Published tribunal order
Tenancy Tribunal case 9050304 — Tenancy dispute in Ngaio, Wellington
Decided 12 Nov 2024 · Published 12 Nov 2024 · Application 9050304
Landlord favoured
- Unit Titles
Order
- Phillip George Dyhrberg must pay Bc 529949 $11,518.81 immediately, calculated as follows: DescriptionsApplicantRespondent Section 124 costs including GST and disbursements $11,066.82 Credit to be applied (in trust) $335.51 Appearance at the hearing ($250 per hour x 1 hour plus GST) $287.50 Filing fee$500.00 Total award$11,854.32$335.51 Total payable by Respondent to Applicant $11,518.81
Reasons
- Both parties attended the hearing which was held by teleconference on 23 October 2024.
- The Body Corporate has applied for recovery of unpaid levies, interest, costs and the filing fee from the Unit Owner.
Does the Unit Owner owe the levies claimed?
- A Unit Owner must pay all body corporate levies and outgoings payable for the unit. See sections 80(1)(f) and 121(1) Unit Titles Act 2010 (“UTA”).
- The Body Corporate has determined the levies payable and Unit Owner's share has been calculated according to their utility interest.
- The Body Corporate has fixed the due date for the levies to be paid, and the Unit Owner has not paid the levies by that date. See section 124(1) UTA.
- The original overdue levies were $6,784.50. The Body Corporate has provided records to prove that amount.
- Since filing the application, the Unit Owner has paid their outstanding levies.
Is the Unit Owner liable for interest?
- If a Unit Owner fails to pay levies by the due date, interest accrues on the unpaid balance. A Body Corporate may charge interest up to 10% per annum. See section 128 UTA.
- The Body Corporate has resolved to charge interest at 10% per annum on unpaid levies.
- The accrued interest has been paid by the Unit Owner.
Is the Unit Owner liable for costs?
- The Unit Owner’s liability for the costs incurred by the Body Corporate in recovering unpaid levies is established under section 124 UTA. This provision allows the Body Corporate to recover “any reasonable costs incurred by it in collecting unpaid levies” as a debt due by the unit owner. The judgments (of the District Court and Court of Appeal respectively) in Body Corporate 162791 v Cheah DC Auckland, CIV2014-004-0120, 24 June 2014 and Body Corporate 162791 v Gilbert [2015] NZCA 185, affirm that the Tribunal is required to order that reasonable costs incurred by the Body Corporate in recovering levies must be paid by the defaulting Unit Owner, with an objective assessment of these costs. Accordingly, based on section 124 UTA and case law, the Unit Owner is liable for the costs incurred by the Body Corporate in recovering unpaid levies.
- The Body Corporate Manager debt collection charges have been paid by the Unit Owner. The remaining claim relates to legal costs.
- The Body Corporate’s lawyer has been instructed since 5 November 2021 to recover overdue levies, costs, and interest from the Unit Owner, following a previous Tribunal Order. On 22 October 2022, the Body Corporate was successful against the Unit Owner in the Tenancy Tribunal (application 9034941). Later, on 28 August 2023, the Body Corporate secured a Final Judgment in the High Court against the Unit Owner. While the Unit Owner paid the judgment amount, it did not cover additional costs incurred by the Body Corporate in seeking recovery of the debt.
- As a result, the Body Corporate has brought a second claim against the Unit Owner to recover these additional costs. This approach has been endorsed by previous Adjudicators in the Tribunal. On 18 January 2024, the Body Corporate sent a letter of demand to the Unit Owner, and the same day, the Unit Owner offered to pay $1,000 per fortnight toward the outstanding debt. The Body Corporate’s lawyer responded the following day, stating that this proposal was insufficient and that the Body Corporate would proceed to file with the Tenancy Tribunal if full payment was not made by 25 January 2024. As the debt remained unpaid, a Tenancy Tribunal application was filed on 15 February 2024.
- On 27 March 2024, the Unit Owner requested a breakdown of the charges, which was provided by the Body Corporate on 12 April 2024. The Unit Owner also raised concerns about section 124 costs and requested further clarification, to which the Body Corporate’s lawyer explained that costs continued to accrue until full payment was made. The Unit Owner then requested a statement of payments, which was provided on 23 April 2024.
