Common misconceptions of strata living part 10


Welcome to the final edition of our ten part series discussing the most commonly misunderstood issues related to strata living.

10. How is money recovered when an owner becomes bankrupt?

During times of financial difficulty for lot owners; bodies corporate and owners corporations can often find themselves out of pocket with overdue and unpaid levies. It is a common misconception that this money cannot be recovered.

A lot owner with financial difficulties can be a huge concern to strata communities, especially if an owner declares bankruptcy and they face the possibility of losing payment of any overdue contributions and/or recovery costs.

In theory, there is always a risk that outstanding debt will not be paid at settlement. Even if the worst case scenario was to occur, the debt would stay with the lot, and as such become the responsibility of the new owner.

In practice, and in the SSKB Levy Management Team’s experience, this generally does not occur. When an owner declares bankruptcy the mortgagee will take possession. In this case the body corporate or owners corporation debt then belongs to the mortgagee. This action differentiates the outstanding amount for the lot from other creditors in that it will then get paid by the mortgagee either at settlement or before.

At SSKB, the Levy Management Team actively watches how these matters progress and will suspend any current legal action and ensure all costs are included in the C205 search provided to the purchaser prior to settlement.

Thankfully, in most cases however the SSKB team is very successful in persuading the mortgagee to pay as soon as they take possession.

If you’d like any more information on the ways that the SSKB Levy Management Team can help you, please contact

sskb@sskb.com.au.

 



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