Many are predicting that home loan interest rates will soon start rising again.
The likely impact on many Australian families will be ‘mortgage stress’ – a financial burden that is set to become a big problem all around Australia, as moderate rate rises can add hundreds of dollars to monthly mortgage repayments.
Those who find themselves under financial pressure may need to prioritise their bills, often choosing to pay the bank first, putting all debts aside until they’re in a position to take care of them.
But did you know that if you default on local council rates or other council charges and fees, the council may be able sell your home?
Council set to sell homes
Indeed, that’s exactly what will happen to nine homes in Brisbane in the coming weeks. The residences will go under the hammer as Brisbane City Council moves to forcibly sell them in an effort to recover around $100,000 in unpaid rates.
In Queensland, local councils have a right to sell properties to recover outstanding rates, although it is considered a last resort after all other avenues of debt collection have been exhausted.
What about NSW?
And yes in New South Wales, local councils have this right too.
If you owe rates to the local council, it will want to recover them as soon as possible and it might choose to do this through the State a Debt Recovery Office (SDRO) or directly through civil proceedings.
If you have a debt through the SDRO, you can simply accept it and pay up, or apply for a payment plan or an extension.
Disputing the charges
It can be difficult to dispute local council rates, because they are based on your land title and the legal basis for rate charges is set out in the Local Government Act 1993.
But it is worth noting that if you have an outstanding debt, the Council also has the right to charge interest and late payment fees, which means the original debt can escalate fairly quickly. In special circumstances, it may be possible to have extra charges waived.
When a council takes civil proceedings, it has a number of options, including seeking a court order requiring payment. The council can seek to garnish a portion of your wages until the debt is repaid, or even ask for the whole lot.
Civil cases are often dealt with through the local court. If you don’t comply with your obligations for payment, the very real eventuality is that the Council can eventually seek an order to take possession of your home, so it can be sold off to recover the funds owing.
Interestingly though, the council cannot profit from the sale – once the house is sold, and the Council’s money has been recovered, all remailing funds must go towards paying the mortgage and costs of sale, and anything remaining will be returned to you.
Many councils understand the financial reality facing families, and all of them have hardship policies to help landowners who fall on tough times.
However, the reality is that rates are used to pay for vital civil services like rubbish collection, sewage facilities and infrastructure such as road maintenance, footpaths, parks and street lights. To meet these costs, Councils will take steps to recover debts from you, no matter what your personal circumstances.
If you are threatened with legal actions, it is a good idea to seek legal advice immediately.
If you are suffering financial hardship, then ask for specialist financial advice. Almost 70 percent of participants in the Australian ‘Men and Money’ survey undertaken recently said their financial strain led to health and relationship issues. Depression, drinking, heart problems, suicidal thoughts and loss of family were the reported impacts on their lives.
Financial hardship is a burden, but it may become a little easier if appropriate practical strategies are put into place.