13 May 2015 Who Pays after a Lot sells?
Who is liable for Owners Corporation levies when a Lot has been sold?
Introduction:
Recovery of outstanding owners corporation (body corporate) fees and charges is one of the most common matters litigated in the Owners Corporation List at VCAT. Generally, these proceedings are procedural and relatively straight forward. However, complexities may arise when a property has been sold and questions asked as to whether it is the vendor or the purchaser who is liable to pay the owners corporation fees.
Owners Corporation 1 PS506584A -v- Sokomoto Pty Ltd & Ors (Civil Claims) [2009] VCAT 764 in May 2009 was one such case and raised the issue of whether a lot owner’s duty to pay owners corporation fee extends to a period before the owner came into possession of the property.
Background of the Case:
Sokomoto Pty Ltd (“Sokomoto”) took possession of the property at settlement on 16 September 2007 and shortly after, owners corporation fees for the lot fell due. While Sokomoto was the lot owner at the time the fees fell due, they were not in possession of the lot for the period that the fees related to and as such they did not believe that they should have to pay the entirety of those fees.
Accordingly. Sokomoto joined the Vendor and the Purchaser's Solicitors to the action. The Vendor was joined as they were in possession at the time the owners corporation fees were accrued, and the solicitors were joined because if it was found that Sokomoto was liable for the fees, then they should be liable for not including that in the usual adjustments at settlement.
The solicitors for the owners corporation submitted that Sakamoto was liable for the owners corporation fees regardless of whether they were in possession of the lot in light of s26( 1) of the Owners Corporations Act 2006 (“OC Act”) which provides that:
The owners for the time being and any purchaser in possession of, and any person entitled to receive the rents and profits from, a lot are liable to pay any outstanding fees, charge, contribution or amount owing to the owners corporation in respect of that lot.
Alternatively, the owners corporation submitted that the owners were liable to pay the owners corporation fees pursuant to s29(9) of the Subdivision Act 1966, which is almost identical in its wording of s26(1) of the OC Act which states:
The owners for the time being and any purchaser in possession of, and any person entitled to receive the rents and profit from, each lot are liable to pay any outstanding charge contribution or amount owing to the body corporate in respect of that lot.
Decision:
Ultimately the first argument was disregarded by the Tribunal as the OC Act came into effect 16 days after the settlement date. Given that s28(1) of the OC Act could not apply retrospectively, it would be unable to apply in this matter.
However, as the Subdivision Act was in force at the settlement dale, s29(9) of that Act did apply, and subsequently Sakamoto was found liable for the fees which fell due after settlement, regardless of when they accrued .
At the time of making their decision, the Tribunal stipulated the similarity between s26(1) of the OC Act and s29(9) of the Subdivision Act, as well as the fact that should the settlement date not have been outside the scope of the OC Act, then it would have applied in the same way as the Subdivision Act had been applied.
Conclusion:
No decisions were made in respect of the Vendor or the Purchaser's Solicitors and so the level of liability which could be attributed to them remains unclear. However, this case clearly highlights the importance of obtaining proper advice prior to selling or purchasing any property that is subject to an owners corporation.