by Katrina Brown | Feb 26, 2013 | Body Corporate Law, Levy Arrears and Litigation, Strata/Community Living
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.
Submitted by: Katrina Brown, BA JD ATIA TEP SSA, Commercial and Property Lawyer
Katrina@nautiluslaw.com.au
by Katrina Brown | Feb 22, 2013 | Body Corporate Law, Levy Arrears and Litigation, Strata/Community Living
Can an owner refuse to pay strata levies because the owner has a dispute with the Body Corporate?
Short answer: No!
An owner’s obligation to pay strata levies is independent of any other matter between the owner and the body corporate. Therefore, if an owner refuses to pay his/her/its strata levies – the owner will become non-financial, and incur interest at 30% (or such lesser rate set by the body corporate). Following from being a “non-financial” member, the owner will also lose the right to vote at meetings and act on the Committee.
If an owner disputes a decision, action or inaction of a body corporate, he/she/it must lodge the complaint with the body corporate and seek clarification or remedy from the dispute. If not resolved at this level, the owner may seek to gather support from other owners to call an extraordinary general meeting. If this is not possible (in other words, the owner cannot generate sufficient interest from other owners), the owner may submit an Application for the matter to be decided by the Body Corporate Commissioner, or in limited circumstances, may lodge proceedings in the Magistrates or Supreme Court (depending on the type of complaint and parties involved – such as an insurance dispute over repairs, wherein the dispute relates to an insurer of a body corporate).
Further, even if the owner claims the body corporate owes him/her/it money for something (such as repairs the owner claims to have been made relating to “common property” or damages associated with “common property), the owner must continue to pay strata levies as and when they fall due, and take action against the body corporate separately.
If the owner refuses to settle his/her/its strata levy obligations, the owner will suffer not only the loss of standing as a financial member, but also incur interest and potentially mercantile and/or legal fees associated with recovery proceedings. Unlike a commercial dispute between creditors and suppliers, there is no right reserved to the owner to “set off” obligations due between the parties.
If you are having problems with mounting body corporate strata levy balances in your Scheme, and are seeking progressive and assertive legal representatives, please contact the team at Nautilus to arrange a no-obligation consultation. Our solicitors service the Eastern Queensland region, from Port Douglas to Coolangatta. We invite you to contact our Body Corporate Team by telephone on 07 5574 3560 or
by email.
Submitted by: Katrina Brown, BA JD ATIA TEP SSA, Commercial and Property Lawyer
by Katrina Brown | Feb 13, 2013 | Body Corporate Law, Strata/Community Living
There are five different Body Corporate regulation modules to be considered when a body corporate is assessing the scheme. This is depending on the individual circumstances of the scheme. Over the following weeks we will be reviewing each Module.
The first Module to be discussed is the “Standard Module.”
The Standard Module
A new regulation module, the Body Corporate and Community Management (Standard Module) Regulation 2008 (the Standard Module) commenced on 30 August 2008. This regulation module replaces the Standard Module regulation which commenced in 1997. This Body Corporate regulation module is considered to be highly regulated and is generally used in schemes which are predominantly residential.
Committee- Section 98
It is essential for a Standard Module scheme to have a Committee; this is chosen at the compulsory Annual General Meeting. The Committee must compromise of a chairperson, secretary and treasurer. Members of the body corporate (the lot owners) are eligible to be voting members of the Committee and may nominate themselves for Committee membership.
Expenditure- Section 151
The body corporate of a Standard Module scheme is able to limit Committee spending, although, if no amount is set, the amount is then defaulted to multiplying the quantity of lots included in the scheme by $200.00. For example, if there are 200 lots in a particular scheme, the Committee spending amount is $40,000.00.
Financial- Section 146
A Standard Module scheme must establish and maintain an administrative and sinking fund.
The following must be paid into the Sinking fund:
(a) the amount raised by way of contribution to cover anticipated spending of a capital or non-recurrent nature (including the periodic renewal or replacement of major items of a capital nature and other spending that should be reasonably met from capital); and
(b) amounts received under policies of insurance for destruction of items of a major capital nature; and
(c) interest from investment of the sinking fund.
The administration fund incorporates recurrent spending such as maintenance of gardens and lawns on common property.
Records- Section 204
Standard Module scheme Committee members are allowed reasonable access (without payment of a fee) to all body corporate records. General members of the body corporate are entitled access to the records on the exchange of payment.
Improvements to common property by a lot owner- Section 164
If authorised by ordinary resolution of the body corporate, a lot owner may make an improvement to the common property. If the improvement is minor ($3000 or less), the Committee may give approval.
Body Corporate Debt- Section 145
(2) If the amount of a contribution or contribution installment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2-year period, start proceedings to recover the amount.
