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Hi everybody - George Sourris, Empire Legal.

Today's topic: Body Corporate Special Levies QLD & how to deal with them!

 When it comes to Special Levies in a Body Corporate, there is often knowledge gaps about who pays what and who is legally liable. 

Let's explore further.

In Queensland, Body Corporates is governed by the BCCMA (Body Corporate Community Management Act) 1997, Queensland. Within the 462 page Act are laws that the CTS or Community Title Scheme lots must abide by. You are a lot owner in a CTS if you own a unit / apartment / townhouse.  

HOT TIP- You can tell if a property is in a CTS from the Title search. There will be a reference to a "Community Management Statement" with a reference number.

Let's start with a quick one minute explanation of the different levies, then we'll dive deeper into Special Levies. A Body Corporate typically has three different levies that each lot owner in a complex must pay:

1. Administration Fund.

2. Sinking Fund.

3. Insurance.

The Administration Fund is there to pay for day-to-day operations of the complex, i.e. gardens, caretaker, paying the Body Corporate manager, onsite management, pool and maintenance, etc. 

The Sinking Fund is effectively the "savings account", to be used for repairs of the complex.

Examples include: lift repairs, repainting, resurfacing of the driveway, lobby upgrades, etc. There is a forecast that is completed to work out anticipated future costings. This is how the levy is calculated.

The Insurance levy is the lot owner's contribution of the building insurance for the entire lot.

These levies are calculated based on the individual lot owner's percentage of ownership of the entire lot. 

A lot owner can find out their contribution by looking at the CMS (Community Management Statement) of the building complex.

For example, in a block of units, the one bedroom lot owner will almost certainly pay less levies than the penthouse owner, as the penthouse has more square meterage of the lot area owned. 

Special Levies.

Okay, now for the fun part. Special Levies. A word no lot owner wants to hear. 

A Special Levy is struck when something unexpected happens to a building within a Body Corporate that requires expensive repair that was not forecasted. For example, let's just say the pool in the complex starts leaking and it's a $100,000 repair. If this has not been budgeted for, and there is not enough money in the sinking fund, the Body Corporate will call a General Meeting and pass a Special Levy for the repair.

There are of course rules that must be complied with, e.g. having several quotes, creating a proposed payment schedule, etc. If we use our example of the $100,000 pool repair - let's say there's 10 lot owners. If their lot entitlements were all equal, they will need to contribute $10,000 each.

Paying for Special Levies. 

Special Levies may be recovered in one repayment cycle or may be set out over multiple levy periods across several financial years of the Body Corporate. This is usually done to make the repayments more manageable for higher price levies. So, using our earlier example, say, an additional $2,000 over the next five periods of levies; so that each lot owner does not have to pay a lump sum of $10,000 immediately. 

Keep in mind in the above example, that if say two of the five $2,000 instalments are levied before the contract date for a sale, and the remaining three are after the contract date, then the latter three of these levies become the buyers responsibility. 

Now, the part you've been waiting for. What happens when selling a property and there are Special Levies in play?

Section 2.6(12) of a standard REIQ contract outlines what happens in relation to Special Levies when a property is being sold.

The seller is liable for -

1. any special contribution of which a levy notice has been issued ON OR BEFORE the contract date; and

2. any other Body Corporate debt owing in respect to the lot or settlement. The buyer is liable for any special contribution levied AFTER the contract date.

Relevant Extract of a Standard REIQ CTS Contract below:

So buyers, if you have concerns, we suggest requesting a special condition be inserted into the contract,  so that you have time to explore the Body Corporate records, or otherwise do your research before you sign on the dotted line.

The meeting minutes could reveal issues with the complex that may require extra spending via Special Levies.  

We help our buyers via a Body Corporate Records Agent, who attend the Body Corporate, search the records and provide a comprehensive report for our buyer's consideration. If you sign a contract to buy, then from the date AFTER the contract date, any Special Levies struck are yours to bear in full.

And vendors, You have a duty to disclose.

So, if you know about a special levy that gets struck, say, after the Section 206 Body Corporate disclosure is ordered for your sale, you'll need to make sure it's paid.  If you don't, it will get found when the buyer requests the information certificate from the Body Corporate as part of the searches and it will be paid as part of the property settlement.

Special shout out to Drew Davies from Place Ascot + Nundah for the blog suggestion.

Guys - like, subscribe, share. If this has added ANY value to you, please pass it along to someone that may want to know about Body Corporate levies.

Thanks.

See you next week. 

Part 2 bonus content (1 min) available here: 

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George Sourris. Empire Legal.

If you have any questions, you can email me: george@empirelegal.com.au. 

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Thanks for reading everybody. See you on the next one.

Ladies and gentlemen, please keep in mind that all advice is general in nature and does not constitute legal advice. This is authorised by George Sourris, Empire Legal, Brisbane, Queensland, Australia.

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Note: all information is general in nature and as each matter is unique please contact our office for tailored advices: the above does not constitute legal advice.