COVID-19 Update: Bodies Corporate Granted Temporary Financial Relief Powers

The Queensland Government have now enacted some much welcomed amendments to the Body Corporate and Community Management Act 1997 (“BCCMA”) to help bodies corporate navigate their way through the financial burdens brought about by COVID-19. The amendments are only applicable up to the 31st December 2020 upon which they will expire.

The Justice and Other Legislation (COVID-19 Emergency Response) Amendment Act 2020 makes five important amendments to the BCCMA as follows:

1. Power to vary Sinking Fund Budgets and Levies

The body corporate may, by ordinary resolution, reduce the current sinking fund budget (and therefore reduce sinking fund levies) to exclude forecasted expenses for capital repairs intended to be carried out in future years. The body corporate must ensure that the sinking fund contains sufficient funds to carry out any imminent repairs and must increase levies to take into account these suspended amounts when the temporary provisions expire. Where the budget is reduced, the body corporate must refund the equivalent amount of sinking fund levies that have already been paid.

2. Levy Due Date Extensions

The committee may extend the due date of levies to a date not beyond the end of the body corporate’s financial year for one or more owners if they are satisfied that those owners have suffered financial hardship as a result of COVID-19. Alternatively, they may decide to extend the due date for all owners. The committee must ensure that the body corporate continues to have sufficient funds to carry out business on behalf of the scheme. Lot owners whose due dates are extended, will remain ‘financial’ and can therefore vote and nominate for committee positions during that time.

3. Penalties

Penalties cannot be charged on late payments of levies during the relevant period (21 May 2020 to 31 December 2020). This is the case for levies charged both before and during the relevant period. Penalties that have already accrued for previous periods will however still apply.

4. Commencing Proceedings for Unpaid Levies

The requirement for bodies corporate to commence proceedings against a lot owner where levies have been outstanding for 2 years or more has been suspended, although bodies corporate can still choose to commence proceedings if they wish.

5. Power to Borrow

The body corporate now has the ability to borrow double the funds they were otherwise entitled to, under the authority of an ordinary resolution (as opposed to a special resolution).

Some other points to consider:

• Those who are buying or selling a lot in a community titles scheme should remain incredibly vigilant with respect to the sinking fund information that is disclosed or should be disclosed in the Disclosure Statement and the due dates of levies. Buyers should be aware that low sinking fund levies might increase substantially when these temporary provisions expire and sellers should disclose the potential for future liability to buyers. We would recommend that physical inspections of the body corporate records be carried out where possible to ensure that the correct information is relied upon.
• Caution should be exercised by bodies corporate in carrying out these additional powers. Other than those described, all other provisions requiring bodies corporate to spend money (such as insurance requirements and maintenance and repairs) remain the same and bodies corporate have an obligation to ensure that they remain financial enough to meet these obligations.
• The Justice and Other Legislation (COVID-19 Emergency Response) Amendment Act 2020 also amends a number of other pieces of legislation in response to the COVID-19 emergency. Should you require more information about the Justice and Other Legislation (COVID-19) Emergency Response) Amendment Act 2020 generally, please contact a member of our team in our Townsville or Sunshine Coast offices.

If you are a member of a body corporate, a committee or a buyer or seller of a unit and want more information, we are here to help. Please contact Maxine Fenlon, David Patton or another member of our Property Law team.