- This topic has 6 replies, 5 voices, and was last updated 2 years, 5 months ago by .
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Topic
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A lot owner owes $40K in levies. Has never complied with court orders and has used the extensions due to Covid lockdown to extend the process and ignored efforts by SC, SM and solicitor to agree on a payment plan. He has never explained or communicated the reason for the default or that he intends to deal with it.
The SC must decide to proceed with the creditor’s petition or let the arrears accrue with the 10% interest and recoup the amount owed to the OC when the unit is repossessed/sold.
It is not straightforward as forcing bankruptcy due to a concern about other debts/lack of equity etc mean the debt may not be repaid to unsecured creditors which the OC would become with the creditor’s petition.
It is thought the mortgagee may repossess but they have not answered solicitors’ letters indicating their intentions and financially the bank may prefer we force bankruptcy so they can repossess without the $40k liability that would be discharged on the sale of the property, ie outstanding levies and interest.
The resident may be paying his mortgage if nothing else, so this could go on for years.
If the current arrears are removed as part of the creditor’s petition, this individual is unlikely to cooperate with the Trustee, so it could drag on and on. And if there is no equity in the unit, the Trustee may not force the sale anyway meaning we have lost the $40K, the bankrupt is free of the debt and he will start another levy debt.
The whole process is crazy. Any advice out there would be greatly appreciated
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Replies
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Hi,
I feel that this is such an important question, and we’ve got no reply yet!
Body corporates are actually compelled to begin legal proceedings after 2 years (and not later than 2 years and 2 months) of overdue levies.
The following pages was helpful in detailing legal avenues (though in this case, it seems like you have already been through this part).
However these documents don’t explain what happens after you go to court.
This one might be the best information I’ve found so far:
Since the BC is an unsecured creditor, bankrupting the owner is only useful if there’s some money left over after everyone else has got ther share – and the BC is low in the list.
You would be better off if the mortgagee reposesses, then the purchaser pays outstanding BC debts and deducts that from the purchase price. They however (don’t seem to be) liable for your legal expenses in chasing the old debt.
Hope this helps a little,
Dallas
- This reply was modified 2 years, 7 months ago by .
I had alway thought that the process was to get a court judgement on the debt then “garnishee” any future sale of the property and that guaranteed the debt would be recovered.
But I am now reading that if bankruptcy is declared, the garnishing of the sale proceeds lapses and, as “et” suggests, you go down list of creditors.
Perhaps the best tactic is to get the garnishee order then do everything possible to keep the owner solvent. Meanwhile, you could alert local real estate and buyers’ agent to the possibility that the property might be sold, tell them how to contact the owner and let them do all the heavy lifting.
Unleash the hounds!
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
I’m in Victoria, our strata has an interesting case which I will share with you, one of our units owes around $20K to the OC which includes repairs we undertook in the apartment to stop sewage flowing into our common area, the tenant maintains she has an interest in the property but can’t prove it, the bank that hold holds the mortgage is reluctant to proceed with a sale of the property and the mortgagees have declared bankruptcy, our strata raises $140K per year so the debt is a problem, COM has tried through our solicitors to contact the bank to no avail.
This strikes me as a case where some mildly sensationalised media coverage might help: “Bank sniffs at $20k strata sewage repair debt.”
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
I wonder if this defaulter is up to date with his council rates? Councils can sell “land” to recover unpaid rates after 5 years. Would this extend to strata lots?
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