When Should A Body Corporate Allow A Discount for an Overdue Payment?

WHEN SHOULD A BODY CORPORATE ALLOW A DISCOUNT FOR AN OVERDUE PAYMENT?

 

The legislation has created a significant incentive for owners to pay their contributions by allowing a body corporate to fix a discount of up to 20% to be given to owners if a contribution is paid on time. 

But … 

The issue lies in the scenario where the contribution is received by the body corporate after the due date but the owner still wants the benefit of the discount. 

The blunt response is that the owner is not entitled to the discount. But, in certain circumstances, that seems overly harsh. 

That is why the legislation also gives a body corporate the power to allow part or all of a discount even if the amount was not received by the due date, if the body corporate is satisfied there are ‘special reasons’.

Special reasons 

What constitutes ‘special reasons’, is not defined. 

It depends on the circumstances of the situation and a body corporate should consider the merits of the particular case before making its decision. 

Take the following scenarios:

  1. an owner paid the contribution on the due date but it was received by the body corporate the next day, the owner had no history of late payments, the owner did not know the payment would be received the next day;
  2. an owner paid the contribution 12 days late because the owner unexpectedly went to hospital for emergency surgery just before the due date for the contribution and made payment the day after returning from the hospital;
  3. an owner had a direct debit set up with Stratapay (a recognised payment platform) to pay contributions, however a computer error resulted in Stratapay not paying the contribution amount to the body corporate by the due date;
  4. an owner did not receive the notice of contribution before the due date for payment.

In each of these scenarios, an adjudicator has found that the body corporate acted unreasonably in deciding to not allow a discount. 

Consequences 

If a body corporate refuses to allow a discount, it can have the following consequences:

  1. the owner may not be entitled to vote at a general meeting because they owe a body corporate debt;
  2. the owner may accrue up to 30% interest per annum on the unpaid amount;
  3. the owner may be required to pay reasonable recovery costs in recovering the unpaid amount.

That is not to say that a body corporate should always allow a discount, but rather emphasises that a body corporate must act reasonably in deciding whether to allow a discount. 

What should you do? 

A body corporate should treat requests by lot owners to reinstate a discount carefully. 

That is because:

  1. if a body corporate does not consider the specific circumstances of the request and adopts a blanket approach, an adjudicator will likely find that the body corporate acted unreasonably and order the body corporate to refund the amount of the discount;
  2. if a body corporate allows a discount without there being ‘special reasons’, it is arguable that that the body corporate exceeded its powers and other owners may apply to the Commissioner’s Office for relief. 

If a body corporate is unsure of its ability to allow a discount for an overdue payment, or simply wants to try and avoid a potential dispute, legal advice should be obtained as soon as possible.

 

Article Written by Brendan Pitman -10 May 2021
Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

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Reallocation of Exclusive Use Areas – A Cost on Who?, For the Benefit of Two

REALLOCATION OF EXCLUSIVE USE AREAS – A COST ON WHO?, FOR THE BENEFIT OF TWO

 

A situation that frequently comes across my desk is where two or more lot owners (but usually just two) are seeking to ‘swap’ exclusive use areas between their lots. Sometimes it is just one owner, who owns multiple lots, seeking to transfer areas between their lots (usually for the purpose of selling one or more of the lots with the different allocations in place).

Section 171(1) of the Body Corporate and Community Management Act 1997 (Act) sets out the following:

(1)       The common property or body corporate asset to which an exclusive use by-law for a community titles scheme applies must be—

(a)         specifically identified in the by-law; or

(b)         allocated—

i            by a person (who may be the original owner or the original owner’s agent) authorised under the by-law to make the allocation (an authorised allocation); or

ii           by 2 or more lot owners under a reallocation agreement (an agreed allocation).

Essentially, if two or more owners decide that they would like to swap areas of common property (that are subject to an exclusive use by-law), then they are entitled to such a swap by entering into a ‘reallocation agreement’. Such an agreement is defined in the Act to be ‘an agreement in writing under which two or more owners of lots for which allocations are in place under an exclusive use by‑law agree to redistribute the allocations between the lots.’

