Two pieces of legislation deal with Council rates:
- The Local Government (Rating) Act 2002, obliges property owners to pay their rates. It also enables the council to recover unpaid rates from the bank as mortgagee if the property owner is in default.
- The Property Law Act 2007, also obliges the borrower in a mortgage to pay rates for the property.
A council can notify a bank, as mortgagee, that a property owner has not paid his or her rates, and demand that the bank pay them instead. The bank must pay the arrears. Typically, it will recover the money from the customer by debiting the amount to his or her account. It is standard practice for the terms and conditions of property loans to include a reference to a bank's right to recover money owed by customers.
Customer did not authorise the debit
Some customers complain that their bank acted unlawfully by taking money from their account because they did not authorise the withdrawal. In such cases, we will review correspondence between the council and bank, and between the bank and customer. We will also check whether the terms and conditions of the customer’s account allowed the bank to debit the account in such circumstances. If the terms and conditions contain such a provision, and if the bank paid the rates arrears in response to a council demand, we cannot take the complaint further.
Bank failed to notify the customer
Customers complain that their bank failed to notify them of its intention to debit their account. It is standard practice for a bank to try to contact a customer to advise that it has received a rates notice from a council, and also to explain the consequences of a rates demand being served on the bank. We review communications to check that the bank gave adequate notice. If we find the bank failed to give adequate notice, we may consider compensation for inconvenience.
Customer in a dispute with council
Customers complain that their bank should not pay rates arrears or debit their account because they are in a dispute with their council. Banks are not required to become involved in such disputes, and are entitled to rely on a council’s notice that rates are in arrears. The courts are the place for ratepayer challenges.
It is standard practice for a bank to try contact a customer to advise that it has received a rates notice from a council and explain the consequences of the demand before debiting your account.
Repayment plan contained obligations for bank and customer
Sam fell into arrears with her home loan repayments. The bank asked her to sign a repayment agreement confirming her own proposal to continue making repayments, along with paying an extra $250 a week in arrears. Sam failed to meet the terms of the agreement, and the bank began recovery action.CASE 2
Bank procedurally correct over rates arrears
Zhang owned a property over which his bank had a mortgage. He could not pay his rates because of financial difficulties. The council wrote to him for several months about the overdue rates before advising his bank that it might issue it with a payment demand.CASE 3
Bank failed to answer question about how to block rates demand
Jordan stopped paying his rates because of a dispute with his local council. Jordan had repaid his bank loans on the property, although he had not instructed the bank to discharge the mortgage, with the result that the title still showed the bank held a mortgage over the property.
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Financial abuse of the elderly
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Updated July 2021