The Queensland Government has recently established a review of Queensland’s property laws with a view to reducing red tape, regulation and property law duplication. This review examining legislation including the Property Law Act 1974, Land Sales Act 1984 and the Body Corporate and Community Management Act 1997. See the Queensland Government (Department of Justice and Attorney-General) website for more detailed information.
In WA public feedback on proposed reforms to Western Australia’s strata title laws has recently closed with the consultation period running from 31 Oct to 16 January 2015. Landgate has been tasked to deliver reforms to the Strata Titles Act 1985 (“STA”) in 2015. A copy of the Consultation Paper can be found on the Landgate website.
As is the case with any legislative review, opinions are wide and varied due to the large number of stakeholders potentially affected by any resultant amendments to existing legislation. In considering these consultation papers, one issue that drew my attention was the examination of body corporate debts and reserve funds.
Reserve Funds (aka Sinking Funds)
At present, section 36(2)(a) of the STA (WA) empowers the strata company to establish a reserve fund to accumulate funds to meet major expenses which are likely to arise. However, having a reserve fund is not a mandatory requirement.
Other Australian jurisdictions including Qld, NSW, SA and VIC have mandated requirements in this regard. Despite these requirements, there are bodies corporate that do not properly budget for planned long term maintenance leading to significant delays in crucial maintenance activities; sometimes resulting in safety concerns for residents.
In the WA Landgate consultation paper some drawbacks to mandating reserve funds are identified, one of these being a scenario where a levy is approved but payment is not made by everyone. The strata company must then recover the unpaid levies as debts from those proprietors who have not paid.
It is scenarios like this that may have contributed to the inclusion of questions in the Queensland options paper which consider debt recovery issues; such as specifying a scale of costs for debt recovery actions taken by the body corporate to collect unpaid contributions and penalty interest.
Another issue is how long bodies corporate should allow unpaid contributions to accrue before taking steps to recover these amounts (amongst other items). After all, it is imperative that bodies corporate have sufficient funds to meet their ongoing responsibilities and consequently there is the ability to take recovery action for these outstanding amounts.
Regardless of the nature of the levies being charged, identifying non-payment by lot owners and implementing rigorous debt recovery processes and procedures is an integral part of ensuring that strata titled properties are properly maintained, thereby protecting the investment of the property owners as well as their safety.
With an aging population seeing some retirees struggling to find the funds to pay for their share of building maintenance and upkeep, some residential apartments are simply falling into disrepair.
Compounding this issue is the population influx into some Australian jurisdictions, with strata titles now comprising one third of new lots created in Western Australia, playing a significant role in providing flexibility in development as urban and rural land use changes to smaller lot sizes and multilevel apartment living.
A spotlight needs to be shone on the management of outstanding body corporate debts for both body corporate managers, as well owners and residents of strata titled properties.
With reforms pending in both WA (including broadening the powers of the State Administrative Tribunal in the resolution of strata title disputes) and Queensland, it is definitely a case of ‘watch this space’!
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