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Check out our Complete Guide to Body Corporate Levies

Body corporate levies are essential to the operation of a body corporate. A body corporate is not a business, and is entirely self-funded by the lot owners in the scheme.

Levies are the mechanism for owners within a body corporate to pool their money, and to pay for shared expenses. All owners within a body corporate have entered into a binding legal agreement to pay levies on time. If an owner does not pay their levy contributions on-time, the other owners all have to pay more to fill the gap.

This is like a group of friends going out for dinner, and splitting the bill. If one friend refuses to pay or can’t afford their meal, the other friends will have to put in additional money to pay the restaurant bill. That is not fair on the friends who came prepared to pay for their own share of the food, and the friend who didn’t pay now owes money to the rest of the group.

Importantly, there is zero ‘profit margin’ on levies. If the body corporate has to pay a $10,000 invoice, it needs to bring in $10,000 from owners based on their entitlements. On-time levy payments from owners are critical to keep a body corporate operating. If an owner falls behind, the entire cashflow of the body corporate is interrupted.

What is a levy payment plan?

Because a body corporate does not have any profit margin, it cannot allow owners to reduce or avoid paying levies. The full amount of the levy must always be paid by the owner, in accordance with the approved budgets.

However, a body corporate can allow an owner to enter into a payment plan to repay a levy debt over a short period of time. A body corporate’s ability to extend a payment plan to a lot owner will depend on the individual cashflow of that body corporate.

For example – Instead of paying a $1,500 levy contribution on the due date, a body corporate may allow a particular owner to pay that in 3x $500 fortnightly instalments.

Late payment penalties on payment plans

In addition to allowing a delayed payment plan, most bodies corporate apply an overdue penalty interest to late payment of levies. Even if an owner has an approved payment plan, the owner will generally be required to pay the penalty interest until they are caught up with their payments.

This decision is usually made by committees to incentivise owners to prioritise their levy payments over other household or discretionary spending.

What happens if a payment plan is not available, or is not complied with?

If a body corporate decides that a payment plan is not available to an owner, that may be for one of the following reasons:

  • The cashflow is needed to fund important and urgent work, and cannot be delayed;
  • The owner does not have a good payment history;

The body corporate committee may then decide to use the body corporate’s debt recovery powers and to pursue the debt via the Queensland court system.

If an owner has a payment plan and then fails to make the regular payments, that will generally result in formal debt enforcement proceedings.

Top causes of levy debts

Cause and explanationRecommended recovery plan

 

 

1. Owner has forgotten to update contact details

 

Owners and agents can change their mailing, residential address or email address and forget to notify the body corporate.

Payment plan is generally recommended
2. Property was sold but transfer forms not completed

 

More common with interstate owners and conveyancers who may be unfamiliar with Queensland body corporate law, or the information held by the conveyancer and provided on the form may be incorrect.

Payment plan is generally recommended
3. Administrative error by owner/rental property manager

 

Owner may not be aware that rental property manager is not deducting the levy payments from the rental proceeds.

Payment plan is generally recommended
4. Financial hardship (e.g. loss of work/income)

 

The owner is unable to meet their household expenses due to income loss or other financial difficulties

Payment plan is generally recommended
5. Refusal based on disagreement with committee

 

In some cases owners refuse to pay levies if the owner did not agree with the reason for the levy (e.g. if the owner voted against a spending motion at the AGM but the motion passed anyway).

Legal debt recovery is generally recommended as early as possible
6. Owner unable to be contacted or traced at all

 

Owners may move overseas permanently, or pass away without a will, in some cases these debts can be very slow to recover but are still recovered with a very high degree of success.

 

If the owner is a corporation which is de-registered this is also a very lengthy legal recovery process.

Legal debt recovery is generally recommended as early a

What factors are considered when a payment plan is requested?

The following factors are considered when a payment plan is requested:

  1. Cashflow – can the body corporate continue to operate until the full payment is received?
  2. Owners’ reason – does the owner have a genuine and compelling reason to be extended this payment leniency? This may be categorised as:
    1. Genuine mistake
    2. Genuine financial hardship
    3. Active refusal to pay

If a lot owner actively refuses to pay their levy contributions (for example if there are other disputes between the body corporate and the owner), a levy payment plan is generally not approved.

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