Recovery Costs of Chasing Unpaid Levies – What can a Body Corporate Claim?

It is common for a body corporate to try to pass on to a lot owner the costs of recovering from the lot owner outstanding levies.  But a recent case of the District Court of Queensland has highlighted that bodies corporate need to be very careful about what recovery costs they purport to pass on.

Thompson v Body Corporate for Arila Lodge [2017] QDC 134 is a case about section 145 of the Body Corporate and Community Management (Standard Module) Regulation 2008. Section 145(1)(c) provides that:

“If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover…the following amounts as a debt…any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount”.

In this case, the body corporate obtained a summary judgement in the Magistrates Court for recovery of approximately $16,000.00 in unpaid levies plus an additional $32,000.00 in recovery costs.  The recovery costs consisted of legal fees, debt collector fees and the body corporate’s fees in trying to recover the levies from the lot owner.

The lot owner did not dispute that the unpaid levies were payable by the lot owner. However the lot owner appealed to the District Court on the basis that the recovery costs were not “reasonably incurred” and therefore the judgement in relation to the recovery costs, should be quashed.

The court determined that firstly, the onus is on the body corporate to prove that the costs are reasonable and the lot owner is to be given the benefit of the doubt.  Secondly, recovery costs that can be claimed include ‘all costs reasonably incurred of a reasonable amount’.  The court therefore said that determination as to the reasonableness of recovery costs requires scrutiny of the individual items claimed and a global assessment will not suffice.

As the body corporate could not establish that the recovery costs were reasonably incurred, the appeal was allowed insofar as it related to the recovery costs and the matter was referred back to the Magistrates Court for trial in relation to that aspect.

The case serves as a reminder to bodies corporate how critical it is that bodies corporate keep accurate and detailed records of costs and the purposes as to why those costs were incurred.  Bodies corporate should also keep in mind that not all costs can be passed on.  They must be costs of a reasonable amount and must be directly related and necessary to the recovery process.

We can assist bodies corporate with both levy recovery and with determining what costs can be claimed.  Please contact Maxine Fenlon or David Patton of our office for more information.