Are you acting as an unpaid banker for your ratepayers? Liquidation and Bankruptcy – the rates collection alternative to sale of land under the LGA

MDP A recently established Australian Law firm; Noted for its triumphant debut; Meeting clients’ standards and objectives: –Delivery of high standard of service –Drive outcomes to achieve commercial objectives –Sharing knowledge and resources with clients Extensive experience with local government; Size and structure allows for flexibility in service; Clients have direct contact with Directors.

MDP’s Sale of Land Service Step 1 Giving initial notice of intention to sell to owner, encumbrance holders, lessees and trustees; Step 2 Initiating of selling procedures to allow Auction of Land to proceed (done within 3 and 6 months after giving notice under Section 1041); Step 3 Auction Process and conveyance of land after auction; Provided in conjunction with Integrity Debt Management (IDM)

Sale of Land Service Step 1 Provision to Council of advice; setting out of full details of steps to be undertaken; statutory compliance requirements; All relevant searches; Drafting notices in proper form to owner and other parties required to be notified; Providing Notice to Owner of the Land and to other parties required to be notified; General compliance advice to Council.

Sale of Land Service Step 2 Drafting a notice of time and place for intended auction; Advertising notice in local paper; Producing notice for attachment to land; Service of notice on owner and other parties required to be notified; Providing copy of notice to Council to be displayed at Council’s public office; Certification to Council of procedural compliance to date; Dealing with all inquiries received, and referral to Council where appropriate.

Sale of Land Service Step 3 Advise as to the obligation under Section 1044 in respect of each allotment, including advice as to valuation requirements where relevant; Arrange valuation of land, if required; Instruct auctioneer; Settling auction terms; Settling terms of contract;

Sale of Land Service Step 3 cont. Attendance at auction; If land not sold at auction, negotiation with bidders post auction; All matters necessary to effect settlement with buyers including liaising with buyer, and buyer’s financier for settlement; Notice to Registrar of Titles and issue of Title; Advise Council and former Owner as to application of proceeds.

The procedure LGA land sale process: –Can be burdensome for Council personnel –Emotional process Particularly if Council wishes to have properties sold with vacant possession –Risk of media involvement and negative publicity –Loss of time Particularly with Deceased Estates; and Failed Developments

The procedure Cont. –Appointment of liquidator (company ratepayers) or trustee in bankruptcy (individual ratepayers) Properties sold and rates recovered far more quickly; Less involvement for Council. There is an alternative procedure that can be used by Council outside the ambit of the LGA

Liquidation This is the winding up of a company’s financial affairs; Results in distribution of assets to creditors; Statute governing this is Corporations Act 2001; Outstanding amount must exceed $2,000.00; Creditor’s Statutory Demand must issue first: –Amount must be in default and not be disputed; –No need for judgment however, this process ensures there can be no dispute as to amount outstanding.

Liquidation cont. Served by post on company; Following service, the rate payer has 21 days to respond; If no payment is made in that time, a winding up application may be made to the Court; A hearing date is given once Winding Up Application is filed with the Court –Usually approximately one month away.

Liquidation cont. Before the hearing –an insolvency practitioner must provide consent to act as liquidator; and –The hearing date and application details must be advertised in a newspaper with local circulation. Winding Up Proceedings are also served by post At the hearing: –Liquidator appointed to wind up ratepayer company The liquidator must be appropriately qualified; The Council is entitled to nominate their preferred insolvency practitioner.

Bankruptcy Trustee is appointed to administer individuals’ affairs; Results in distribution of assets to creditors; Statute governing is Bankruptcy Act 1966 (Cth); Outstanding amount must exceed $5000; First step is to issue proceedings and obtain judgment in Council’s favour; Bankruptcy Notice filed with ITSA upon receipt of judgment; Served by post on ratepayer; Following service, the rate payer has 21 days to respond;

Bankruptcy Cont. If no payment is made in that time, a creditor’s petition may be filed in the Court A hearing date is given once filed with the Court –Usually approximately one month away Before the hearing –an insolvency practitioner must provide consent to act as trustee. At the hearing –Ratepayer declared bankrupt and trustee appointed to distribute assets. The liquidator must be appropriately qualified. The Council is entitled to nominate their preferred insolvency practitioner.

Advantages Time limits under LGA do not apply; Liquidator or trustee is responsible for sale of property –This means Council may refer calls from the ratepayer to liquidator/trustee –Also means Council may refer media enquiries to liquidator/trustee As part of the sale process, outstanding council rates and costs will be paid from proceeds.

Best outcome is that ratepayer pays rates before liquidator/trustee is appointed; This process gets the attention of the ratepayer and stops them using the council as an unpaid bank; Whether taken to its conclusion or settled in the interim, the process is always a win for the council.