QLD: Q&A Unpaid Strata Levies and Overdue Fees at Settlement

Lot owners from QLD have raised questions about unpaid strata levies and overdue fees at settlement.

Table of Contents:

• QUESTION: If an owner short pays their levies, how is the money allocated? Do they still qualify for any discount?
• QUESTION: Is there a legal time limit in QLD for a BCCM Form 8 to be issued once a body corporate property has been sold?
• QUESTION: I paid the vendor $500 for strata levies at settlement of my purchased unit. I’ve found out the strata company also refunded the amount and are now charging me arrears for unpaid strata levies.
• QUESTION: Upon the sale of my unit, our Strata Manager claims I owe thousands of dollars in overdue fees many made up of legal charges. I’ve had an independent audit carried out. Where do we go from here?
• QUESTION: If there are unpaid strata levies upon settlement of an apartment is a small strata scheme, who would be responsible for the payment of the overdue levies? The vendor, the purchaser, the mortgagee?
• QUESTION: Were my unpaid strata levies charged in error & can I get a reimbursement?

Question: If an owner short pays their levies, how is the money allocated? Do they still qualify for any discount?

An owner recently short paid their levies. Our body corporate manager allocated funds received to the admin fund levy and the insurance levy. The owner received the 20% standard discount on each payment. The balance of the funds wasn’t sufficient to cover the sinking fund levy, so no discount was allocated. If the levies are short, why grant a discount on any levy component?

Our body corporate manager advised that each component was a separate levy, so each discount is considered separately. We asked why levies paid should be allocated against admin, followed by insurance and sinking fund. We were advised it’s the order in which the levies appear. What usually happens when an owner short pays their levies?

Answer: The committee should make every endeavour to assist owners in accessing applicable discounts and preventing the imposition of interest penalties.

To look at the answers to your question, there are a couple of applicable sections of the act. The below references are from the Standard Module Regulations.

First, let’s look at section 164, which allows for a discount, provided the relevant motion has been passed at a general meeting:

S164 Discounts for timely payment

The body corporate may, by ordinary resolution, fix a discount to be given to owners of lots if a contribution, or an instalment of a contribution, is received by the body corporate by the date for payment fixed in the notices of contribution given to the owners.

The keywords here are “or an instalment of a contribution”

In this context, it would appear the body corporate has the authority to give a discount even on a partial payment (instalment), by the due date specified in the notice of contribution.

Next, we will look at section 166, the payment of a debt (which is a levy contribution):

S166 Payment and recovery of body corporate debts

5. If an owner is liable for a contribution or an instalment of a contribution, and a penalty, an amount paid by the owner must be paid-
   
   1. first, towards the penalty; and
   2. second, in reduction of the outstanding contribution or instalment; and
   3. third, towards any recovery cost for the debt.

6. If the body corporate is satisfied there are special reasons for allowing a discount of a contribution, or waiving a penalty or liability for recovery costs, the body corporate may allow the discount, or waive the penalty or costs in whole or part.

In interpreting the above, even if the owner was overdue with their payment, the body corporate appears to be able to give a discount in whole or part. Regarding the order of payment on a contribution, here it is applied to the oldest debt owing.

Third, let’s look at section 197, the insurance premium:

Part 6 Insurance Act, Section 189

S197 Insurance of common property and body corporate assets

4. The owner of each lot that is included in the community titles scheme is liable to pay a contribution levied by the body corporate that is a proportionate amount of the premium for a policy of insurance taken out under this section that reflects the interest schedule lot entitlement of the lot.

For clarity, the insurance levy is only issued separately if the interest entitlements of a lot are different from its contribution entitlements.

Regarding your concerns, there is no definition in the Act or Regulations as to what contribution must be paid first – admin, sinking or insurance.

The only definition is that if there is a debt, then it’s the interest first, then the contribution and finally any other amount.

However, the body corporate, via its committee, is tasked with making a decision on behalf of owners regarding such matters. The strata manager (body corporate manager) is engaged to assist the committee with its administrative and financial duties.

As such, if the committee feels it is more in order to allocate payments to the administrative fund first and the sinking fund second, followed by the insurance levy (if this is separately levied), it should provide instructions to the strata manager accordingly.

What has not been addressed here is, was the owner ever advised that they short paid the levy? There may be a valid reason as to why this occurred, and if they have made up the shortfall, the committee has the ability to reinstate any lost discounts.

What should ordinarily occur: The committee should make every endeavour to assist owners in accessing applicable discounts and preventing the imposition of interest penalties.