Action can be commenced earlier, but body corporate need to be careful that they apply a reasonable approach.
We welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
In the coming weeks we will address the Accommodation, Small, Commercial and two-lot scheme modules.
Stay Tuned!
by Katrina Brown | Feb 9, 2013 | Body Corporate Law, Strata/Community Living
The Body Corporate and Community Management Act 1997 (“the Act”) provides that a Body Corporate Committee shall (subject to delegation of any functions to a Body Corporate Manager or external service provider):
- Manage the Body Corporate and oversee compliance with by-laws;
- Obtain adequate and correct insurance policies;
- Organise repairs and maintain Common Property (and, in some instances, property adjoining Common Property);
- Communicate with and Report to Body Corporate Owners;
- Manage, deal with and organise third parties and contractors;
- Undertake financial reporting and accounting, including:
- Preparing annual budgets and contribution proposals; and
- Issuing levy notices and monitoring levy payments (including levy recovery legal proceedings);
- Represent the Body Corporate in legal proceedings;
- Ensure the Property is compliant with Queensland and Commonwealth Legislation, including but not limited to:
– Occupational health and safety;
– Fire safety; and
– Glass and structural mandates.
The obligations placed on the Committee can be daunting and onerous. However, a Body Corporate is authorised, pursuant to the Act, to delegate many aspects of the executive and/or administrative responsibilities of “managing” a Body Corporate to a service provider, which is often referred to as a “Body Corporate Manager.” (Section 119 of the Act) The Committee and Body Corporate Manager, collectively, service the obligations to the Body Corporate Owners.
The Body Corporate may elect to delegate all, or few, of the executive and/or administrative tasks otherwise reserved to a Body Corporate Committee. For example, in small complexes (under 8 Units), a Body Corporate Manager may be retained to perform the financial reporting obligations, but the Committee will remain all other tasks (such as organising contractors, providing notice to owners, undertaking meetings, etc). Most medium to larger complexes employ Body Corporate Managers to perform a far broader scope of tasks, with the Committee retaining more of an executive “supervisory” role with insight on strategic matters, but hands off on the administrative duties.
In order to retain a Body Corporate Manager, the engagement must be in writing, state the term of engagement, state the functions the Manager is required or authorised to carry out and state the basis for which payment of the services is made. In defining the functions authorised, the engagement must also identify if the Manager is permitted to engage in any executive decisions. An engagement may not exceed a 3 year period; however, no minimum term exists. Upon the expiry of the 3 year period, the Manager must renew the engagement with the Body Corporate.
The benefit of this flexibility of engagement, is that Bodies Corporate can “test” a Body Corporate Manager on a shorter term, and if happy, then engage the Manager for the longer term.
If, however, the Body Corporate is dissatisfied with the services of a Manager, during the period of an engagement agreement, the Body Corporate may terminate a Manager in some circumstances (including circumstances in which a Manager commits certain offences). (See Sections 129 and 130 of the Act)
Nautilus works with many outstanding Body Corporate Managers across Queensland, and we certainly support the retention of Managers for the bulk of Bodies Corporate. The scope of works can be broad, or limited – but in all cases, the Committee is able to rest more comfortably knowing they have a resource available to them. This is especially important for large Bodies Corporate, because the Committee members usually have significant personal obligations and are not capable (nor required) to work extensively for the Body Corporate (which would otherwise be required in the absence of a Body Corporate Manager appointment).
We appreciate that from time to time Committees may question the services offered by a Manager, or may wish to be provided advice on Management Agreements. Our Team are seasoned at reviewing Agreements, and assisting Queensland Bodies Corporate with such matters.
We offer an initial no charge, no obligation consultation and offer such services by telephone, Skype, email or on location (Brisbane to Gold Coast only). We also fly to Cairns, Townsville, Mackay and service the Sunshine Coast on a quarterly rotating schedule (although the bulk of services to these regions occur by telephone, Skype or by email).
We welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
by Katrina Brown | Feb 6, 2013 | Body Corporate Law, Strata/Community Living
We hear that on occasion – but all is not lost for the Body Corporate!
If an owner of a property fails to pay the loan repayments associated with their mortgage, the mortgagee (the bank that lent them money to buy the property and holds a mortgage over the property) may exercise its “right to take possession” of the property. In this case, there is a large likelihood that if the owner has defaulted on their mortgage, they have also stung the Body Corporate and have not paid their levies and penalties (also known as a “body corporate debt”).
