This article is about interest charges on overdue strata fees in QLD.
Table of Contents:
- QUESTION: If a lot owner agrees to and receives a service, then subsequently fails to pay the body corporate for it, is this recoverable similar to an unpaid levy? Can the owner still vote?
- QUESTION: I’ve received a letter of demand, including penalty charges, for overdue levies. My records indicate the contribution notice was never sent by the strata manager. Can I ask for evidence?
- QUESTION: Can a group of lot owners freeze levy payments by paying their levies into a trust account until they receive better service from the resident manager and strata manager?
- QUESTION: How much time do I have to pay before interest is charged on overdue strata fees? Can I pay within the month the levies are due without incurring charges?
Question: If a lot owner agrees to and receives a service, then subsequently fails to pay the body corporate for it, is this recoverable similar to an unpaid levy? Can the owner still vote?
Section 200 of Body Corporate and Community Management (Accommodation Module) Regulation 2020 permits a body corporate to supply, or engage another person to supply, certain services for the benefit of owners and occupiers of lots e.g. cleaning, painting, and mowing.
If a lot owner agrees to and receives a service, then subsequently fails to pay for it, is this just a simple debt, or is it recoverable as a body corporate debt similar to unpaid levies? Does the debt preclude the owner from voting etc., until paid?
Answer: A debt owed through a service agreement is treated slightly differently than an unpaid levy.
A debt owed through a service agreement is treated slightly differently than an unpaid levy. A service agreement debt does not attach to the lot in the same way as an unpaid levy, and the body corporate does not have the same rights to charge interest or reasonable recovery costs.
However, the service agreement debt is still a debt associated with the ownership of a lot, and so the owner (if the agreement was with the owner). Accordingly, the owner would be unable to vote at general meetings or nominate for the committee.
Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753
This post appears in the July 2023 edition of The QLD Strata Magazine.
Question: I’ve received a letter of demand, including penalty charges, for overdue levies. My records indicate the contribution notice was never sent by the strata manager. Can I ask for evidence?
I have just received a letter of demand from my body corporate manager for overdue contribution levies. Although I am aware that payments are due quarterly, I usually pay immediately in response to any contribution notice I receive, according to the instructions on each notice.
On this occasion, I’m certain the manager never sent a notice. I always receive correspondence by email, including the letter of demand, and I have no record of the notice in question ever being received. A co-owner is always copied on the emails from the manager and they did not receive a notice either.
I understand the manager MUST send a notice at least 30 days before the due date in accordance with r163 of the Body Corporate and Community Management Regulation 2020. The strata manager has threatened to take me to court, despite not doing their job. I have asked them to forward me the original email notice but they have not done so.
I have every intention of making the payment but they are asking for penalty fees that I do not believe they are entitled to.
Answer: What happened with the process?
I think the starting point is what happened with the process. I don’t think it is unreasonable to first ask for evidence or how that the invoices / reminders were sent. If they were sent by email (and received), that is going to be valid in terms of notice with the opt in provisions that are in the new Modules – where people who had provided email addresses were automatically deemed to have agreed to receive notices that way. There is no need for there to be a follow up by post. But if nothing at all was sent in any format then that’s a different story in my book.
Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500
This post appears in the December 2022 edition of The QLD Strata Magazine.
Question: Can a group of lot owners freeze levy payments by paying their levies into a trust account until they receive better service from the resident manager and strata manager?
A number of Lot owners within a Body Corporate Scheme are unhappy with the services provided (or lack thereof) by the Resident Manager and the Strata Company. The Committee isn’t instructing the Resident Manager to fix a number of issues raised by concerned Lot owners. Can the Lot owners affected put their Body Corporate Levies into a trust account type situation in protest until these issues are fixed and or performance is rectified?
In this situation, the Resident Manager (although not supposed to according to the Code of Conduct) hand picked a new Committee. The new Committee and the Strata Company are now basically being run by the Resident Manager, instead of the other way around. Therefore this has created continual conflict between a number of Lot owners, the current committee and the Resident Manager. Anything asked of the Committee or the Resident Manager by certain Lot owners just falls on deaf ears.