Karen Thompson
Vision Strata
E: contact@visionstrata.com.au
P: 07 5630 6546

This post appears in Strata News #669.

Question: Is there a legal time limit in QLD for a BCCM Form 8 to be issued once a body corporate property has been sold?

We have a situation in our complex where a property was sold back in March. It’s now tenanted, yet the developer of the complex is still down as the owner of the property on the Body Corporate roll.

Is there a legal time limit in QLD for a Form 8 to be issued? Is there anything we can do to speed this along?

Answer: The period of an owner to provide information to the Body Corporate was shortened to one month when the legislation changed in March 2021.

The period of an owner to provide information to the Body Corporate was shortened to one month when the legislation changed in March. The Body Corporate then has 14 days from receiving the notice to update the roll. However, there is no direct penalty for not providing an update, so effectively all the body corporate can do is update the roll when the correct details are provided.

When the property is transferred from one owner to another owner it’s important that the body corporate is updated as soon as it can be otherwise, the new lot owner is not going to be receiving any information because no one knows who they are. For starters, they’re not going to get their levies, they’re not going to get their AGM notice. They’re going to be denied their rights. It’s within that person’s interest to try to ensure that body corporate is updated. Is there any kind of formal requirement to do it? Not that we could find.

It’s a good question, because I think in body corporate offices up and down the country, managers have to spend quite a bit of time chasing up owners who we don’t know who they are. We contact solicitors, and we contact other people to say, ‘Do we know who this new lot owner is?’. It’s a time consuming part of the job that we do. Usually people find out because the old lot owner remains on the roll until they’re replaced, and they continue to get the levy notices coming through, and that’s usually tends to be the trigger point of which the change can happen. But what you’ll find is, in some owner’s cases, if they don’t take the time to update, then that lot is building up a debt over time. If it goes on long enough that might be transferred to the debt collector, and the first time they hear about it is when large amounts of debt collection fees have been racked up and they’re getting a phone call from someone saying ‘When are you going to pay?’. If you are changing properties, make sure we make submissions as soon as possible.

Yeah, they go up quite quickly. Unfortunately, it’s a necessary part of the industry to ensure that the body corporate fees are up to date. No one really enjoys the debt collection part of it, but it works. Owners have to take responsibility of their property.

The money is needed to run the building. If one owner is not paying, other owners have to make up that deficit. It’s not really fair on any of the other owners who are paying on a regular basis. Be careful please, and keep up to date with those levies.

William Marquand
Tower Body Corporate
E: willmarquand@towerbodycorporate.com.au
P: 07 5609 4924

This post appears in Strata News #496.

Question: I paid the vendor $500 for strata levies at settlement of my purchased unit. I’ve found out the strata company also refunded the amount and are now charging me arrears for unpaid strata levies.

I recently purchased a strata property. At settlement, I paid the previous owner $500 for being ahead in their Strata fees.

After settlement, without my consent or knowledge, the Strata company refunded $500 from the strata account to the previous owner for ‘being ahead in fees’. They have then tacked this on to my account as unpaid strata levies, with arrears fees.

After being stonewalled and harassed with further arrears notices, after several months I found out about the ‘refund’. Is it legal for them to have done this?

Answer: A body corporate can only make decisions that are authorised by the empowering legislation.

As a creature of statute, a body corporate can only make decisions that are authorised by the empowering legislation. There is no scope to reimburse owners for overpayment in the legislation and adjudicators have generally only allowed refunds of levies when mistakes were made in relation to the issued notice. For example, in Melton Crest Apartments [2016] QBCCMCmr 212.

It might also be worth looking at the contract of sale and any agreed terms around the adjustment at settlement to try and recover the amount from the seller.

I’m not sure how any arrears fees would have accrued if it was only an overpayment that was refunded though which would have only brought the balance back to square.

Frank Higginson
Hynes Legal
E: frank.higginson@hyneslegal.com.au
P: 07 3193 0500

This post appears in Strata News #305.

Question: Upon the sale of my unit, our Strata Manager claims I owe thousands of dollars in overdue fees many made up of legal charges. I’ve had an independent audit carried out. Where do we go from here?

I recently sold my unit. The Body Corporate manager claimed I owed approx $6000 in overdue fees. I claimed I didn’t as my accounts had been very badly mismanaged to look that way.

Upon settlement, I had the amount put into trust for a three month period to cover the new owner until we had the accounts audited. The Body Corporate manager refused any help and asked $7500 for an audit. I had an independent audit done. The only amounts were continual legal fees charged after an arrangement had been made to repay a $4400 debt, which I did.

