Many bodies corporate can be unclear on what a ‘body corporate debt’ actually is.
A body corporate debt is an amount owed by a lot owner to the body corporate which is:-
- a contribution or instalment of a contribution;
- a penalty for not paying a contribution or instalment of a contribution by the date for payment;
- another amount associated with the ownership of a lot.
Examples of another amount—
- an annual payment for parking under an exclusive use by-law
- an amount owing to the body corporate for lawn mowing services arranged by the body corporate on behalf of the owner
When an owner owes a body corporate debt owner is considered ‘unfinancial’.
There are consequences for an owner being unfinancial such as:
- They can potentially be sued for the recovery of the debt amount;
- They lose their right to vote on most general meeting motions other than on resolutions without dissent,
- They cannot nominate committee members and cannot be elected to the committee themselves.
Interest on Body Corporate Debts
A body corporate may decide, by ordinary resolution, to apply financial penalty for levies that are not paid by the due date. The penalty rate must be no more than 2.5% for each month the levy is in arrears.
The body corporate may also seek to recover costs reasonably incurred by the Body Corporate in recovering the amount outstanding, such as legal costs.
The body corporate must state any adopted penalty amounts in the contribution notice that is sent out at least 30 days before the amount is due.
If a debt has been overdue for 2 years, the body corporate must start debt recovery within 2 months of that date. This does not stop the body corporate from starting debt recovery earlier.
A body corporate may decide, by ordinary resolution, to apply discounts to levies that are paid early.
A discount must be at a set rate of no more than 20% of the amount of the instalment and must be stated in the levy notice.
Disputing a Debt
An owner can apply for conciliation through BCCM to determine a dispute about a debt.
However, if debt recovery action has been started in a court (such as the Queensland Civil and Administrative Tribunal), the dispute cannot be conciliated.
If debt recovery action is started after a conciliation application is lodged, the conciliation application must end.
The recovery of levies can be a slow and difficult process for Bodies Corporate, but it need not be. The key for Bodies Corporate is acting quickly before the debt grows and taking steps to recover unpaid levies in a timely fashion.
Doing so will result in substantial savings all-round for the Body Corporate and increase harmony in the community.
If your Body Corporate requires assistance in relation to the recovery of a debt or you simply have some questions on this topic, please contact us today.