The Lodge Beenleigh [2006] QBCCMCmr 659 (14 December 2006)

Last Updated: 27 March 2007

REFERENCE: 0548-2006

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	20954
Name of Scheme:	The Lodge Beenleigh
Address of Scheme:	Jacobs Well Stapylton Road STAPYLTON QLD 4207

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Robert Morgan, the former Owner of Lot 108

I hereby order that within fourteen (14) days of the date of this order the Body Corporate for The Lodge Beenleigh reimburse the applicant, Robert Morgan, the amount of $93.02.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0548-2006

"The Lodge Beenleigh" CTS 20954

The Lodge Beenleigh community titles scheme (The Lodge Beenleigh) consists of 165 lots and common property. The community management statement for The Lodge Beenleigh indicates that the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation Module) applies to the scheme.

APPLICATION

Pursuant to the Body Corporate and Community Management Act 1997 (Act), this application was made by Robert Morgan, owner of Lot 108 (applicant) on 14 July 2006. The applicant sought orders against the Body Corporate for The Lodge Beenleigh (respondent) in the following terms:

To resolve a penalty incurred by the Gold Coast Body Corporate Specialists in Jan 25 2006 on the Body Corporate fees for the period 01-10-05 to 31-12-05 of $92.96 that has now escalated to $186.04 for unpaid Body Corp fees relating to the above period, as I took possession of the above address on 19-10-05 and the Gold Coast Body Corporate Specialists were notified on 21-10-05, they failed to notify myself of the non-payment of fees for 71 days of that period therefore incurring the penalty on 25-01-06.

PROCEDURAL MATTERS

In August 2006 the Commissioner’s Office attempted to organise a conciliation session to assist in the resolution of this dispute. Unfortunately all parties did not agree to conciliation.

Under section 243 of the Act, a copy of the application was provided to the Body Corporate and to all owners, with an invitation to the committee and all owners to respond to the matters raised in the application. A submission was made on behalf of the respondent and by eleven owners. The applicant inspected the submissions received and made a written reply (see sections 246 and 244 of the Act respectively).

A dispute resolution recommendation was made referring the dispute to departmental adjudication.

MATTERS IN DISPUTE

The application relates to financial discounts lost because of non-payment of body corporate contributions that accrued when the applicant purchased Lot 108. The facts of the dispute, as outlined in the application, submissions and reply to submissions, are as follows:

	On 21 September 2005 the applicant’s solicitors requested a body corporate information certificate, with financial and other information about the lot, pursuant to section 205 of the Act.
	On 28 September 2005 the Body Corporate provided this certificate, which showed there were no unpaid contributions at that date.
	According to Land Registry records, a settlement notice for the purchase of Lot 108 was lodged on 12 October 2005 and the transfer was recorded on 10 November 2005.
	The applicant says he took possession of the property on 19 October 2005.
	On 21 October 2005 the applicant’s solicitors send notification[1] to the Body Corporate of the change of ownership. This was received on 24 October, with the Body Corporate records updated on 25 October 2005.
	On 24 October 2005 the levy notice for the period 1 October to 31 December 2005 was issued to the previous owners in the amount of $464.81, with a discount of $92.96 available if the contributions were paid by the due date of 25 November 2005.
	On 25 January 2006 the applicant received a contribution notice for the January to March 2006 period in the amount of $465.34, with a discount of $93.07 available if the contributions were paid by the due date of 20 February 2005. The notice also included arrears for the previous period which had not been paid.
	On 8 February 2006 the applicant paid $372.27, which was the discounted amount of the January to March quarter. On 15 February 2006 he then paid $371.85, being the discounted amount of the October to December quarter.
	As the applicant was still in arrears, the Body Corporate determined he was not entitled to a discount for the January to March period. However the loss of this discount was waived. Accordingly, the April to June 2006 quarter notice including only the arrears of $92.96, being the lost discount for the October to December quarter.
	Payment on 18 April 2006 again did not pay the arrears and accordingly the discount for that period was lost, leaving arrears of $186.03 owing in the July to September notice.
	All arrears were paid on the sale of the lot.

The applicant says he contacted the body corporate manager (BCM) and was told that once the initial invoice is sent they do not reissue accounts to new owners. The applicant argues the BCM had 71 days from notification of the change of ownership to advise him of the overdue account.

