Body Corporate Debt Recovery

Body corporate debt recovery is required when lot owners do not pay their levies.

If lot owners do not pay their levies and contributions, then the body corporate are required to start the debt collection for unpaid levies.

As professional debt recovery lawyers we are experts in the body corporate debt collection process.

We offer a number of fee options:

1. Fixed fees;
2. Capped fees; and
3. Deferred fees.

This gives you the flexibility to obtain the best legal advice, at a fee structure that suits you best.

Body corporate debt recovery can be complicated, so it is best left to the professionals.

What Happens When a Lot Owner Does Not Pay Levies?

If a lot owner does not pay his/her levies, then it puts a lot of financial strain on the other lot owners, and may mean that the body corporate does not have enough money to conduct the work that it is required to do.  For example:

1. The other lot owners may have to make further contributions or budgets have to be increased to make up the difference;
2. Special levies may need to be raised, exposing good-paying lot owners to further costs;
3. The body corporate may not have enough funds in the account to pay tradespeople to conduct the work which needs doing around the complex. This may devalue everyone’s property;
4. If it seems like lot owners who do not pay are ‘getting away with it’ then it may cause friction in the community, and cause more problems in the future; and
5. If one lot owner seems to be getting away with not paying his/her body corporate levies, then it may be a signal for other lot owners to do the same.

This is why the Act makes it compulsory to collect unpaid body corporate levies.  See our FAQ below.

The Body Corporate Debt Recovery Process

There are a couple of ways that a debt recovery lawyer can assist bodies corporate to recover unpaid levies.  This process includes:

1. Sending a letter of demand;
2. Commencing legal action;
3. Service of the originating process;
4. Default judgment or summary judgment;
5. Enforcement of the judgment.

We will explain these in more detail below.

Sending a Letter of Demand

A lawyer’s letter of demand is a good first step in the body corporate debt recovery process.

This is because it sends a clear message that the body corporate are serious about collecting the unpaid levies, and the delinquent lot owner may then take notice.

A lawyer’s letter of demand will also explain the consequences if the lot owner does not pay his/her debts and foreshadow legal action.

If the debtor pays then the matter is resolved quickly and efficiently.

If the debtor does not pay, then the body corporate will need to commence legal action to recover these unpaid body corporate levies.

Commencing Legal Action

Legal action for debt recovery can be commenced in the Court or in QCAT.

As solicitors we would always recommend commencing legal action in the Magistrates Court rather than QCAT.

Body corporate debt recovery is commenced by issuing a claim and statement of claim in the Magistrates Court.

Once your debt recovery solicitor has drafted the claim and statement of claim it is then filed in the Magistrates Court and sealed with the Court’s seal.

A sealed copy is then served on the debtor.

Service of the Originating Process

Service on a lot owner who is a natural person is done by handing them a copy of the claim and statement of claim personally (plus a few alternatives in the Magistrates Court).

Bodies corporate are required to keep addresses of a lot owner on file.

If the body corporate failed to keep an address for service for a lot owner, then the address for service is the residential or business address, as last notified to the body corporate for the lot owner.

Service of the claim and statement of claim on a lot owner who is a corporation is be done by sending it by prepaid post to the address of the registered office obtained from the current extract with ASIC.

Once served, they will have twenty-eight (28) days to file a notice of intention to defend and defence.

Default Judgment or Summary Judgment

If the defendant does not file a defence within 28 days, then the body corporate can ask the Court for a judgment in default.

This will be a judgment for the full amount of the claim plus legal costs plus interest.

If the defendant tries to defend the claim, then the body corporate may be entitled to make an application for a summary judgment.

Pursuant to rule 292 of the Uniform Civil Procedure Rules 1999 (Qld):

If the Court is satisfied that:

• the defendant has no real prospect of successfully defending all or a part of the claim; and
• there is no need for a trial of the claim or the part of the claim.

Then the court may give summary judgment for the plaintiff against the defendant.

As there are very few (if any) proper defences to a body corporate debt recovery claim, it is likely that a Court will give summary judgment upon application.

The purpose of legal proceedings is to obtain a judgment which can then be enforced.

Enforcement of the Judgment

A judgment creditor can enforce a judgment over the property of the judgment debtor.

This can be done through the Federal Courts with insolvency, or through the State courts by enforcement warrant.

Enforcement Warrant

There are a number of different types of enforcement warrant:

1. Enforcement warrants for seizure and sale of property
2. Enforcement warrants for redirection of debts
3. Regular redirections from financial institutions
4. Enforcement warrants for redirection of earnings
5. Order for payment of order debt by instalments
6. Enforcement warrants for charging orders
7. Enforcement warrants for appointment of a receiver

Not all enforcement warrants apply in all circumstances.

However, the obvious choice is the enforcement warrant for seizure and sale of the debtor’s real property.  This will allow the enforcement officer to seize and auction the lot.

However, if an enforcement warrant is not the correct choice, then a body corporate can also consider the bankruptcy / winding up processes in the Federal Courts.

Bankruptcy / Insolvency

There may be some instances where an enforcement warrant may not be the best choice for a body corporate to enforce a judgment debt.

This may be if there is no (or little) equity in the property, or if the property is held in a complex investment structure.  If this is the case, then personal / corporate insolvency may be the best option.

If the judgment debtor is a natural person, a body corporate can issue the judgment debtor with a bankruptcy notice, and then file a creditor’s petition to commence bankruptcy proceedings.

If the judgment debtor is a company, a body corporate can issue the judgment debtor with a statutory demand, and then file a winding up application to commence corporate insolvency proceedings.

So, this is the body corporate debt recovery process.

Body Corporate Debt Recovery Fees

We offer a number of fee options:

1. Fixed fees;
2. Capped fees; and
3. Deferred fees.

Let us explain in more detail below.

Body Corporate Debt Recovery – Fixed Fees

We offer fixed fees for all body corporate debt recovery services which means that you can be assured that the legal costs will not surpass your budget.

Our fixed fees are fixed for each particular legal service and are disclosed prior to commencement.

Body Corporate Debt Recovery – Capped Fees

We also offer a capped fee service.

This means that we cap out legal fees at the amount that the body corporate is awarded.

For example, if the legal costs are $5,000.00 but the Court orders $4,500.00, then we will discount our legal fees by $500.00.

This ensures that the body corporate has the least out-of-pocket expenses as possible.

Body Corporate Debt Recovery – Deferred Fees

In some circumstances we will also defer our fees.

This means that if we choose to run your matter in this way, we can defer our legal fees until the body corporate receives a payment.

This reduces the amount of fees paid up-front, and means that even bodies corporate with minimal funds available for legal services can still have the same access to justice.