Can a body corporate recover legal fees in making a claim for unpaid contributions?
When a body corporate takes legal action to recover unpaid contributions, it is quite common for them to end up out-of-pocket in respect to their legal expenses. These legal expenses along with the non-payment of body corporate levies not only place a financial burden on bodies corporate, but also on diligent paying lot owners. However recent court rulings have allowed for a body corporate to recover the costs of their legal fees when making claims for unpaid contributions.
What expenses can be recovered?
Legislation and common law in NSW provides a body corporate with this right recover these costs. Due to a recent ruling in the Supreme Court, expenses incurred when claiming unpaid contributions can include all legal costs and disbursements, as well as all other expenses incurred in the debt recovery process.
Are there limitations on what these expenses can entail?
There are certain limitations in making a claim for legal expenses in for the recovery of unpaid contributions. The Supreme Court held that the costs must be incurred only during the recovery of the contribution. Also, the legal costs and disbursements can only be claimed if they were “reasonable in amount” and “properly and reasonably incurred”.
To obtain judgment for its legal expenses, a body corporate will now need to prove this in order to succeed in a claim for the recovery of their legal expenses.
What do these changes mean for body corporates and other owners?
These new changes mean that an Owners Corporation will not be out of pocket by commencing legal proceedings. This is great news for other owners in the scheme who keep their levy payments up to date, since they no longer have to be burdened with paying the bill for any court actions against someone failing to pay up.
In summary, when going to court to recover outstanding contributions, such as unpaid levies plus any interest due, a body corporate is now able to recover the cost of the action that was “reasonably” incurred
If you are experiencing any issues relating to unpaid contributions, our experienced team of lawyers here at The Quinn Group can assist you to understand your rights and to make a claim. For further information on recovering legal costs, submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to arrange an appointment. You can also visit our dedicated website All Strata Solutions.