The submission from the Body Corporate simply details the chronology of events and the amounts charged, paid and owing in respect of each contribution notice since the transfer for the lot. A submission by the new owner of Lot 108 says she believed all amounts owed when they purchased were deducted from the sale price. Owners’ submissions express various opinions:

	Six owners argue the applicant’s solicitors failed to identify all outstanding costs at the time of settlement and accordingly that the issue is for the applicant to address with his solicitor.
	Two say that the penalties for unpaid fees should be waived, with one saying that only the fees dating from settlement are the responsibility of the applicant.
	One says the onus is on the BCM to ensure prospective purchasers are informed about debts owing and it is unacceptable for the BCM to say that accounts are not sent to new owners.
	One does not comment on the merits of the application but notes that the applicant was treated the same as all other owners by the BCM in that the BCM does not return phone calls, hang up on owners, do not answer letters and give incorrect answers.

In his reply to submissions the applicant comments that two of the opposing submissions are by a committee member and the resident managers, and suggests that they are unreliable as a result.

JURISDICTION

Section 227 of the Act defines the allowable parties to a dispute under the dispute resolution provisions. At the time the application was lodged the applicant was an owner and therefore was a party to a dispute in respect of which an adjudicator could make an order. Although the applicant has since sold his lot, he still has a valid interest in that the fees are still in dispute. This situation is distinguishable from a dispute involving, for example, a by-law contravention, where, upon the sale of the party’s lot, an order regarding a by-law contravention would usually be irrelevant. Accordingly, I am satisfied that this is a matter which falls within the dispute resolution provisions of the legislation (see sections 227, 228, 276 and Schedule 5 of the Act).

Section 276(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about:

(a) a claimed or anticipated contravention of the Act or the community management statement; or

(b) the exercise of rights or powers, or the performance of duties, under the Act or the community management statement; or

(c) a claimed or anticipated contractual matter about -

(i) the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or

(ii) the authorisation of a person as a letting agent for a community titles scheme.
An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

DETERMINATION

The key issues in this matter are the responsibility for the October quarter contributions, and whether the Body Corporate was entitled to withhold discounts for unpaid contributions.

Applicable law

Section 93 of the Accommodation Module provides for the Body Corporate to levy contributions for each financial year. Section 94 then provides as follows for contribution notices:

94 Notice of contribution payable [SM, s 96]

(1) At least 30 days before the payment of a contribution, or instalment of a contribution, is required, the body corporate must give the owner of each lot written notice of--

(a) the total amount of the contribution levied on the owner; and

(b) the amount of the contribution, or instalment of contribution, of which payment is currently required; and

(c) the date (the date for payment) on or before which the contribution, or instalment of contribution, must be paid; and

(d) any discount to which the owner is entitled for payment of the contribution, or instalment of contribution, by the date for payment; and

(e) any penalty to which the owner is liable for each month payment is in arrears; and

(f) if the owner is in arrears in payment of a contribution or penalty--the arrears.

(2) The written notice under subsection (1) may also include notice about an amount payable by a lot owner to the body corporate for--

(a) a specially contracted service enjoyed by the owner; or

(b) an exclusive use or special right over common property enjoyed by the owner.

(3) A written notice under this section may be served on a lot owner at the lot owner’s address for service, or in the way directed by the lot owner.

Sections 95 and 96 of the Accommodation Module provide for discounts for contributions being paid on time and penalties (by way of interest) for late payment.

Section 97(3) of the Accommodation Module allows the Body Corporate to pursue unpaid debts against the person who was the owner of the lot when the debt becomes payable and a person who becomes and owner of the lot before the debt is paid.

97 Payment and recovery of body corporate debts [SM, s 99]
(1) If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt--

(a) the amount of the contribution or instalment;

(b) any penalty for not paying the contribution or instalment;

(c) any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.

(2) If the amount of a contribution or contribution instalment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2 year period, start proceedings to recover the amount.
(3) A liability to pay a body corporate debt in relation to a lot is enforceable jointly and severally against each of the following persons--

(a) a person who was the owner of the lot when the debt became payable;

(b) a person (including a mortgagee in possession) who becomes an owner of the lot before the debt is paid.

(4) If there are 2 or more co-owners of a lot, the co-owners are jointly and severally liable to pay a body corporate debt in relation to the lot.
(5) If an owner is liable for a contribution or a contribution instalment, and a penalty, an amount paid by the owner must be paid--

(a) first, towards the penalty; and

(b) second, in reduction of the outstanding contribution or instalment; and

(c) third, towards any recovery costs for the debt.

(6) If the body corporate is satisfied there are special reasons for allowing a discount of a contribution, or waiving a penalty or liability for recovery costs, the body corporate may allow the discount, or waive the penalty or costs in whole or part.

The Act defines a lot owner as the person who is, or is entitled to be, the registered owner of the lot. While the applicant was not the registered owner of the lot until the transfer was recorded on 10 November 2005, he was entitled to be the registered owner as soon as settlement occurred.

Responsibility for contributions and lost discounts

The applicant was within the category of owner from the date of settlement, and the Body Corporate could pursue contributions from him then although there was another registered owner.

