New Covid-19 Body Corporate Laws

The Government’s COVID-19 Emergency Response Act 2020, which commenced on 23 April 2020, enacted a series of reforms to address the COVID-19 emergency.

It includes powers to change usual legislative requirements across a variety of areas, including attendance at places or meetings and other physical presence requirements, making and using documents and statutory timeframes.

In addition to these reforms, last week the Government passed the Justice and Other Legislation (COVID-19 Emergency Response) which includes measures to “alleviate the financial burden caused by the COVID-19 emergency on community titles schemes.”

These measures will be in place until 31 December 2020 and for the purposes of this article this period will be referred to as the COVID-19 emergency period.

Reducing sinking fund budgets

The reforms will temporarily allow bodies corporate to, by ordinary resolution, adopt a sinking fund budget for the current financial year that does not meet the usual requirements to provide for capital expenditure for the next 9 years.

A body corporate that has already adopted its budget may, by ordinary resolution, adjust it to reduce the amount for capital expenditure for future years, but if it does so, must refund any overpaid amounts to owners.

Extend due dates for levies

Committees will be allowed to extend the due date for payment of levies for a particular owner if the committee is reasonably satisfied the owner is experiencing financial hardship because of the COVID-19 emergency, or for all owners generally.

Previously, bodies corporate could charge 2.5% interest per month on overdue levies. They now are unable to do that on amounts that are overdue during the COVID-19 emergency period.

Overdue levies and penalty fees

The legislation prevents bodies corporate from charging a late payment penalty for overdue levies during the COVID-19 emergency period.

It also allows bodies corporate to delay recovery action for certain unpaid levies until after the end of the emergency period.

Currently there is a statutory obligation to commence proceedings for recovery of body corporate levies two years and two months from when they are first due. That obligation has been removed during the COVID-19 emergency period.

Bodies corporate can still commence proceedings, but they are not obliged to. Proceedings started before the COVID-19 emergency period remain unchanged.

Body Corporate borrowing

Bodies corporate can decide to borrow money by ordinary resolution unless the amount borrowed is more than $250 per lot. If the sum borrowed is more than $250 per lot this must be approved by resolution without dissent.

The reforms double the maximum amounts that bodies corporate may borrow by ordinary resolution to $500 per lot. Any amount higher than this will need to be approved by resolution without dissent.

Insights

The reforms are sensible and practical solutions that provide a range of options for Bodies Corporate to approve and provide financial relief for owners affected by the impacts of COVID-19.

Although these reforms are welcome, bodies corporate should exercise a high degree of caution when considering utilizing financial relief options included in the temporary legislation, particular remembering that they are only temporary measures. There are numerous cost obligations associated with many schemes that cannot be deferred, especially on items like safety and maintenance.

Every scheme is different and financial options that are appropriate for one body corporate may not be appropriate for another. Even with similar schemes with similar needs, the financial position of owners and many other factors can influence what financial relief measures need to be taken (if any).

Before acting on these reforms consider the distinct circumstances of your scheme and body corporate as well as the individual circumstances of lot owners affected.

You can also read the whole bill here: Justice and Other Legislation (COVID-19 Emergency Response) Amendment Bill 2020.

The information contained in this article is general information only and not legal advice. Independent legal advice should be sought before you take any action or otherwise rely upon its contents in any way.

Author: Sam Aubrey

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