How could a simple matter of unpaid body corporate levies turn into a full blown legal battle? - SSKB - Strata Managers | Community Experts

How could a simple matter of unpaid body corporate levies turn into a full blown legal battle?

To gain a proper understanding of this case, we have to go back to 2007 where Dr Prins and Mrs Prins took out a loan through St George Bank Limited (now Westpac) to purchase an apartment in The Wave.  The couple would later fail to pay their body corporate levies.

The Body Corporate for The Wave and SSKB took several steps to recover the debt owed by Dr and Mrs Prins, however, in 2011 after several attempts to mediate had been unsuccessful, The Wave saw legal action as the only remaining avenue to recoup the debt owed to the body corporate.

SSKB Director Paul Wood said “The entire team at SSKB, take personal pride in providing industry leading service and advice to our bodies corporate in all areas of community living. We are especially proud of our Debt Collections Team and their high success rate in ensuring that arrears matters rarely progress to legal action. In fact more than 95% percent of our arrears matters are dealt with out of court, saving owners thousands of dollars every day.”

“Unfortunately, there are rare occasions where levy responsibilities are ignored by a lot owner to such an extent that legal action is inevitable.”

In December 2011 the Body Corporate for The Wave tried to recoup the debt through legal action, meanwhile, Dr and Mrs Prins lodged a complaint with the Financial Ombudsman Service against Westpac. This lodgement effectively prohibited Westpac from taking any action against Dr and Mrs Prins or measurements to protect the lot until late 2012.

In October 2012, following lengthy legal proceedings and a five day trial, a judgement was obtained by the body corporate against Dr and Mrs Prins for the reasonable recovery cost of what then amounted to $150,000.

It was concluded by the magistrate that:

          1. A body corporate debt includes contributions, penalty interest and recovery costs  (reasonably incurred).
          2. The Body Corporate had satisfied section 143 (1) (c) of the Body Corporate and Community Management (Accommodation Module) Regulation 2008 that the costs incurred by it in the amount of $150,000.00 were reasonably incurred in the Body Corporate in recovering the body corporate debt.

However, the matter did not end here as the debt continued to grow Dr and Mrs Prins continued to lodge appeals which were subsequently dismissed. In April 2013 Dr and Mrs Prins were finally declared bankrupt on their own petition – the total costs at this point had escalated to more than $347,000.

Mortgagee Westpac gained possession of the lot in July 2013 and paid the outstanding levies to the body corporate, but argued that it was not liable for any recovery costs.

More specifically: “Westpac contends that its liability  under Section 143(3) of the Regulation for the body corporate debt as mortgagee in possession  does not extend to “recovery costs” referred to in Section 143(1)(c) of the Regulation.”

On 11 April 2014, an appeal by Westpac to this ruling was dismissed by the Supreme Court with Westpac ordered to pay the legal costs of the Body Corporate for The Wave.

It is simply unacceptable for certain owners to believe they do not have to pay levies and rely on other owner contributions in order to maintain the operations of the building. This decision clearly reinforces this position and further confirms SSKB’s opinion that recovery costs are a body corporate debt and a liability that remains with the lot.

The Supreme Court decision, and background, can be read in full at the Supreme Court Library of Queensland website

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Recent Comments


Peter Collins On April 17, 2014 | Reply

I guess this judgement will also apply to Special levies. Does it apply to the supply of electricity gas water and sewerage services?

    SSKB On April 17, 2014 | Reply

    The decision does apply to special levies. In most circumstances the decision would not apply to utilities, as they would not usually be considered body corporate debt.

Sam Xu On May 5, 2014 | Reply

I bought an apartment in Melbourne. In my Contract of Sales, the Entitlement and Liability is equally distributed among 11 unit owners. I signed the contract based on that OC fee figure. But, when I attended the first OC meeting after settlement, I realized that the Entitlement and Liability distribution changed to be based on unit price. As a result, I have to pay the highest, although $300 to $400 more than the equal distribution method. The size and price of all units are not much different, from 50 sqm to 74 sqm, price from 480K to 570K. Important thing is that I was not informed by any way!

Question: if I refuse to pay the extra OC fee, only pay the figure from my Contract of Sales, am I allowed?

SSKB On May 6, 2014 | Reply

Hi Sam,
We would have to advice that you pay the fees.

If what was disclosed in contracts is not what was delivered at settlement this is a legal matter and not generally dealt with through the OC.

We suggest you seek legal advice from your solicitor who acted on your behalf.

Solicitors carry out searches on your behalf prior to settlement on the registered documents and may have been aware of the issue.

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