The landscape of levy collection in New South Wales is set for a significant transformation, with a number of changes to practice and procedures in 2025. These changes are due to amendments made to the Strata Schemes Management Act 2015.

Here is a summary of the key 9 changes:

1. A levy notice will now need to be accompanied by the information approved by the Commissioner for Fair Trading.  There is no such information as yet.

2. A strata manager or strata committee will now be able to approve a payment plan for payment of overdue levies with an owner.  A resolution at a general meeting to approve a payment plan with a specific owner will no longer be necessary.

3. An owners corporation will be entitled to reject a request made by an owner for a payment plan for overdue levies but it will need to have a reasonable basis for doing so.  An owner will be entitled to apply to NCAT for an order forcing the owners corporation to agree to the owner’s request for a payment plan if NCAT considers the rejection of the plan by the owners corporation was unreasonable.

4. The strata regulations may contain guidance on what constitutes a reasonable refusal of a payment plan by an owners corporation.  But it is not clear whether and, if so, when, those regulations will be written.

5. The strata regulations may also prescribe the requirements for payment plans including what a payment plan needs to contain.  But again, it is not clear whether and, if so, when, those regulations will be written.

6. An owners corporation will not be able to sue an owner for levy arrears if the arrears are being dealt with under a payment plan that is being complied with by the owner.

7. An owners corporation will only be able to take legal action to recover interest on overdue levies and levy recovery expenses if the owners corporation offers the owner in arrears the option of entering into a payment plan and NCAT or a Court awards the interest and costs.

8. An owners corporation will now need to give a 30 day notice (rather than a 21 day notice) to an owner who is in levy arrears before being able to take legal action against the owner to recover the levy arrears.

9. Payments made by an owner in levy arrears will now need to be applied firstly to overdue levies in order of due date, then to interest and then to levy recovery expenses but only where those expenses are ordered to be paid by NCAT or a Court.  This rule will not apply where the owner in arrears specifies how payments must be applied or a Court or NCAT has made an order specifying how those payments should be applied.

Key Actions: Preparing for Levy Collection Changes

Audit current levy collection policies for compliance with new requirements on notices and payment plans.

• Develop clear internal guidelines for assessing and approving payment plan requests to avoid disputes.
• Train strata committees and managers on their new authority for payment plan approvals and updated debt recovery notice periods.
• Monitor for new Strata Regulations that will offer further guidance on payment plans.
• Seek expert legal advice to ensure full compliance and effective strategy in the new environment.

By acting now, owners corporations can prepare now and ensure a smooth transition and minimise legal challenges under the updated legislation.

FOR LEVY COLLECTION ADVICE PLEASE CLICK HERE!

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

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For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Must strata lot owners pay, as part of their levies, maintenance of the common property they do not use?

Are all strata owners responsible for paying for the maintenance of every part of the common property even if some owners cannot or do not use part of the common areas?

Is it possible for an owners corporation to raise a differential contribution that is levied on some but not all owners or is levied in shares that are not proportional to the unit entitlements of the lots?

Here are some typical examples where owners often query if they should pay for maintenance of these areas:

• A strata scheme that contains multiple stages – should they pay for stage 2 if they’re in stage 1?
• The owner of a ground floor lot who does not use a lift servicing the upper levels of the building
• The owner who does not use recreational facilities such as a swimming pool, gym or tennis court

Are these exceptions or are common areas in strata residential blocks treated as a whole?

Read this paper to find out the true position – Common Property Use and Differential Levies in Strata Blocks

For NSW strata legal or levy collection advice contact us here or call 02 9562 1266, we’re happy to assist.

During times when owners suffer financial difficulty, owners corporation can often find themselves out of pocket with overdue and unpaid strata levies. This can be a huge concern to strata communities, especially if an owner declares bankruptcy and they face the possibility of missing out on payment of any overdue strata levies or recovery costs.

So when can an owner who does not pay strata levies on time be made bankrupt? And what happens once an owner is bankrupted?

Bankruptcy is a legal process that can occur when an individual cannot pay their debts as and when they fall due.  In Australia bankruptcy is governed by the Bankruptcy Act 1966 (Cth) and is regulated by the Australian Financial Security Authority (AFSA).

Once a person becomes bankrupt, control is given up of their finances and assets to a Trustee in exchange for protection from legal action being taken against the person by an entity to which they owe money.

So, what happens when a lot owner is unable to pay their strata levies? Can they be bankrupted?

Bankrupting an Owner

• A bankruptcy notice can be issued in the event that an owner owes strata levies, is sued by the owners corporation, and judgment is entered against the owner for more than $5,000.
• Usually, we will exhaust all avenues for recovery of outstanding strata levies before seeking the strata manager/owners corporation’s instructions to bankrupt the owner.
• However, if the judgment debt is significantly higher than $5,000, the strata manager/owners corporation would normally provide an instruction for us to move to bankrupt the owner immediately after entry of judgment against them.
• Upon receipt of instructions, we perform a bankruptcy search to ensure the owner has not already been declared a bankrupt.
• If the owner is not already bankrupt, we draft and file a bankruptcy notice with the Australian Financial Security Authority – the current filing fee is $470.
• Once filed, we then serve the bankruptcy notice on the owner.
• Then, the owner has 21 days to make payment of the amount claimed in the bankruptcy notice.
• If the amount claimed remains unpaid after 21 days, we seek the strata manager/owners corporation’s instructions to issue a creditor’s petition to commence court proceedings to make the owner bankrupt.
• If the strata manager/owners corporation instructs us to proceed, we commence bankruptcy proceedings in the Federal Circuit Court against the owner.
• If the Court makes an order for the owner to be declared a bankrupt, a Trustee is appointed to the owner’s estate.

What happens once an owner is bankrupted?

• The Trustee obtains information about the owner’s financial circumstances including any assets owned by the owner and any liabilities of the owner.
• After completing his or her investigations, the Trustee will normally move to sell the owner’s assets to pay the liabilities owed by the owner.
• This often involves the Trustee obtaining possession of the owner’s strata lot and selling the lot.
• Once the lot is sold, the owners corporation is normally paid the overdue levies, interest and recovery costs.

For NSW levy collection or strata legal advice contact us here or call 02 9562 1266, we’re happy to assist.