The Information Certificate issued by the Body Corporate prior to purchase put the applicant on notice that contributions would fall due for the period 1 October to 31 December 2005. While at that time the date of issue of the contributions was 1 October (with a due date of 1 November 2005), the settlement statement dated 17 October 2006 clearly shows that the contributions were not yet paid for this quarter. The settlement statement included a proportional payment by the vendor for the first 17 days of the quarter. The Information Certificate stated that the body corporate legislation provides that a new owner becomes jointly and severally liable^[2] for any amounts due but unpaid when they become owner. Accordingly, the applicant knew, or should have known, that he was responsible for the contributions for that quarter.

While the contribution notice was not sent until 24 October 2005, after settlement, the Information Certificate foreshadowed that it would be issued on 1 October 2005, which was prior to settlement. Accordingly, it would have been logical for the applicant to assume that the contribution notice would be sent to the previous owner. If the applicant believed the notice would be sent to him, I am at a loss to understand why he did not contact the Body Corporate when he did not receive it.

Contributions are foreshadowed in the annual general meeting and responsibility for those contributions does not accrue solely by the receipt of a contribution notice. If, for example, a contribution is lost in the mail through no fault of the body corporate or the owner, the owner remains liable for the contributions. Owners should be aware, at least in general terms, that contributions are owing and contact their body corporate if they have not received a notice.

In some respects the conduct of the BCM is understandable. They sent the contribution notice to the address on the roll at the time of issue. The roll was updated promptly – the day after receipt. I do not consider that a body corporate has a responsibility to reissue contribution notices to a new owner – that is the responsibility of the previous and new owners.

However, in this case the BCM was informed on 24 October 2005 that the details in the roll had changed and on the same day sent the contribution notice to the old details. The Body Corporate is required under legislation to send the contribution notice to the address on the roll. In a BCM firm handling a large number of schemes it is likely that the individual responsible for updating the roll is different from the person who sends out contribution notices and so would not be aware that notices had just been sent to the old address. Accordingly, I consider that it is reasonable that BCMs have a clear process in place to check that any notices (including meeting notices and contribution notices) which were sent out from the body corporate between the time of receipt of the Form 8 and the time of the updating of the roll are forwarded to the new address for service.
I should note that I consider this responsibility only arises after the Form 8 has been received – although it would of course be helpful and good practice for a BCM to notify a new owner of any notice sent to the previous owner from the date the Form 8 was sent.

Section 97(6) of the Accommodation Module provides that the Body Corporate can allow a discount that would not otherwise be allowed if there are "special reasons" to do so. A body corporate should arguably use some restraint in using this section, because the discounts and penalties are the body corporate’s primary means of encouraging payments in a timely manner and to ensure the scheme remains financially viable. The Body Corporate arguably showed good faith in allowing the discount for the January-March quarter but in the circumstances there was some justification to allow the discount for the October-December quarter or the later discounts.

Conclusion

I am satisfied that the applicant was responsible for the October-December 2005 contributions. He was clearly on notice that the contributions were owed in October with a due date in November, and he had been paid by the previous owner for the portion of the quarter prior to settlement. The applicant should have simply paid the contribution after settlement or checked with the Body Corporate if he felt he should have received a contribution notice. The applicant took on the risk of losing discounts for timely payment by ignoring his responsibility for his contributions and taking no action until the next contribution notice arrived in January.

However, I am also concerned that the Body Corporate failed to acknowledge that the contribution notice was sent to the previous owner on the same day it was notified that there was a new owner. While it is administratively reasonable that the roll was not actually updated until the 25 October 2005, the BCM should have ensured that any notices sent to Lot 108 after receipt of the notification of a new owner but before the roll was updated were forwarded to the new owner.

In summary, I am of the view that both the applicant and the Body Corporate (through the BCM) have been remiss in respect of their responsibilities. The two disputed discounts amount to $186.03. In the circumstances I consider it is just and equitable that the each party be responsible for 50% of this amount. As the disputed amount was paid by the applicant, I have ordered that the Body Corporate reimburse the applicant. If the Body Corporate does not have the current address for the applicant (which changed following the sale of Lot 108) they should contact this Office.

I would, on a more general note, encourage all owners to pay all disputed contributions as soon as they are aware of them. While it may not be the normal practice in the business world to pay disputed accounts, doing so in the body corporate context avoids the owner losing discounts, incurring penalties and debt collection processes, and losing voting rights while they pursue their dispute with the BCM, the Committee and, if necessary, this Office. Disputed amounts can be reimbursed if found to be incorrectly charged.

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^[1] BCCM Form 8

^[2] That is, the debt may be enforced against the former owner and the new owner obligators jointly or against either of them separately.