Actioning unpaid body corporate levies in Queensland
Unpaid levies can be a financial headache for a body corporate, particularly a small body corporate. When the committee has taken all the initial actions of confirming that levies are getting through to the lot owner and sending reminders, what can they do? The BCCM regulations require that they must take action if the debt owed is more than two years old.
A path which may leave the body corporate seriously out of pocket
If your body corporate has a body corporate manager (BCM), the committee is often persuaded to outsource the task of progressing any action to a debt recovery or legal company. Recently, I was reminded of the consequences when I read a lawyer’s statement that “It is not uncommon for a body corporate to incur costs of $20,000 or more in levy recovery proceedings” and “A body corporate will almost never recover 100% of its costs, even if it wins”. Once a body corporate starts legal action, it is difficult to withdraw the action without the costs being awarded against the body corporate. Committees are often not made aware of the range of financial consequences when commencing an action.
The reason why the costs can be so high is because legal firms will probably need to commence action in the Magistrates court with any subsequent appeal processed through superior courts. Legal representation is expensive and increases when superior courts are involved. There is another way (provided the debt is less than $25,000) that is much cheaper and should ensure most debt recovery costs are recoverable from the lot owner but does require some effort from one or more members of the committee. (It could be the body corporate manager, subject to their agreement to act and subject to an agreed fee structure which is reasonable and consistent with the body corporate’s administration agreement)
A cost effective path to debt recovery
The most cost effective way to recover a debt (which is less than $25,000) is through the small claims tribunal which is administered by QCAT and where parties must represent themselves and where costs must be borne by the separate parties to the dispute. You can raise your debt dispute online to QCAT on this link (or just google ‘QCAT debt dispute’).
First steps
Prior to starting the debt dispute application, you might also consider commencing a QCAT mediation process (which is voluntary) and mediated by QCAT for free via telephone conference between all parties. You can start a mediation request through the QCAT website.
Before you take any action, make sure that you have a committee resolution to approve the approach and to also authorise the spending of the QCAT application for which there is a filing fee of approximately $350 (for debts between $1,000 and $10,000) and a bailiff service fee generally around ~ $50. These outlays can be recovered from the lot owner as permitted by the Act. A sample committee motion might read –
that a minor debt dispute be commenced in QCAT against the owners of lot XX (who have been sent multiple reminders in regard to outstanding levies) and that John Howard is authorised to submit the dispute application to QCAT, and to register any successful order in the Magistrates court, and to represent the body corporate in all matters pertaining to the dispute and that John Howard is authorised to be reimbursed for the cost of any filing fees to QCAT upon presentation of a receipt.
Timing
Although the BCCM regulations require a body corporate to commence action (within 2 months) to recover levies that are 2 years old, there is nothing to stop the body corporate commencing action earlier.
Filing fees to QCAT
The QCAT filing fee can be found under the Minor Civil dispute section on the QCAT website. The service fee for a bailiff can be determined from this link on the Queensland government website. Select a bailiff in the location where the respondent can be served physically.
Before you file …
We firmly recommend sending a letter to the lot owner by both registered post and email before starting your QCAT action. This will enable you to be sure that the respondent received the letter. It is best to send this letter in the same time frame as when the committee minutes are issued (where the motion mentioned earlier was resolved). In the letter, we suggest stating –
- that the body corporate is required by the BCCM Act to recover lot owner debts.
- that the committee has authorised action to recover the debt against the lot.
- that the enclosed current lot ledger is currently unpaid, and unless paid within 14 days –
- that a QCAT minor debt dispute application will be commenced.
- that a bailiff will be engaged to serve the QCAT documentation in person to the lot owner.
- that the cost of the QCAT action (~$xxx) will also be recovered as a debt from the lot owner.
- that the body corporate has a history of completing debt recovery actions successfully (if true).
In many cases, this may have the desired impact … without requiring any further committee actions.