Fortunately, hope is not lost. Section 143 (3) of The Body Corporate and Community Management (Standard Module) Regulation 2008 provides:
(3) A liability to pay a body corporate debt in relation to a lot is enforceable jointly and severally against each of the following persons—
(a) a person who was the owner of the lot when the debt became payable;
(b) a person (including a mortgagee in possession) who becomes an owner of the lot before the debt is paid.
The mortgagee is, therefore, jointly and severally liable for the body corporate debt – even though the debt arose before the mortgagee took possession. Phew…you might be saying.
The really great part for the Body Corporate is that if the mortgagee drags their feet in terms of paying out the debt, the Body Corporate has a continuing right to penalty interest at the rate resolved by the Body Corporate (but not more than the amount permitted by Queensland legislation, which is presently 2.5% per month – 30% per annum!).
How do you know when the mortgagee takes possession? They have to tell the Body Corporate, by Body Corporate and Community Management Form 8 (Information for body corporate roll), that they have done it. If they do not notify the Body Corporate, hard luck on them – the Body Corporate is still entitled to their interest, and recovery of reasonable legal fees for having to chase the mortgagees.
The Nautilus Team works closely with banks, non-traditional lenders and family financiers to maximise the rate of payment of the body corporate debts after possession. We also encourage mortgagees on title to consider paying out the debt before possession, and adding the amount to the mortgage balances, to maximise their chances of recovering equity in the property when they do take possession.
So, if you have not been advised a mortgagee has moved in on your non-financial owner’s property, and is preparing to sell – realise, all is not lost – but you do need to act. Remember, as a Committee, you have 2 years and 2 months to start legal proceedings for an outstanding body corporate debt. If there has been no contact from the mortgagee and a marketing campaign for the sale of the property begins, bear in mind the Mortgagee has an obligation to settle the total body corporate debt on settlement of the property.
We welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
by Katrina Brown | Feb 2, 2013 | Body Corporate Law, Strata/Community Living
Insurances: We have posted articles about the state of Queensland floods, and the concerns raised by clients with regards to the price of insurance – but most hard hit being Northern and Central Queensland coast communities. Coming into February, and following “Ex” Cyclone Oswald – we fear the blow to Queensland body corporate owners will be a harsh one from yet another premium rise. If all goes well (and we are concerned that it will), the insurers will maintain premiums at 2012 levels, with only CPI increases. We all keenly remember the justifications offered by the insurers from the 2012 rate hike – in that Queensland bodies corporate were not charged enough to cover the risk of global change. Well, here we are in 2013, with yet another global weather event – and we ask – will the decide Queensland body corporate owners are still underpaying? We are hoping not, but expecting the worst.
Our best advice to bodies corporate for February 2013 – speak to your manager about the potential for insurance premium hikes. If you can “shop around”, consider it early. Also, consider whether there are property improvements you can make on the grounds to make them more resistant to damage resulting from storm damage. For example, if you suffer flooding, has the body corporate considered building retaining walls or upgrading the storm water drainage system. Preventative measures can assist in insurance premium reviews, by demonstrating a lower – or nil claim rate.
Levy Litigation: There appears to be stabilising of body corporate levy litigation referrals, meaning (at least in our understanding from the bodies corporate we represent) that owners are beginning to catch up with their levy arrears. Unfortunately, the most notable files are those which have lingered for one+ years as a result of owners which cannot be found, or insolvent owners for whom enforcement sales (if no mortgagee is secured against title) and/or mortgagee dealings offer the only option. We have been employing lateral solutions for recoveries in these instances.
Our dealings with mortgagees continues to be positive and beneficial to the bodies corporate where owners are either unwilling, or unable to service ongoing arrears. As sad as the circumstances may be at the stage a mortgagee is forced to intervene, the fact remains that the innocent “financial” owners should not be required to bear the burden of the few who are “non-financial.”
The advice to many of our bodies corporate remains the same – if you can reach a payment plan with the owner, and you have properly resolved penalty interest, then seriously consider agreeing to a plan. This is not to say that any payment plan should be considered. Definitely not. If we report to an owner has proposed a payment plan, we require the owner to acknowledge the liability to indemnify the body corporate for its legal fees and costs, as well as stipulate to remaining current with all future levies – whilst spreading the arrears over a reasonable term (we generally recommend a term greater than one year is unreasonable, unless extenuating circumstances present themselves).
Our second advice for February 2013 is to ensure your body corporate has properly documented resolutions supporting the maximum penalty interest available under the legislation, which is 2.5% per month (30% per annum). In the absence of a body corporate regulation, the body corporate is prevented from claiming interest other than that which is available under the Civil Proceedings Act, which is currently 10% per annum.
Submitted by Katrina Brown BA JD ATIA TEP SSA, Senior Property and Commercial Lawyer, Nautilus Law Group
