Tough Economic Times - How Financially Prepared Is Your Body Corporate?

As we all sit in our isolated bubbles waiting for the Coronavirus pandemic to end, the stark reality of just how interconnected our lives really are starts to sink in. We are all part of a domino chain whether we want to be or not. One week into national lock-down and the financial pain for many body corporate owners is starting to bite. Hard. A body corporate relies on owner funds (levies) to operate and these have the potential to slow to a trickle if not managed well during tough economic times.

The Domino Effect of Levy Arrears

When an owner is affected by a drop in income, be it salary, or rental income from their residential or commercial unit, it could result in devastating effects for both the owner and the body corporate community.

For the owner it can mean rising penalty interest accruing, escalating legal fees, statutory demands and ultimately as a final resort, repossession of their unit to pay outstanding levies and accrued costs. These are heart-breaking times for anyone involved in the process.

Rising levy arrears will affect the body corporate's ability to meet contractual costs necessary to keep the building safe, hygienic and compliant with Warrant of Fitness obligations. If the building becomes non-compliant, this will flow on to insurance requirements, and a loss of cover will most likely place all owners in breach of their mortgage obligations.

The Fence at the top or the Ambulance at the bottom?

The body corporate manager will need to tightly manage cash-flows, review all cash reserves, budgeted items and free up cash-flows for essential services, to keep the building operating and create a window of time for owners to organise any financial assistance they may need.

Owners finding themselves in financial difficulty need to act quickly. Talk to your Body Corporate Chairperson, Committee or Manager, let them know your situation. It may be possible to arrange a payment plan, or there may be other options to help owners meet levied contribution obligations. If your body corporate has agreed to a robust levy collection process, and your body corporate manager has been actively collecting levies on time, it will mean that your body corporate should already be in good financial shape with nil, if not minimal arrears.

Strong leadership, support and collaboration.

There will be difficult decisions ahead for committees, and this is a time for strong leadership, empathy and collaboration. Proactive steps should be taken early to mitigate rising levy arrears, poor cash-flows and financially stressed owners. The body corporate manager has a pivotal role in providing support, guidance and leadership to help committees and owners get through these challenging times in the best possible shape. This is not a time to sit and wait, time is money.

If you are worried about your body corporate's cash-flows or have difficulty collecting levies – contact Everything Body Corporate to find out what you can do.