Have you lost the right to recover unpaid levies?

Most schemes have them; those lot owners that just don’t pay their levies, or enter into payment plans that see levy payments drawn out over an extended period of time. With a recent decision of the District Court in Townsville, bodies corporate must now be extremely vigilant in their dealings with these lot owners or else the body corporate will lose their right to recover the unpaid levies against those lot owners forever.

The Decision

In BC for Mount Saint John Industrial Park CTS v Superior Stairs & Joinery Pty Ltd [2017] QDC 245, the Body Corporate commenced proceedings on 8 May 2013 relating to unpaid levies which included a special levy raised on 17 August 2009. The primary issue to be determined was whether the body corporate had the right to recover the unpaid special levy.

The Limitation Act which sets the periods for when claims must be started before being barred, provides a limitation period of 6 years for an action to recover a sum of money. However, the Module applicable to this Scheme (other Modules also contain a like provision) provided that if an amount of a contribution 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.

After considering the language used in the legislation, the Judge determined that the time period provided in the Module overrides the time period in the Limitation Act. This meant that the body corporate was barred from recovering any unpaid levies against the lot owner that were outstanding for more than 2 years and 2 months.

Where to from here?

This decision represents a significant shift in the common understanding of the industry regarding how long bodies corporate had before needing to commence proceedings for the recovery of unpaid levies.

Bodies corporate and their managers must now be extremely vigilant to monitor unpaid levies to ensure that the right to recover is not lost. The effect of losing the right to recover is particularly significant in small schemes where other lot owners will need to carry any levy shortfall.

We strongly recommend that bodies corporate review their debt management policy and that if any unpaid levies are nearing 2 years outstanding, that you immediately commence recovery proceedings.

At MBA Lawyers we have a tight debt management policy to assist bodies corporate to recover unpaid levies and can help you through the debt recovery process.

Article authored by Brendan Pitman – Lawyer at MBA Lawyers