Some of the legal fees were for contravention notices sent through their lawyer for breaching a By-Law (using power cords across common ground) which doesn’t exist.

I have been trying to resolve this matter with little success. I now have the copies of the audited accounts and a letter from the accountant stating the accounts have been mismanaged. What should I do at this point?

Answer: You should write to the body corporate confirming that the fees are not payable.

If you have been charged fees for a by-law contravention notice, you should write to the body corporate confirming that those fees are not payable – and clearly set out what part of the debt relates to those notices.

If the body corporate does not waive them – the commissioner’s office would be the place to go – but you may need the new owner to be on board with that so there is jurisdiction to accept the application.

Frank Higginson
Hynes Legal
E: frank.higginson@hyneslegal.com.au
P: 07 3193 0500

This post appears in Strata News #202.

Question: If there are unpaid strata levies upon settlement of an apartment is a small strata scheme, who would be responsible for the payment of the overdue levies? The vendor, the purchaser, the mortgagee?

Could you please advise if a new owner buys a strata plan lot it a 3 lot building who is responsible for any unpaid strata levies…? Can a mortgagee eg bank etc be responsible for any overdue levies …?

Answer: If the levies were not adjusted on settlement or paid out then the buyer has responsibility for them.

There are a few pieces to this.

The simple answer though is that if the levies were not adjusted on settlement or paid out then the buyer has responsibility for them. They do attach to the lot – as opposed to the person who owned the lot at the time they were struck.

The standard REIQ real estate contract provides for adjustments of levies across periods and also for the seller to be responsible for levies up to the settlement date. If someone does their own deal outside that or doesn’t use the standard contract, they can be left carrying the arrears.

A bank is responsible if it is in possession of the property (i.e. has kicked the borrower out as a mortgagee can).

Frank Higginson
Hynes Legal
E: frank.higginson@hyneslegal.com.au
P: 07 3193 0500

This post appears in Strata News #192.

Question: Were my unpaid strata levies charged in error & can I get a reimbursement?

I bought my townhouse in May and only received my first body corporate notice about a month after its due date, as it was sent to the previous owner.

I have now paid the fees as well as almost $700 in penalties because they weren’t paid by the due date. I submitted a claim form to be reimbursed for the overdue fees as it was impossible for me to have been able to pay the unpaid strata levies on time due to the delay in being issued with the notice. 

I have found out that this request for reimbursement was declined by the body corporate committee in the recent meeting. No other discussion about the matter has been had the with body corporate at this stage.

I would like some advice on how to challenge this decision as I cannot see how it is legal for any organisation to charge a customer penalty fees (particularly almost $700) for not paying a bill that they didn’t receive until after its due date.

 

Answer: To be able to dispute the unpaid strata levies charge you will need to understand how those charges are accrued.

It’s frustrating that so much debt has accumulated in such a short amount of time, particularly since you didn’t receive the notice of contributions.

To be able to dispute the penalty charges you will need to understand how those charges accrued. I don’t have that information so instead, you’ll need to check:

• Did the account get cleared prior to settlement?
• When was the roll update form submitted?
• Is there a discount for payment by the due date?
• Was interest charged, and if so at what rate?
• Were other charges debited to the account?

Each of these things is going to impact on your potential claim.

Did the account get cleared prior to settlement?

When you buy a unit you’re agreeing to take on all the liabilities associated with that unit in relation to the body corporate.

That will include any outstanding fees payable by the previous owner.

As part of your settlement statement, your Solicitor should have calculated a pro-rata settlement with levies.

For example, if you settled on 1st May, and the previous owner had already paid the levy period 1st April to 30th June they would receive a credit for the period from settlement date to the end of the paid levy period i.e. 1st May to 30th June.

If the levies were overdue at that time then the same calculation would be made however a payment to the body corporate to clear the account would be included in the disbursement of settlement funds.

Check both your settlement statement and first levy statement to see if there was any balance carried forward from the previous owner.

Even if the account was cleared at the time of settlement there may have been outstanding charges incurred by the previous owner later charged. This happens when levies are in arrears when you settle. The collection processes may have been instigated but not charged to the account prior to settlement.

The only way to ensure these are cleared is to obtain a section 205 certificate from the body corporate immediately prior to settlement. It’s effectively a guarantee if you pay this amount it will clear the account.

If there are carried forward amounts, discuss this with your Conveyancing Solicitor to find out why it wasn’t cleared.

