Body Corporate, Case Study
Case Study: By-law overreach stalls at a lot’s front door
Article by admin
Current as at September 1, 2026
This article appeared in the QLD Strata Magazine published by LookUpStrata, August 2026
Ernest Hemingway famously wrote about the two-step process of going bankrupt: gradually, and then suddenly.
The same warning could be made for a body corporate that doesn’t keep an active eye on its income against its compulsory expenditure.
There haven’t been too many horror stories about the financial, and consequent material, demise of strata schemes in years gone by, but a few have caught my eye in recent months.
Maybe they have always been there and I haven’t seen them, or maybe they are suddenly media worthy. Or perhaps – for whatever reason – some poorly managed chickens are coming home to roost for some unfortunate bodies corporate.
In essence, if a body corporate is not disciplined in keeping on top of the levies that it is owed, abiding by the statutory requirement to maintain common property, and meeting compulsory expenditures such as insurance, it is a recipe for disaster and collapse.
While every situation is distinct, for some true horror stories try looking up Couran Cove on Stradbroke Island or Cairns Tropical Resort in Kuranda. Or perhaps try this little 61 sqm gem with body corporate levies of just under $1,000 a week in Surfers Paradise.
How do these things happen?
Lot owners who fail to pay their levies will quickly run-up steep interest costs, which at law accrue at 30% per annum (or 2.5% per month). Running hand-in-glove with non-payment of body corporate levies is usually non-payment of rates, water bills and land tax.
In smaller properties, when you add in a loan that may be secured against the property itself, there is the very real possibility that the liabilities of the lot become more than the equity left in the property.
These so-called ‘zombie lots’ can end up haunting a body corporate starved of the income required to run a properly functioning scheme.
While banks may have a security interest to ensure they get paid first in any distressed sale, everyone else has to wait and share whatever is left proportionally.
We’ve written before that chasing levies does not always require applying the legal blowtorch; however, committees are required by law to commence a proceeding to recover a levy once it has been outstanding for more than two years and two months. There are good reasons for this – and some of those are apparent in the buildings mentioned earlier.
In a situation where lot owners are not paying their levies on time, the daily cost of operating the scheme may not change, but it is being paid for by proportionately fewer lots.
In the simplest possible terms, if half of the owners don’t pay what they owe, the contributions required from the other owners doubles.
That is because body corporate bills don’t go away. Insurance MUST be paid. There are maintenance and operating costs that MUST be paid. A body corporate cannot just turn off the tap as it has statutory and contractual obligations to meet.
If it doesn’t have the money to meet them, what happens?
A committee facing income pressures may decide the best course of action is to pare back its outgoings or delay expenditure on maintenance and other vital expenses.
This is a path that only leads to ruin.
Maintaining common property, insurance, capital expenditure – these are not areas of discretionary spending. These costs must be met.
Serving on a body corporate committee should not be regarded as a spectator sport. Nor should owning a lot. Ignorance may be bliss, but when the management of your asset is in the hands of other people, it’s worth keeping an eye on what is going on.
Committee members play an important role in protecting the viability of their scheme, and that can mean taking tough decisions when financial problems arise.
The strata disasters mentioned here were not overnight incidents. They were slow-moving train wrecks that took years to eventuate and could have been stopped in their tracks.
But nothing will change unless there are eyes on the ball.
It’s a very particular area of law and securing legal advice early can help prevent serious consequences down the track.
Read more from industry experts in The QLD Strata Magazine:
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