Lot owners do not want to go down the expensive track of climbing Mount Everest just to fail.
A number of people have suggested freezing their levy payments in protest by paying into a Trust Account. Depending on who you talk to you, some say it can be done and others say it can’t.
Answer: You definitely can’t pay into a trust account.
You definitely can’t pay into a trust account. The Act is very clear – levies have to be paid as issued to the body corporate.
And with respect to the selection of the committee, the resident manager has not picked them. The owners have. The people on the outside at the moment are entitled to stand for committee as much as anyone. If they do not get voted in then the owners as a group have spoken – be they guided by the resident manager or otherwise.
The committee are required to act reasonably but they aren’t required to action every request or do what people not in committee ask them to.
Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500
This post appears in Strata News #307.
Question: How much time do I have to pay before interest is charged on overdue strata fees? Can I pay within the month the levies are due without incurring charges?
We have a unit in far North Queensland and our next levy is due 1st December. How much time do I have to pay before interest is charged on overdue strata fees?
We also have a unit in NSW and I know we can pay within the month that the levy is due before interest and other charges are incurred.
Answer: You will need to check with your body corporate to confirm how penalty interest is calculated in your scheme. It may only be incurred one month after the due date or it may accrue on a pro rata basis.
Timely payment of contributions and service charges by each owner is essential for the ongoing operation of a body corporate. Regardless of an individual’s personal or financial circumstances, it is unfair on all other owners if an owner does not pay on time, and in full, any amounts owed. For this reason, a body corporate can resolve to give a discount (of no more than 20%) to owners if their payment is received by the due date stated on the contribution notice. The body corporate can also resolve to charge penalty interest (of no more than 2.5% per month – equating to 30% per annum) for contributions or instalments that are in arrears.
In The Reserve [2015] QBCCMCmr 353, an adjudicator noted that additional charges could not be penalty interest because “it is charged at the rate of 2.5% per month on the outstanding amount. The contribution was outstanding for a period of 18 days, less than one month.”
However, conversely, in Seabay [2006] QBCCMCmr 644, an adjudicator provided that “The EGM resolution of 22 November 2000 provides for a lesser amount that being that interest is pro rata for a period less than a month. On that basis, and by my calculations, the applicant would owe $61.15 interest for March and $36.69 interest for part of April (60% of the full monthly rate).”
Accordingly, it is entirely a matter for a body corporate to determine at the AGM for how much, and how often, contribution payments will fall due and how penalties will be calculated. You may need to check with your body corporate to confirm how penalty interest is calculated in your scheme. It may only be incurred one month after the due date or it may accrue on a pro rata basis.
Where a contribution is not paid by the due date, a body corporate (but not a body corporate manager) can allow the discount or waive the penalty, in whole or part, if satisfied that there are special reasons for doing so. In one case, an owner was 12 days’ late in paying as he was unexpectedly hospitalised for emergency surgery from just before the due date until the day before the levies were paid. Other special reasons have included a body corporate computer error; payment arriving one day late through no fault of the owner; and non-receipt of levy notices.
In addition to penalty interest and discounts, a body corporate could incur recovery costs pursuing unpaid levies (e.g. legal and administrative fees). Reasonable recovery costs are also payable by the lot owner. This was confirmed in Westpac Banking Corporation v Body Corporate for the Wave Community Title Scheme 36237 [2014] QCA 73, where the body corporate incurred hundreds of thousands of dollars in legal fees pursuing unpaid levies which were all ultimately payable by the owner. For this reason, if you would like to dispute an amount claimed by the body corporate, the general rule we tell our clients is: pay on time first, argue later. This is to avoid spiralling recovery costs and penalty interest. If you are successful, you could then be reimbursed.
Myles Holley E: myles.holley@hyneslegal.com.au W: Hynes Legal P: 07 3193 0500
This post appears in Strata News #296.
Have a question about interest charges on overdue strata fees in QLD or something to add to the article? Leave a comment below.
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