In a strata or community title scheme, the owners corporation or body corporate depends on levies to fund maintenance, insurance and management. When one or more lot owners fail to pay their levies, the cost is borne by those who do — through either depleted funds or the need to pass a special levy to cover the shortfall. Understanding the recovery options available to an owners corporation is essential for any strata manager or committee member dealing with a non-paying owner.
The levy obligation
Levies are a statutory obligation flowing from ownership of a lot in a strata scheme. In New South Wales, the Strata Schemes Management Act 2015 (NSW) governs this. In Victoria, the Owners Corporations Act 2006 (Vic) applies. In Queensland, the Body Corporate and Community Management Act 1997 (Qld) is the relevant legislation. Each Act creates an obligation to pay levies as determined by the owners corporation or body corporate, with interest and recovery costs typically recoverable in addition to the principal levy amount.
Importantly, the levy debt attaches to the lot — not just the individual owner. This means that if a lot is sold while levies are outstanding, the unpaid levies typically become a matter for settlement adjustment, and the new owner takes the lot subject to the scheme's ability to pursue recovery.
Initial recovery steps
Most strata managers begin with a formal levy notice or arrears notice to the lot owner. This should specify the amount outstanding, the period it relates to, any interest accrued, and the consequence of non-payment. Many schemes have a defined process — specified in the by-laws or the management agreement — that must be followed before more formal action is taken.
Tribunal proceedings: VCAT and QCAT
In Victoria, the Victorian Civil and Administrative Tribunal (VCAT) hears owners corporation levy disputes. An owners corporation can apply to VCAT for an order that the lot owner pay the outstanding levies, interest and costs. The process is relatively accessible and does not require legal representation for smaller matters.
In Queensland, levy disputes under the Body Corporate and Community Management Act are typically resolved through the Body Corporate Commissioner's dispute resolution process before proceeding to QCAT. The Commissioner's process is mandatory for most disputes; parties who bypass it risk costs consequences.
In New South Wales, unpaid levy recovery can be pursued through NCAT for amounts within its jurisdiction, or through the Local Court or District Court for larger amounts.
Court proceedings and enforcement
For larger outstanding amounts — or where tribunal proceedings have been unsuccessful — court proceedings may be appropriate. A judgment for unpaid levies can be enforced through standard enforcement mechanisms: garnishee orders, writs of execution over personal property, and — where the lot owner is an individual — bankruptcy proceedings (if the total threshold is met).
Where the lot owner is a company, a statutory demand may be available if the levy debt exceeds the minimum threshold and is not genuinely disputed.
Practical considerations
- Act early — the longer levies go unpaid, the larger the debt grows and the harder enforcement becomes
- Document all levy notices and correspondence carefully
- Check your by-laws and state legislation for the specific process required before commencing proceedings
- Consider whether a payment plan is appropriate for an owner experiencing genuine financial difficulty
- For persistent or large levy debts, seek specialist advice from a strata lawyer or a recovery firm with experience in this area
If your owners corporation is dealing with significant levy arrears, speak to Merion about recovery options.