Other than needing to be in writing, there are no strict requirements about the form or content of a reallocation agreement. It could be as simple as a one page document setting out an extract of how the revised allocations will appear in the table in Schedule E of the Community Management Statement (CMS) and executed by the owners involved. I have also seen and prepared much more complex versions, setting out the terms of the reallocation in a formal deed of 10 or so pages. Much depends on the needs of the owners involved in the transposition, whether they are related parties, and whether the reallocation also involves the exchange of money.

Section 174(1) of the Act provides than an authorised or agreed allocation has no effect unless details of the allocation are given to the body corporate. Accordingly, once two or more owners agree to swap their exclusive use areas, the owners must give notice and details of the agreed allocation (ie a copy of reallocation agreement) to the body corporate.

Once the notification is received, the body corporate must lodge a new CMS with the Department of Resources (titles office) that includes the change within 3 months (section 176 of the Act).

Two questions that are frequently posed to me by a committee or body corporate manager following receipt of an agreed allocation are:

  1. What are the approval requirements for the body corporate to lodge the new CMS?; and
  2. Who is responsible for the costs of preparing and lodging the new CMS with the titles office?

It is important to note that body corporate consent is not required to the recording of a new CMS pursuant to an agreed allocation. The approval requirements set out in section 62 of the Act do not apply to an agreed allocation. The body corporate must simply comply with the legislative obligation to register a new CMS within 3 months of the allocation being notified (in accordance with section 176 of the Act).

Sometimes a body corporate will still be concerned to properly record the fact of the new CMS being lodged and, in such circumstances, my recommendation is that the committee pass a motion at its next meeting, or by voting outside committee meeting (VOC / flying minute), noting the agreed allocation and the fact of the new CMS being prepared and lodged with the titles office. A committee meeting may be required in any event to properly engage and instruct a solicitor to prepare and lodge the new CMS on behalf of the body corporate. That brings us to the next issue of the responsibility for the costs associated with preparing and lodging the new CMS.

Section 63 of the Act provides that the body corporate is responsible for the costs of preparing and lodging a new CMS (unless another section of the Act provides otherwise). There is no exception to the general position under section 63 of the Act in relation to the preparation and lodgment of a new CMS arising because of an agreed allocation. Accordingly, the body corporate is responsible for preparing and lodging the CMS at its own cost.

This often comes as quite a surprise to the committee given that an agreed allocation only benefits the lot owners involved and the body corporate may have no reason (other than the reallocation itself) to register a new CMS in the 3 months following notification of the agreed allocation. Nonetheless, the statutory obligations of the body corporate are clear in this regard and, whilst the owners providing the notification can be asked to contribute to the cost, the body corporate cannot insist upon it if the owners decline.

    Article Written by Jarad Maher (27th April 2021)

     

    Liability limited by a scheme approved under Professional Standards Legislation
    Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

     

     

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    Changes to NSW Strata Laws

    CHANGES TO NSW STRATA LAWS

     

    There are now 81,717 strata schemes registered in NSW and every year this number grows by more than 1,000 across both Sydney and regional NSW. 

    Minister for Better Regulation, Kevin Anderson, has stated that, with the continued surge in popularity of apartment living, the NSW Government expects over half the population of Greater Sydney to be living in strata titled apartment towers, townhouses and blocks of flats by 2040. 

    The following changes to the Strata Schemes Management Act 2015 commenced on 24 February 2021: 

    1. Owners of multiple lots can appoint a single proxy – a person who owns more than one lot in a scheme may appoint a single proxy to vote on behalf of all their lots (to prevent the limitation on the number of proxies a person can hold stopping this from occurring);
    2. Proxies are still valid for adjourned meetings – a proxy that is appointed for a meeting that is adjourned is still valid for the reconvened meeting;
    3. Secret ballots – must not be disclosed as part of an inspection of a strata scheme’s records, unless ordered by the NSW Civil and Administrative Tribunal (NCAT) or a Court;
    4. Providing the by-laws to tenants – strata laws are now consistent with residential tenancies laws to clarify that a landlord must provide the strata scheme’s by-laws to a tenant before entering into a lease. 

