Reminder: New Provisions For Rates Arrears Sales

In October 2020, the Local Government Regulation 2012 (“LGR”) was modified to change the process that a Council must follow before selling land for arrears of rates or charges. 

While some local governments will have already used the new provisions of the LGR, many Councils have delayed commencing sale procedures while the economic impacts of the COVID-19 pandemic continue. 

Timing Changes

The key threshold for when a sale process can commence is unchanged – Councils can still only pursue a sale when at least some of the rates or charges are overdue for 3 years (or 1 year if the rates or charges were levied on vacant land or land used only for commercial purposes and Council has a judgment, or 3 months for a mining claim).

However, after the local government issues a Notice of Intention to Sell Land, the LGR now imposes a “sunset date” on when the Council must end procedures – 1 year after the Notice is given. The existing provisions that confirm Council must end the procedures if it is paid the total amount of rates or charges plus expenses, or if the land is sold, remain.

A Council must still commence sale procedures not sooner than 3 months (or 1 month for a mining claim), and not later than 6 months, after the Council gives the Notice.  Councils should bear in mind that the timeframes are calculated by reference to when Council gives the Notice – ie when the Notice is taken to have been served.

The Auction Process

Other key changes apply to the conduct of the auction process. 

Local governments are still required to set a reserve price that is at least:

  • The market value of the land; or
  • The higher of:
    • The amount of overdue rates or charges on the land;
    • The value (ie, the unimproved value) of the land.

However under the amended LGA if the reserve price is not reached at auction, Council may enter into negotiations with any bidder (not just the highest bidder) who attended the auction, but may only sell the land for an amount equal to or greater than the reserve price (not merely higher than the highest bid).

Importantly, in what is a reform that local governments have cried out for some time, Councils are no longer taken to have purchased the land for the reserve price if negotiations with a bidder at auction are not successful.

There is also a new process for what happens if the land is not sold at auction.  Councils can now decide to continue to offer the land for sale by another auction or sale by negotiation. If Council wishes to offer the land for sale by negotiation, it must serve and publish a Sales Notice.

The sale by negotiation or subsequent auction process is limited by the new 1 year limitation period – ie, if the land is not sold within 1 year of the Notice of Intention to Sell being issued, even following an unsuccessful auction and under the new subsequent auction or sale by agreement provisions, the sale cannot proceed and the process resets.

Finally, there is no longer a requirement to publish the auction notice in a newspaper circulating generally in the local government area.  Instead, the LGR includes a requirement that local governments “take all reasonable steps to publish the auction notice in another way to notify the public about the sale of the land”. 

The LGR refers to two examples – a newspaper circulating generally in the local government area or on a real estate trading website.  However, there is no reason why Councils could not publish the auction notice via social media to discharge their obligation under this provision.

What about a sale process that started before the changes?

Finally, Councils should be aware that any sale process started before the new provisions came into effect – ie 2 October 2020 – will be subject to the former provisions until the process ends. 

There will be a rapidly diminishing number of these types of processes, but a process that commenced in September or early October 2020 may still be active, and therefore will be subject to the provisions that applied at the time the process commenced.

How We Can Help 

Preston Law has assisted local governments, large and small, across Queensland in all aspects of rates arrears matters – from large-scale sales and acquisitions for arrears, to assisting Councils with developing targeted debt recovery programs.

If you would like further information about the legal services that we offer to local government, please contact Julian Bodenmann.

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