What is a body corporate special levy?
The normal body corporate levies payable by unit owners are the Administrative Fund levies for the everyday running costs of the body corporate, and the Sinking Fund levies which are saved for future capital works on the building which comprises the Community Titles Scheme. To use business terminology, the Administrative Fund is the trading account and the Sinking Fund is the capital account.
However, where an unbudgeted capital expense looms, or planned works or projects will cost more than is comfortably available in the Sinking Fund, a body corporate sometimes must raise additional funds from the unit owners. The extra money enables the body corporate to pay for the expense.
The money is raised at a meeting of the unit owners which considers a motion to agree to a “special levy” being charged (or “struck”).
Examples of special levies are where the owners want a building paint job which is more expensive than budgeted for; or where there is an unforeseen major leak or problem in the building which is not covered by insurance.
If the body corporate meeting approves the special levy, a bill is sent to each unit owner for their share of the levy. If a unit is under contract at the time, this is where it gets interesting.
Who pays special levies before the contract date?
The standard contracts require that special levies are to be paid by the seller where they are struck by the body corporate on or before the contract date.
The seller is also responsible for paying any other body corporate debt such as recovery costs owing to the body corporate for non-payment of levies on time.
Who pays the special levies after the contract date?
The contract provides that the buyer is liable for any special levy struck after the contract date. This can become a major trap for a buyer if a seller does not notify them that a special levy is about to be struck. Further, a seller has no obligation to notify a buyer of this situation arising.
We recommend discussing this issue with your solicitor prior to signing any contract for purchase of a lot in a community title scheme. There are ways that you can protect yourself from becoming required to pay an unexpected, and potentially large body corporate special levy.
Can I get out of the contract if I find out special levies have been struck after the contract date?
The answer for a straightforward contract without any relevant special conditions is usually NO.
There are ways to protect yourself, such as using a a Due Diligence condition. For more info see here.
The Property and Conveyancing team at FC Lawyers can review your contracts before you sign them, so contact us at any time to discuss.
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