A lot owner is proposing a repayment arrangement for their outstanding levies – what do I need to know?
The majority of lot owners pay their levies on time. Some don’t, for various reasons.
When faced with a demand for outstanding levies, an owner may propose a repayment plan.
Body corporate managers and committees need to be careful to ensure that:
- the committee gives due regard to the proposal, complying with the requirement to act reasonably
- if agreed, the terms of any plan are put in writing (this can be done by an exchange of emails)
- the terms deal with:
1. the further levies that will be accrued while the plan is in place
2. penalty interest and recovery costs; and
3. the consequences if the plan is not adhered to.
A common pitfall is that the terms of the plan are not actually agreed.
For example, the defaulting owner writes to the body corporate to propose that they:
- pay $1,000 within the next two days
- pay $100 per week for the next 20 weeks (the committee calculate that this will be sufficient to clear the existing debt, including penalty interest and recovery costs, but not to pay the further levies that will accrue during that time).
The body corporate writes to the owner saying that the proposal is acceptable, provided that the owner also pays all future levies on time, by separate payments.
The owner does not respond, but simply pays the initial $1,000 and commences making weekly payments. The owner then does not pay a future levy on time. The body corporate notifies the lot owner that it intends to commence proceedings to recover the outstanding levies, because the owner has not complied with the agreement (its proposed terms). The owner asserts that it has complied with the agreement (their proposed terms).
In this example, there was no agreement. The body corporate’s response was a counter-offer, which was not accepted by the owner.
If you would like to discuss any of the above issues, or body corporate issues more generally, please give Bronwyn Ablett a call on (07) 3226 3944.