Hot tip
If you select Brisbane as your nominated location in your online application, the QCAT website states – you do not need to print your application and lodge at QCAT. After you have paid, your application will be submitted electronically to QCAT and you will receive a sealed copy returned to your email. Otherwise, after payment you will receive an emailed copy of the application form, you must print it and lodge it at the QCAT location you have nominated by either person or by post.
Make sure your supplementary documentation showing evidence of the debt includes full details of the transactions associated with the lot ledger since the lot ledger was last in a paid-up state. Your documentation needs to be very self-explanatory and suitably annotated and highlighted.
Serving your application on the lot owner
Once you have received a sealed copy of your application, you can then contact the bailiff to have the documentation served on the lot owner(s). Once served, you may find that the lot owner(s) pays the outstanding debt. Good news, but to finish the process you must lodge a notice to withdraw (Form 58) and serve a sealed copy of the application to withdraw to each respondent.
If the respondent continues not to pay, the respondent has 28 days from when they receive your application to lodge a response. If the respondent does not respond, you can apply to QCAT to make a decision by default using Form 6.
QCAT Hearing
Assuming that the respondent has replied, the matter will be listed for a QCAT hearing at which parties are expected to attend the tribunal in person and present their case. If you are not able to attend in person, you must make an application to QCAT prior to your hearing to ask for permission to attend by phone.
The aim of the hearing is to make a final decision about the case. A decision may be provided at the end of the hearing however if the tribunal needs more time to consider the matter or to gather more information, it may reserve its decision and all parties will receive QCAT’s decision at a later date.
Assuming that the body corporate is successful in the hearing, you may need to enforce the QCAT order. If the other party does not comply with the order to pay the debt to the body corporate, you can enforce the QCAT order. You have six years to enforce the order.
Letter of demand
Prior to taking any further actions, we firmly recommend sending a registered letter and email to the lot owner. In the letter, we suggest stating –
- that the letter is a letter of demand and the relevant QCAT decision is attached
- that the debt ($xxx), ordered to be paid by QCAT, remains outstanding.
- that the debt can be paid to the body corporate in the following ways (give banking details)
- that unless the debt it is paid within 14 days –
- the body corporate will register the order in the Magistrates court
- that the Magistrates court will automatically send a copy of the order to a credit reporting agency for their records.
- that the body corporate will subsequently consider making an application to the court to issue an enforcement warrant to recover the debt.
Register your order in Magistrates court
To register the QCAT order in the Magistrates court, you need to complete an affidavit (a sworn statement signed by you and properly witnessed by a Justice of the Peace) confirming that the debt has not been paid. Form 46 on the government website should be used for the affidavit. You will need to obtain from QCAT a copy of the QCAT decision certified by QCAT (a JP or solicitor is not sufficient). Once you have your certified true copy and your sworn or affirmed affidavit, take the documents to the registry of the Magistrates Court. They will file the documentation, and advise you a file number. There is no filing fee. As a result of this action, the Magistrates Court will automatically inform a credit reporting agency of the debt. This is a very powerful incentive for the lot owner to pay off the debt.
Registration must be completed in the Magistrates Court which is closest to where the lot owner lives or carries on business; or closest to where the decision was originally made. Which of these options you choose is up to you. If, however, you register the decision in a court that is not the closest to where the lot owner lives or carries on business, you will have to pay them “conduct money” (travel and other costs associated with attending any hearings during the enforcement process). You may not be able to claim this conduct money back from the lot owner.
Enforcement
If the debt continues to remain unpaid, the body corporate can subsequently make an application to the court to issue an enforcement warrant to recover the debt. Enforcement warrants can authorise the seizure and sale of property of the lot owner, the redirection of money that is owed or the redirection of their earnings. We recommend that a committee motion is passed prior to taking this final step which will be highly intrusive for the lot owner. It is also the time to consider if the next steps should be completed by a debt recovery agency.
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