    There is a further amendment Bill before Parliament that is expected to become law in mid-2021 which will introduce the following changes:

    1. An owners corporation will be able to authorise, by way of an ordinary resolution, the installation of sustainability infrastructure on common property, such as: 
      • the installation of solar panels,
      • increasing the recovery of recycling of material,
      • reducing the consumption of water,
      • preventing pollution and greenhouse gas emissions, and (e) facilitating the use of sustainable forms of transport.

    2. Any by-law or a decision by an owners corporation that would unreasonably prohibit the keeping of an animal on a lot will have no force or effect. However, the regulations may specify circumstances in which the keeping of an animal may unreasonably interfere with another occupant’s use and enjoyment of the occupant’s lot or common property (e.g. a dangerous dog). 

    3. An owners corporation will need to serve a copy of any NCAT application it receives on each owner, instead of just placing a copy of the application on the noticeboard. 

    4.NCAT will have the power to require a person to pay a penalty of up to $5,500.00 for breaching an order made by NCAT. 

      Article Written by Col Myers (January 2021)

       

      Liability limited by a scheme approved under Professional Standards Legislation
      Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

       

       

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      Part 2: Who Pays For The Costs To Defend A Defamation Claim Involving a Committee Member?

      PART 2: WHO PAYS FOR THE COSTS TO DEFEND A DEFAMATION CLAIM INVOLVING A COMMITTEE MEMBER?

      It makes sense to think that any claim made against you while performing your duties as a committee member should be defended at the cost of the body corporate (or their insurer).

      But, think again.

      Insurance

      The insurance for a community titles scheme will generally contain a policy covering office bearer’s liability. This policy is designed to provide protection to committee members against losses arising from their conduct performed (or not performed, as the case may be) during the course of carrying out their committee duties.

      However, this policy will generally contain an exclusion from protection for defamation. This means that if a defamation claim is made against a committee member, the insurer will generally not provide cover for any costs incurred defending that claim.

      Body corporate

      There are statutory restraints regarding how a body corporate may apply its funds.

      The primary functions of a body corporate includes administering the common property, enforcing the community management statement and carrying out other functions as required by the body corporate legislation.

      Body corporate funds may only be used to undertake these statutory purposes, and cannot be used for other purposes however worthwhile those other purposes may be.

      Paying for costs incurred by a committee member defending (or initiating) a defamation claim are not usually considered costs that fall within the functions of a body corporate as interpreted by adjudicators.

      The body corporate’s duty to act reasonably also applies to the way that the body corporate chooses to spend its money and the circumstances where it might be reasonable for a body corporate to pay the legal costs of a committee member arising from a defamation claim are limited.

      In the event that a body corporate were to pay the costs of a committee member arising from a defamation claim, it is likely that an adjudicator would order a body corporate to recover those costs, should an adjudication application be made.

      What should I do?

      Before a body corporate makes any payment for costs incurred by a committee member in a defamation claim, it should obtain legal advice, otherwise the body corporate may be embroiled in a dispute in the Commissioner’s Office, despite any good intentions.

      If you are a committee member and are not protected from liability for a defamation claim by the body corporate legislation (see our previous article here), it is unlikely that a body corporate will be allowed to pay for costs incurred by you to defend that claim.

      However, if a committee member is required to defend a defamation claim, the circumstances surrounding the claim may make it appropriate for the body corporate to pay for any costs incurred, and legal advice should be obtained about the committee member’s position about the recoverability of costs.

