Bodies Corporate are urged to commence recovery action against lot owners with outstanding levy payments within 2 years.
A recent ruling made by a Queensland District Court Judge ruled that Bodies Corporate must start legal proceedings to recover a lot owners debt within two years and two months of the debt becoming due; otherwise the Body Corporate will be unable to take recovery action.
What happened for this ruling to occur?
The Body Corporate for Mount Saint John Industrial Park CTS v Superior Stairs & Joinery Pty Ltd – This case involved a Body Corporate that raised a special levy to lot owners in 2009 to rectify works on a road that was on the common property. A lot owner disputed the contribution and insisted that they would not pay the levy raised. The Body Corporate then commenced recovery proceedings about 3 and a half years after the special levy first fell due.
The lot owner defended that part of the recovery claim was made out of the two year time limit established in the BCCM (Standard) Module Regulation 2008 (Qld).
In this regulation it states: ‘If the amount of a contribution or contribution instalment has been outstanding for 2 years, the Body Corporate must, within 2 months from the end of the 2 year period, start proceedings to recover the amount.’
The way it has been done in the industry in the past is to treat the above provision as compelling the Body Corporate to take recovery action to ensure the continued financial viability of the Body Corporate, but not stopping recovery action being taken outside of that period. This means that:
- Lot owners could compel a committee to take recovery action as that two year period approached.
- A Body Corporate Manager could refer to the two year period as justification to a committee why a tough decision has to be made against an owner that may be experiencing hardship.
- A claim to recover outstanding contributions was not considered to be barred until six years has passed pursuant to the Limitations of Actions Act 1974 (Qld).
Instead a District Court Judge found:
- The general time limit in the Limitations of Actions Act does not apply in the face of the two year two month period set out in the BCCM regulation module.
- There would be no point to the two year two month period set out in the BCCM regulation module unless it was taken to be a time limit on when the action must be taken.
So what happens now?
If a debt to the Body Corporate is identified that is more than 18 months overdue, then urgent action is required to be taken. A letter of demand or negotiating a payment plan is not sufficient.
The Body Corporate is now required to make a claim in a court or tribunal to recover the contribution before two years and two months pass otherwise the Body Corporate will have lost the right to recover the contribution.
To assist in managing the above it is suggested that;
- Committees are regularly reminded of outstanding levy contributions
- A resolution is passed to adopt a debt management policy to establish timeframes in which the Strata Manager may issue reminder notices, letters of demand and refer arrears to a lawyer for debt recovery
- Carefully consider must be made for any payment plan that would draw out a contribution for more than 12 months.