When was the roll update form submitted?

It certainly is annoying to end up with an unpaid strata levies when the levy notice wasn’t sent to you.

Unfortunately, I’m not convinced that the body corporate manager is at fault here.

When you buy a unit your Conveyancing Solicitor is responsible for sending a form 8 update of the roll to the manager. From the body corporates perspective until that form is received then ownership hasn’t changed.

Going with the previous settlement date of 1st May with next levy period due 1st July I would expect the July levy notice to be sent out in the middle of May. The body corporate must give notice 30 days prior to the due date and the managers usually allow a couple of weeks for mailing etc.

If the notice was sent to the previous owner prior to the roll being updated the body corporate did what they should have.

However, if that’s the case, I would expect them to at least be understanding, so it’s a good argument that it’s just an unfortunate paperwork thing and the body corporate could really be more forgiving.

If the roll was updated before the levy notice was sent you have a good argument that issues should not have arisen had they sent the notice, however, don’t expect to rely on that alone to substantiate your claim. Owners are responsible for updating the roll.

Is there a discount for payment by the due date?

If the body corporate has a discount by the due date and the account is not paid then the discount is forfeit.

These discounts can be up to 20% and depending on the amount of your unpaid strata levies and that could be a substantial amount.

I once saw a body corporate manager pay 15c on a short paid lot owner’s account. That might seem strange behaviour but in the body corporate world any outstanding debt, be it even 1c, is enough to lose your discount and impact your right to vote.

And body corporates have no leniency in this matter. Legislation requires all unpaid strata levies payments be allocated to the oldest amount on the levy statement first. Every time, no exceptions.

That would mean if you short paid 15c in one levy period you would lose your discount which is added back to the account creating a debt of up to 20%.

When next you paid the discounted amount that would settle the debt first before being partially applied to the current balance, leaving another debt, which then triggers losing the discount and spiralling on and on from there.

Discounts can only be reinstated with permission from the body corporate committee or an Adjudicator/Judge which may or may not be granted depending on why they were disallowed in the first place.

If some of the charges relate to discounts lost then you can argue that the discount would have been applicable if you’d received the notice from the body corporate.

Was interest charged and at what rate?

Simple interest, to a maximum of 2.5% per month may be charged on unpaid strata levies for one full calendar month or more if the body corporate has resolved to do so, which most have.

Simple interest means it’s charged only on the overdue levy amount, not compounding with interest or other charges.

2.5% for one calendar month means exactly that. If it’s due 1st May and you paid 1st June, it was overdue one month and interest is payable. If you paid 31st May it wasn’t. If you paid 30th June it was still only overdue one full month.

Query how much interest was charged and how it was calculated. I have seen interest charged daily, compounding, compounding and charged daily and calculated as a percentage of the month overdue. If that’s the case the scheme is being overzealous and it’s not allowed.

Were other charges debited to the account?

The body corporate may charge you levies, they may charge you interest on those levies and they may charge you reasonable collection costs.

What constitutes a reasonable collection cost is up for interpretation and argument.

Body corporate managers charge an arrears notice fee to the body corporate if they have to chase overdue strata levies.

This cost is usually on charged to the lot owner responsible.

Other costs would include Solicitors fees, skip tracing fees if they have to track you down, title search fees and so on. Anything really that the body corporate incurs in collecting the unpaid strata levies.

This one is the tricky one. I can’t say with any degree of certainty whether a charge is allowable or not.

What you could do

Anytime a dispute over unpaid strata levies arises your first step will be to clear the account. You cannot make an adjudication order disputing these charges if you have outstanding levies. They will be reimbursed to you.

And if you don’t, unfortunately, it’s just going to get worse.

From there find out where all the charges come from and how they added up to so much.

The work out how much is questionable and how much you want back.

You do not need to try to address this with the body corporate again because you’ve already been denied, however, it might be worth having a go once you know your figures and can make an argument. It’s always better to resolve through negotiation than legal action.

Whatever your argument back it up with solid evidence, time frames if you have them, the more specific the better.

If you think you have a case make an application to the Commissioner Body Corporate disputing charges made. You might want to have a talk to them first to ensure they have jurisdiction, and if not, make an application to QCAT formerly small claims court.

Lisa Rutland
MyBodyCorpReport.com.au
E: lisa@mybodycorpreport.com.au
P: 0415 818 261

Have a question about unpaid strata levies in QLD or something to add to the article? Leave a comment below.

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This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

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