- Although there was no formal agreement between the parties, the Unit Owner continued to make instalment payments similar to those in a previously terminated payment plan. The Body Corporate chose not to renew this plan due to the Unit Owner’s history of failing to meet payment obligations. By 24 July 2024, the Unit Owner had paid the outstanding levies, but the payments were not sufficient to keep up with the Body Corporate's ongoing levy obligations.
- The Body Corporate say it has extended considerable leniency but, given the prolonged nature of the debt recovery, now seeks an enforceable order to control the recovery process.
- On 18 October 2024, a bill of costs detailing the Body Corporate’s lawyer fees and disbursements was emailed to the Unit Owner. This invoice also included a breakdown of the work completed. Time records associated with the fees charged are also on file for reference.
- The Unit Owner has contested the legal costs as excessive and unreasonable, claiming that the Body Corporate’s lawyers did not adequately provide a breakdown of these costs. The Unit Owner also argued that, despite financial hardship and efforts to repay the overdue levies, the Body Corporate has not waived the legal costs. However, the statutory framework does not require the Body Corporate to waive these costs due to personal circumstances. The Body Corporate’s primary responsibility is to ensure unpaid levies are fairly shared among all unit owners. While the Unit Owner’s situation is unfortunate, the Body Corporate is not legally obligated to waive the legal costs based on financial hardship.
- The Body Corporate is required by law to maintain a fair and timely collection of levies from all Unit Owners. Failure to pay levies on time places an unfair burden on other owners who comply, justifying a firm approach to debt recovery. There is no provision under the UTA that obligates the Body Corporate to demonstrate "understanding or empathy" towards Unit Owners who fall into arrears. Consequently, the Unit Owner’s financial situation does not provide grounds for the Body Corporate to reduce or waive the legal costs.
- The Tribunal does not have the discretion to waive reasonable collection or legal costs incurred by the Body Corporate once these costs have been proven to be reasonable. While the Tribunal empathises with the Unit Owner’s circumstances, it is bound by statutory provisions and judicial precedents, which do not allow for costs to be waived or reduced based on personal financial hardship.
- Under section 124 UTA, once levies are properly raised, both the levies and any collection or legal costs become statutory debts owed by the Unit Owner. These debts are non-discretionary and must be paid if they are reasonably incurred and necessary for the recovery of unpaid levies. Legal and collection costs are part of the statutory debt owed to the Body Corporate, and the Tribunal has no discretion to adjust or waive them.
- The Tribunal has reviewed the time records submitted by the Body Corporate’s counsel and has determined that the solicitor-client costs are reasonable. All costs claimed were directly related to the recovery of unpaid levies under section 124 UTA, and the Tribunal finds them justifiable in both scope and amount. As such, the Tribunal affirms the Body Corporate’s right to recover these costs from the Unit Owner.
- Although the Unit Owner has argued that the additional legal costs have significantly increased the debt owed, the Tribunal is bound by legal precedent to uphold the Body Corporate’s claim for reasonable solicitor-client costs. The Tribunal is required to follow higher court precedents, which confirm the Body Corporate’s entitlement to recover legal costs. Therefore, the Tribunal must enforce the award of legal fees, regardless of the financial impact on the Unit Owner.
- As the Body Corporate has succeeded in its claim, the Tribunal has ordered the reimbursement of the filing fee under section 176(1) UTA and section 102(4) of the Residential Tenancies Act 1986. The reimbursement of the filing fee is warranted due to the Body Corporate's successful claim.
- While the Body Corporate is not obligated to accept a payment plan, its representative has indicated that the Unit Owner may submit a proposal for consideration. The Body Corporate may choose to accept a payment plan at its discretion, but it is not legally required to do so.
- In conclusion, the Unit Owner is legally liable for the reasonable costs incurred by the Body Corporate in collecting the unpaid levies under section 124 UTA. The Tribunal has no discretion to waive or reduce these costs based on the Unit Owner’s personal circumstances. The Body Corporate is entitled to recover the total amount owed, including legal fees, with potential consideration of a payment plan at its discretion.