Are your levies recoverable?

Are your levies recoverable?

By Gary Bugden OAM*

A recent decision of the Victorian Civil and Administrative Tribunal is a timely reminder about the need for attention to detail when imposing owner corporation or body corporate levies.

In Owners Corporation No. SP034630W -v- Pekar [2019] VCAT 136 the owners corporation (“OC”) was unsuccessful in its efforts to recover $14,418.46 in outstanding fees (the Victorian equivalent of levies or contributions) because of technical non-compliance with their legislation.

The facts of the case were:

• On 30 May 2018 the OC issued a fee notice for “arrears” of $11,031.31 and “interest on arrears” of $3,402.79, calculated to 1 July 2018 (“Fee Notice”).
• The Fee Notice was addressed to “Mr I. and Mrs F. Pekar” and sent to the relevant address.
• On 14 August 2018 the OC issued a final fee notice with an opening balance at 1 April 2017 of $11,504.12 and a closing balance (or total) of $14,418.46 (“Final Fee Notice”).
• The Final Fee Notice was addressed to “Mrs Ida Pekar” and contained no explanation as to how the April 2017 balance was calculated.
• “Mr I. and Mrs F. Pekar” do not exist, the lot owner being “Mrs Ida Pekar”, whose husband is Mr Fima Pekar.

The legislation

Section 31(1) of the Owners Corporations Act 2006 (Vic) (“OC Act”) requires a fee notice to be given to a lot owner in the approved form, setting out fees and charges due and payable by the lot owner to the OC. The fee notice must also state certain information relating to the lot owners’ obligation to pay, the interest that will be payable if there is no payment and how the fees and charges can be disputed (sec.31(2)).

Section 32(1) of the OC Act requires the OC to serve on the lot owner a final notice in the approved form if the money owing is not paid within 28 days of the date of the fee notice. Again, this final notice must set out certain prescribed information (sec. 32(2)).

The decision

The Tribunal Member held that:

• The Fee Notice was not provided to the lot owner as required by section 31(1) of the OC Act.
• Even if the Fee Notice had been sent to the lot owner (which it was not), it did not prove the balance of the amount brought forward (i.e. the lump sum amount of $11,031.31).
• “The Final Fee Notice was sent to the lot owner, but it was based on the Fee Notice which I have found does not comply with the Act. As a result, any application for an order requiring payment pursuant to the Final Fee Notice cannot succeed and will be dismissed.” (Vide paragraph 21 of the Member’s Reasons.)

The lesson

Where the legislation governing the imposition and recovery of levies sets up processes, those processes must be strictly followed if the levies are to be recoverable. If the levies are not recoverable:

• it may be necessary for them to be re-imposed on owners for future recovery action to be successful; and
• there may be a risk of owners who previously paid the levies seeking to recover the funds they paid based on mistake.

Implications for NSW

The Strata Schemes Management Act 2015 sets the processes for contributions in NSW, including:

• There must be a determination (i.e. resolution) of the amount of the contributions to be levied.
• Except in the case of a special contribution, that determination must be based on estimates (i.e. a budget).
• The determination of the estimates and the amounts to be levied must be made at the same meeting.
• When the estimates are determined the owners corporation must have before it and take into account a statement of the existing financial situation of the strata scheme and an estimate of receipts and payments.
• The contributions must be “levied” on the lot owners “by giving the lot owner written notice of the contribution payable” (vide sec. 83(1)).
• Other requirements include –
  • Contributions must be based on unit entitlements
  • The levy notice must indicate the date when the contribution is due and payable
  • That date must be at least 30 days after the notice was given
  • Restriction on recovery action before the end of one month after the contribution becomes due and payable.

In the event that recovery action is contested by the lot owner, the owners corporation needs to be in a position to strictly prove that the various processes were duly undertaken. This may even extend to proving the content of the levy notice by producing an actual copy of the notice served (rather than a copy generated by a computerised management system using data drawn from the system’s data base).

Implications for Queensland

The Body Corporate and Community Management (Standard Module) Regulation 2008 (which, as regards levies, is indicative of the content of the other Modules), sets the processes for contributions in Queensland, including in the case of annual contributions:

• They must be fixed by an ordinary resolution of the annual general meeting
• They must be fixed based on the budgets for the financial year
• The number of instalments in which the contributions are to be paid must be decided
• The dates on which instalments are payable must be fixed
• The contributions must be levied by written notice to the owner of each lot at least 30 days before the payment is required
• That notice must specify the 6 things set out in section 142(1) of the Module
• That notice must be served on an owner at their address for service “or in the way directed by the owner”.

Again, in the event of contested recovery action, the body corporate needs to be in a position to strictly prove that those processes were properly undertaken. The availability of an exact copy of the levy notice is particularly important in Queensland because of the amount of information that is required on the notice. Reliance on computer generated historical copies, using data in a computerised management system, is not recommended in Queensland.

Conclusion

It is time to check your determination and levying processes for maintenance contributions, as well as the wording and content of your levy notices. In particular, do you keep an actual copy of the levy notice that was served on each lot owner? If you do, does it contain all the information it is required to contain? Was it served within any required timeframe? The list of questions goes on, so, good luck with your next levy collection!

20 November 2019

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* Gary Bugden OAM DUniv is a partner of Bugden Allen Lawyers in the Brisbane office. He is the author of various books and loose-leaf services and is Sessional Professor of Law, Strata and Community Titles, at Bond University.