Body corporate levies help fund the day-to-day running of a scheme, including maintenance, insurance and other shared expenses. When a levy is not paid by the due date, it becomes overdue and the owner falls into arrears.
Levy arrears can happen for several reasons, from outdated contact details and missed payment dates to financial hardship, disputes or changes in ownership. Understanding the common causes can help owners address problems early and reduce the impact on the body corporate’s cash flow.
1. Outdated contact details
A simple administrative issue can sometimes result in a missed levy payment.
Levy notices and other body corporate correspondence are sent using the owner information held on the body corporate roll. If an owner changes their postal address, email address or other relevant contact details but does not update the body corporate, important notices may not reach them.
Owners should notify the body corporate in writing of changes to their details within the required timeframe. It is also worth checking that emails from the body corporate or body corporate manager are not being directed to a spam or junk folder.
Keeping contact details current is one of the simplest ways to reduce the risk of accidentally missing a levy notice.
2. Missed or misunderstood payment dates
Levy payments are generally made in instalments throughout the financial year, with the amount and due date set out in the contribution notice. Problems can arise when an owner overlooks a notice, misunderstands the due date or assumes a payment has already been made.
A contribution becomes overdue if it is not received by the due date stated in the notice. Depending on the circumstances, an overdue amount may also attract a late-payment penalty and reasonable recovery costs.
Owners should check each contribution notice carefully and keep a record of upcoming payment dates. Setting calendar reminders or arranging payments in advance can also help prevent an accidental late payment.
3. Financial hardship
Unexpected changes in financial circumstances can make it difficult for an owner to pay a levy by the due date. If this happens, it is important to contact the body corporate or body corporate manager as early as possible rather than allowing the debt to continue accumulating.
Depending on the circumstances, a payment plan arrangement may be available. However, this does not remove the underlying obligation to pay the levy, and penalties and recovery costs may still apply.
4. Withholding payment because of a dispute
An owner may sometimes disagree with a body corporate decision, the amount of a levy or how body corporate funds are being spent.
Withholding a levy payment, however, is not an effective way to resolve a dispute. If a contribution remains unpaid after its due date, it becomes a body corporate debt and may be subject to recovery action.
An owner who believes a levy or body corporate decision has not been made correctly should seek appropriate advice and use the relevant dispute resolution process rather than simply withholding payment.
The payment obligation and the dispute should generally be treated as separate issues.
5. Ownership changes and settlement issues
The sale of a lot can also create problems if body corporate records are not updated or outstanding levy amounts are not properly addressed during settlement.
An unpaid body corporate debt may be recoverable from both the person who owned the lot when the debt became payable and a person who becomes the owner before the debt is paid.
Buyers and sellers should ensure their legal representatives check the relevant body corporate information, identify any outstanding amounts and deal with them appropriately as part of the settlement process.
Following settlement, updated owner information should also be provided to the body corporate so that future levy notices and correspondence are sent to the correct person.
This article provides general information only. The requirements applying to a particular body corporate can depend on the scheme and its applicable legislation and regulation module.
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