Repayment plans for unpaid body corporate contributions
Unpaid body corporate contribution disputes are common within community titles schemes.
Negotiating a repayment plan can help the body corporate recover unpaid levies, while preserving the relationships of everyone involved.
But the process can be tricky, so having a dedicated body corporate manager is half the battle. There’s a fine line between acting reasonably and allowing one lot owner to take advantage of the other owners.
The debt recovery process
Generally, when a lot owner falls into arrears, the body corporate issue a letter of demand and when the debt remains outstanding, proceedings are commenced.
However, it is important to consider the time and cost involved with commencing proceedings. Depending on the size of a debt, regular payments can often result in the debt being repaid long before proceedings are commenced and judgement is awarded.
How to enter a repayment plan?
An outstanding contribution can easily be drawn to a lot owner’s attention by issuing a letter from a solicitor. If the lot owner makes contact and explains that he or she is unable to repay the debt in time, the lot owner can be invited to propose a repayment plan.
The repayment plan proposal should be in writing and must be put to the body corporate committee for consideration. Of course, the repayment plan proposal will probably need to be “fine-tuned” to include some key features, but it’s still a good place to start.
What are some of the key considerations when entering into a repayment plan?
- the sum of each regular instalment and the end date for the repayment plan;
- the need to make payment of future contributions on time;
- advising the lot owner that failing to adhere to the agreed repayment plan may result in further recovery action being taken;
- determining whether or not interest/ penalties for late payment will continue to accrue;
- what recovery costs will be paid by the lot owner and when;
- any time limitation implications for the body corporate.
It is important that the body corporate obtains legal advice about any repayment plan so as to ensure that the agreement is reasonable and all the rights of the body corporate at law are protected.
Why has the lot owner fallen into arrears?
In response to this question, it is tempting to say “not our problem” and insist that the debt should be repaid immediately. While in a sense this may be true, it can be helpful to consider why the owner has fallen into areas.
Whatever the reason, showing some care and understanding while negotiating a firm and reasonable repayment plan can go a long way. It saves time, money and generates good will in the community.
Author: Zosia Kilmartin