A body corporate is entitled to sue to recover unpaid levies. In fact, if a levy has not been paid, the body corporate is obligated to attempt recovery within 2 years. This is a mandatory obligation.
If a person does not pay their levies, then everyone else in the body corporate is effectively subsidising that person. If they do not pay, and the body corporate needs more money, a special levy may be issued – and who pays then? Certainly not the person who hasn’t been paying.
The body corporate is entitled to treat any unpaid levies, penalty interest, and costs incurred in recovering levies as a debt. This means the body corporate can make a claim in the Magistrates Court for unpaid levies. Unless the body corporate has incorrectly issued levies, or has promised a discount, then such a claim has no defence. An owner is obligated, by law, to pay levies validly issued.
A concern a body corporate might have is costs. However, a body corporate is entitled to claim all reasonable recovery costs as a debt. You may have heard that, in litigation, a party might get only 60% of its fees back in costs. When chasing unpaid levies, the body corporate is entitled to claim ‘reasonable’ recovery costs. Sometimes it can take thousands of dollars to institute a claim and serve it on someone. All of these costs, if reasonably incurred, can be claimed. All of them.
Once the body corporate has a judgment (either after trial, or uncontested by default) then the body corporate can seek to enforce that judgment. The simplest way to do this is to ask for a warrant from the court to seize and sell the lot that owes the levies. You then register that warrant against the title to that lot.
From there, you can instruct the court bailiff to sell the property. The court will require some money, usually a few thousand dollars, to use to cover the costs of sale. Again, these costs are reasonable recovery costs and can be claimed.
But what if there is a mortgage, or the person cannot pay, even after selling the property? The good news is, if a mortgagee takes possession, or if a new owner takes possession, they are liable for all unpaid levies, interest, and recovery costs. No matter what, the body corporate is entitled to be paid all that it is owed. It just might take some time.
If such a judgment and warrant has been issued, then these records must be kept in relation to that lot. If someone wants to purchase the lot, you want to be able to tell them that they need to pay all outstanding costs. If they want to make sure the lot owner pays them, that’s their issue. In the past we’ve seen matters where an agent has failed to properly inspect records and didn’t see the judgment that was clearly in the body corporate records. The solicitors in that case then had to explain to their client that they failed to tell them of thousands of dollars worth of debt.
This article is intended as general information only and should not be relied upon as legal advice. For specific legal advice please contact us here.