Yes, absolutely. Body Corporate and Community Management Act 1997 permits Queensland bodies corporate to charge 2.5% interest per month, in other words 30% per annum, on overdue strata levies due by an owner to the bodies corporate.
On occasion, in defense of legal proceedings issued against an owner, our opposing legal colleagues and/or the owners themselves will plead that the right to 30% interest is “unconscionable” and/or “illegal.” This position is premised on a misunderstanding as to Queensland body corporate law generally, as well as the nature of the compensation intended to be rectified by the claim to 30% interest.
A body corporate, unlike a supplier of credit to a customer, is unable to “reject” an owner based on credit scores or other poor credit history. The body corporate is not permitted to discriminate against an owner, or even to consider disentitling an owner to access to body corporate assets merely because an owner does not pay his/her/its contributions of body corporate expenses.
Further, unlike a commercial supplier of credit, a body corporate does not have access to investors or funding outside of the body corporate, except in limited circumstances and is legislatively restricted to the level of debt/asset ratio permitted to access in order to fund costs from banks and other lenders.
The 30% interest is intended to not only penalise an owner, but to compensate the body corporate for the costs associated with a default by an owner to service his/her/its obligations.
Purchasers into body corporate properties must consider that the body corporate is not the purchaser’s future personal lender. The body corporate is under no obligation to finance an owner’s costs associated with membership in the body corporate, and whilst payment plans may be acceptable in many circumstances – the right of the body corporate to reject payment plans is reserved because the body corporate is responsible for all owners, and is not obligated to any one member.
At Nautilus, we often hear of stories of financial distress by owners, and our hearts go out to these owners. However, we similarly appreciate that the failure of one owner, can threaten the stability of many others, as well as the financial viability of the body corporate as a whole. We do attempt to negotiate suitable payment arrangements with our body corporate clients, but for regularly delinquent owners and/or owners with longstanding debts – the likelihood of successfully negotiating payment plans (in lieu of other more aggressive collection mechanisms) is often limited.
Our best advice to owners is this – if your bank will extend your mortgage – they will generally do so at rates substantially lesser than 30% per annum – give this a go before falling into arrears. If you do not, cannot, or refuse to – the body corporate is left with no other option but to commence proceedings, and the right to claim 30% interest follows.
If you have any questions about levy recovery litigation, enforcement of body corporate judgments, mortgagee actions on body corporate properties, please do not hesitate to contact Nautilus to arrange a consultation with one of our team members.
We welcome you to contact our team on (07) 5574 3560 or email us info@nautiluslaw.com.au. Thank you for considering Nautilus Law Group.
