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 procedureCont.

– 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.