      Article Written by Brendan Pitman (January 2021)

       

      Liability limited by a scheme approved under Professional Standards Legislation
      Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

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      Part 1: When Are Committee Members Liable for Defamation Claims?

      PART 1: WHEN ARE COMMITTEE MEMBERS LIABLE FOR DEFAMATION CLAIMS?

       

      Sections 101A and 111A of the Body Corporate and Community Management Act (Qld) 1997 are the two most important sections about avoiding liability for claims made against committee members in Queensland.

      Those sections have the following headings: “Protection of committee members from liability” and “Protection of body corporate and committee from liability for defamation”.

      The ‘protection’ from claims given by those sections is however very limited and committee members must tread carefully to avoid exposure to potentially expensive legal action.

      General ‘protection’

      Section 101A gives committee members general protection from civil liability for claims made. Importantly, this section does not extend to protect a committee member from criminal liability.

      If you are a committee member and a claim is made against you, the answers to the following questions determine whether you are protected:

      1. Did you act (or fail to act) in good faith?
      2. Did you act (or fail to act) without negligence?
      3. Were you performing your role as a committee member at the time of the act (or at the time of the failure to act)?

      These questions are not simple and require an intimate understanding of the law, but if you answered ‘no’ to any of those questions, you may not be protected from a civil claim.

      Even if you answered ‘yes’ to all of those questions, the general protection does not apply to claims regarding the publication of defamatory matter by a committee member.

      So, if a claim is made against a committee member about the publication of defamatory matter, section 111A is the only section that may give protection to a committee member from that claim (in addition to any defences the member may have under defamation legislation or the general law, addressed further below).

      Specific ‘protection’

      Section 111A gives committee members protection from liability for defamation, but only in specific circumstances.

      Those circumstances are where the committee publishes required material for a general meeting of the body corporate and that required material contains defamatory matter.

      ‘Required material’ is defined to include:

      1. a motion (including the substance of a motion) submitted other than by or for the committee for the general meeting;
      2. an explanatory note for such a motion that is prepared by the submitter of that motion.

      Some important limitations to the protection that can be observed at this point include:

      1. the protection does not apply to committee meeting material;
      2. the protection does not apply to general meeting motions submitted by the committee;
      3. the protection does not apply to all material that may be published by a committee, such as an explanatory schedule prepared by the committee and published with the general meeting material.

      A possible scenario is where a committee member submits a motion for a general meeting in their capacity as lot owner and that motion contains defamatory matter. That person may seek to rely on the protection from a defamation claim they enjoy in their capacity as committee member, however the legislation has closed that loophole by excluding that person from benefitting from the protection ordinarily given by section 111A.

      Defamation Act

      Section 24 of the Defamation Act provides that a defence under that Act (including under the general law) is additional to any defence or exclusion of liability available to a person under other law.

      This means that, if defamatory matter is published outside of the limited protections offered by s111A of the body corporate legislation, the Defamation Act (Qld) 2005 and the general law may provide a committee member with a valid defence to a defamation claim.

      What should I do?

      There are less protections available to committee members from defamation under the Body Corporate and Community Management Act (Qld) 1997 than may be first thought.

      Additionally, many people are surprised to learn how broad the concept of a defamatory statement is, and when a Court will consider material contains defamatory matter. Anything that lowers the standing of a person in the eyes of others, or might cause people to shun or avoid the person, will be considered defamatory. Accordingly, great care must be exercised before publishing material (whether verbal or in writing) which paints somebody in a negative light.

      Whether you are a committee member or not, it is important that you seek legal advice before publishing any material that may contain defamatory matter as the risk of doing so may result in you facing a possible expensive defamation claim with limited protections under the legislation to defend the claim.

       

      Article Written by Brendan Pitman (January 2021)

       

      Liability limited by a scheme approved under Professional Standards Legislation
      Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

       

       

      GET IN TOUCH

      Tel:          +61 7 5552 6666

      Fax:         +61 7 5528 0955

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      Postal:      PO Box 1876, Southport QLD 4215

       

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