A Guide to the Strata Debt Recovery Reforms

A Guide to the Strata Debt Recovery Reforms

The second phase of the reforms in the Strata Schemes Legislation Amendment Act 2025 come into force on 1 July 2025.  The reforms will affect how an owners corporation recovers amounts in arrears from a lot owner and are meant to balance the financial stability of the owners corporation whilst supporting lot owners, especially those experiencing financial hardship.

Major changes to note:

1. Additional information required in the notice of contributions:

• Notice of Contributions must include information approved by the Secretary (s.83(1A)), such as details of the National Debt Helpline, offering support to owners struggling with financial difficulties.

2. Entering into payment plans:

• Owners corporations cannot resolve to not enter into payment plans (s.85(5AB)) and must consider all payment plan requests for unpaid levies, although the requirement for the proposal to be considered at a general meeting has been removed (s.85(5)).
• It is expected the Strata Schemes Management Regulation 2016 will be amended to provide further requirements for what must be included in a payment plan and guidance about what constitutes reasonable refusal to enter into a payment plan.
• A lot owner can apply to the Tribunal for an order requiring the owners corporation to enter into a payment plan if its refusal is deemed unreasonable (s.85(9)).

3. Notification period extended:

• The timeframe given for a lot owner to respond to notification of an owners corporation’s intention to take recovery action has been increased from 21 days to 30 days, providing additional time for a lot owner to make arrangements for payment of the arrears (s.86(4)).

4. Preconditions for commencing recovery action:

• An owners corporation can only take recovery action if it has offered the lot owner the option of entering into a payment plan and pursuant to an order of the Tribunal or court (s.86(2AA)). It is expected this will have a significant impact on recovery of unpaid contributions.

5. Mandatory method for allocation of payments:

• The allocation of payments must be to outstanding contributions, followed by interest and recovery costs, to ensure lot owners are not disadvantaged by unfair allocation practices (s.86(7)).

What should I do now?

The reforms are meant to encourage owners corporations to be more conciliatory in its debt recovery procedures and to take a more compassionate and proactive view.  It is recommended that strata committees and lot owners contact their strata manager before 1 July 2025 to ensure appropriate measures have been put in place to comply with the reforms.

For the amendments contained in the Strata Schemes Legislation Amendment Act 2025, please refer to the following link: Strata Schemes Legislation Amendment Act 2025.

—Nancy Torry, Solicitor

© Bugden Allen Group Legal Pty Ltd. This is general information only and not legal advice. You should not rely on this information without seeking legal advice tailored to your specific circumstances.