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.
