submitted?
It certainly is annoying to end up with an unpaid strata levies when the levy notice wasn’t sent to you.
Unfortunately, I’m not convinced that the body corporate manager is at fault here.
When you buy a unit your Conveyancing Solicitor is responsible for sending a form 8 update of the roll to the manager. From the body corporates perspective until that form is received then ownership hasn’t changed.
Going with the previous settlement date of 1st May with next levy period due 1st July I would expect the July levy notice to be sent out in the middle of May. The body corporate must give notice 30 days prior to the due date and the managers usually allow a couple of weeks for mailing etc.
If the notice was sent to the previous owner prior to the roll being updated the body corporate did what they should have.
However, if that’s the case, I would expect them to at least be understanding, so it’s a good argument that it’s just an unfortunate paperwork thing and the body corporate could really be more forgiving.
If the roll was updated before the levy notice was sent you have a good argument that issues should not have arisen had they sent the notice, however, don’t expect to rely on that alone to substantiate your claim. Owners are responsible for updating the roll.
Is there a discount for payment by the due date?
If the body corporate has a discount by the due date and the account is not paid then the discount is forfeit.
These discounts can be up to 20% and depending on the amount of your unpaid strata levies and that could be a substantial amount.
I once saw a body corporate manager pay 15c on a short paid lot owner’s account. That might seem strange behaviour but in the body corporate world any outstanding debt, be it even 1c, is enough to lose your discount and impact your right to vote.
And body corporates have no leniency in this matter. Legislation requires all unpaid strata levies payments be allocated to the oldest amount on the levy statement first. Every time, no exceptions.
That would mean if you short paid 15c in one levy period you would lose your discount which is added back to the account creating a debt of up to 20%.
When next you paid the discounted amount that would settle the debt first before being partially applied to the current balance, leaving another debt, which then triggers losing the discount and spiralling on and on from there.
Discounts can only be reinstated with permission from the body corporate committee or an Adjudicator/Judge which may or may not be granted depending on why they were disallowed in the first place.
If some of the charges relate to discounts lost then you can argue that the discount would have been applicable if you’d received the notice from the body corporate.
Was interest charged and at what rate?
Simple interest, to a maximum of 2.5% per month may be charged on unpaid strata levies for one full calendar month or more if the body corporate has resolved to do so, which most have.
Simple interest means it’s charged only on the overdue levy amount, not compounding with interest or other charges.
2.5% for one calendar month means exactly that. If it’s due 1st May and you paid 1st June, it was overdue one month and interest is payable. If you paid 31st May it wasn’t. If you paid 30th June it was still only overdue one full month.
Query how much interest was charged and how it was calculated. I have seen interest charged daily, compounding, compounding and charged daily and calculated as a percentage of the month overdue. If that’s the case the scheme is being overzealous and it’s not allowed.
Were other charges debited to the account?
The body corporate may charge you levies, they may charge you interest on those levies and they may charge you reasonable collection costs.
What constitutes a reasonable collection cost is up for interpretation and argument.
Body corporate managers charge an arrears notice fee to the body corporate if they have to chase overdue strata levies.
This cost is usually on charged to the lot owner responsible.
Other costs would include Solicitors fees, skip tracing fees if they have to track you down, title search fees and so on. Anything really that the body corporate incurs in collecting the unpaid strata levies.
This one is the tricky one. I can’t say with any degree of certainty whether a charge is allowable or not.
What you could do
Anytime a dispute over unpaid strata levies arises your first step will be to clear the account. You cannot make an adjudication order disputing these charges if you have outstanding levies. They will be reimbursed to you.
And if you don’t, unfortunately, it’s just going to get worse.
From there find out where all the charges come from and how they added up to so much.
The work out how much is questionable and how much you want back.
You do not need to try to address this with the body corporate again because you’ve already been denied, however, it might be worth having a go once you know your figures and can make an argument. It’s always better to resolve through negotiation than legal action.
Whatever your argument back it up with solid evidence, time frames if you have them, the more specific the better.
If you think you have a case make an application to the Commissioner Body Corporate disputing charges made. You might want to have a talk to them first to ensure they have jurisdiction, and if not, make an application to QCAT formerly small claims court.
Have a question about unpaid strata levies in QLD or something to add to the article? Leave a comment below.
Lisa Rutland
MyBodyCorpReport.com.au
E: [email protected]
P: 0415 818 261
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
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