Changes to the law for debt recovery by bodies corporate
There have been some significant changes to the law for debt recovery that bodies corporate, and their community managers, need to be aware of. These changes came into effect on 1 September 2010.
Adjudicators appointed by the Office of the Commissioner for Body Corporate and Community Management no longer have jurisdiction to hear disputes about debt disputes.
A debt dispute is defined as:
a dispute between a body corporate for a community titles scheme and the owner of a lot included in the scheme about the recovery, by the body corporate from the owner, of a debt under this Act
Some examples of debt disputes are where a:
- lot owner fails to pay outstanding levies;
- lot owner (which could be a body corporate in a layered scheme) fails to pay a monetary liability imposed by an exclusive use by-law (eg where they fail to maintain the exclusive use area which forces the body corporate to maintain it at its own expense);
- lot owner fails to carry out work they are obliged to carry out (eg by judicial order, notice given under an Act such as an enforcement notice by a local authority; and
- person (whether a lot owner or not) causes damage to the common property or other elements of a scheme’s property that a body corporate is responsible for (eg membranes) and the body corporate must repair that damage.
Debt disputes, and disputes related to a debt dispute (‘a related dispute’), can now be commenced in QCAT or a court of competent jurisdiction.
A related dispute is where the subject matter of the dispute relates to the subject matter of a debt dispute already before a tribunal or court. However, a related dispute first needs to be dismissed by the commissioner before it can be commenced or joined to an existing debt dispute in a tribunal or court.
In some respects, these changes make the debt recovery process somewhat clearer. As the law previously was, some bodies corporate were understandably confused about whether the recovery of $80,000 worth of levies should be made to an adjudicator or the district court.
These changes also create additional pitfalls for bodies corporate as tribunals and courts all have different levels of monetary jurisdiction. These levels are also due to change on 1 November 2010.
If proceedings are commenced in the wrong jurisdiction, then the body corporate risks either:
- if it commences in a court or tribunal which does not have jurisdiction – its application / claim being dismissed with a costs order made against it; or alternatively; or
- if it commences in a court which is superior to a court which does have jurisdiction – not recovering the costs of the court hearing the dispute.
This may hinder the cost-effectiveness of the entire recovery process.
This makes it important to ensure that a committee is guided by legal advice when deciding how and when to commence recovery proceedings. It is also important to remember that there is provision to claim recovery costs (such as legal costs) in these actions. Hynes Lawyers provides dedicated, professional and stream-lined debt recovery services for bodies corporate across Queensland. We understand that cost-effective recovery is the main priority for every committee.