Owners corporations and their managers should take note of a recent VCAT decision concerning what might appear to be a fairly innocuous accounting practice: carrying arrears forward as a lump sum.
In Owners Corporation PS415135N v Imam [2026] VCAT 704 (Imam), VCAT dismissed an owners corporation’s fee recovery application after finding that an amount described in its Final Fee Notice as “brought forward (includes Overdue Interest)” did not contain the information required by the approved form.
The decision has practical implications for owners corporations and managers using accounting software that automatically rolls historical arrears into a “balance brought forward” or “opening balance”.
The message from VCAT is clear: a lot owner should be able to understand from the Final Fee Notice itself exactly what they are being asked to pay.
What happened?
The owners corporation commenced proceedings seeking recovery of unpaid owners corporation fees.
Its Final Fee Notice dated 16 September 2025 included a substantial amount described simply as:
“brought forward (includes Overdue Interest)”
That amount represented an accumulation of earlier amounts.
The issue for VCAT was whether an owners corporation can recover an amount in fee recovery proceedings where the Final Fee Notice identifies it only as an accumulated lump sum such as a “balance brought forward” or “opening balance”.
This was not merely a technical issue.
The Final Fee Notice demanded $21,401.67. The subsequent VCAT application sought $14,566.46. By the commencement of the hearing, the owners corporation had recalculated its claim to $10,171.77, before reducing it again to $9,788.28 because of deficiencies in the material filed.
VCAT regarded those substantial changes as illustrating the importance of transparency in the fee recovery process.
What does the Act require?
Sections 31 and 32 of the Owners Corporations Act 2006 (Vic) (the Act) establish the notice process which precedes an application to VCAT for recovery of unpaid fees and charges.
If money remains unpaid for 28 days following a Fee Notice, an owners corporation may issue a Final Fee Notice in the approved form.
An application under section 163(2) can then be made if the amount remains unpaid for 28 days after the Final Fee Notice is given in accordance with section 32.
The approved Final Fee Notice contains a table requiring three pieces of information about amounts said to remain unpaid:
Date due | Description of fee/charge/interest/arrears | Amount
VCAT considered those requirements to be directed towards transparency.
Member Reid found that the form is intended to enable a lot owner to understand the claim against them by reference to each unpaid amount, its due date, its description and its quantum.
Why isn’t “balance brought forward” enough?
The owners corporation argued that sections 31 and 32 operate sequentially.
In other words, the earlier Fee Notices had already itemised the relevant amounts and the Final Fee Notice was simply the final warning before legal proceedings. On that basis, it argued that the lot owner could refer back to those earlier notices to understand the accumulated balance.
VCAT rejected that argument.
Member Reid said:
“Trawling back through a series of earlier notices and undertaking an accounting exercise to understand a final fee notice is not something lot owners should have to do.”
The fact that a lump sum could be reconstructed using earlier Fee Notices or the owners corporation’s ledger did not make the description in the Final Fee Notice sufficient.
There was also a practical problem with a lump sum: it has no single meaningful due date.
The individual amounts comprising the balance each have their own due dates. VCAT considered that those are the dates the approved form requires the owners corporation to identify.
Can VCAT simply unpack the balance?
No.
This is another important aspect of the decision.
The owners corporation argued that its ledger and Summary of Proofs identified the components of the lump sum and that VCAT could determine which components were properly recoverable.
VCAT rejected that approach.
The entries on the Final Fee Notice had to be considered as the owners corporation had chosen to describe them. The Tribunal was not prepared to dissect the lump sum at the hearing and award those parts which might otherwise have been recoverable.
That was particularly significant in Imam because the lump sum included amounts such as legal costs and debt recovery costs which the owners corporation did not ultimately claim and, in several instances, had no statutory entitlement to place on the lot owner’s account in the first place.
The lump sum therefore stood or fell as the amount appearing on the Final Fee Notice.
Debt recovery costs
The lump sum problem in Imam was compounded by another issue: on VCAT’s findings, the amount included items that were not lawfully recoverable from the lot owner as a debt.
That finding sits alongside an established line of Tribunal authority concerning section 165(1)(ca) of the Act, which empowers VCAT to order a lot owner to pay the “reasonable costs incurred by the owners corporation in recovering an unpaid amount from the lot owner (other than costs in the proceeding).”
In Imam, Member Reid referred to three authorities dealing with this issue: Owners Corporation RP002044 v Finch (Owners Corporations) [2016] VCAT 2166, Owners Corporation 1 Plan No. PS718154U v Wang (Owners Corporations) [2025] VCAT 452 and the Tribunal’s specially constituted decision in Owners Corporation 1 Plan No. PS735439F v Singh (Owners Corporations) [2022] VCAT 389 (Singh).
In Singh, the Tribunal considered the proper operation of section 165(1)(ca). It concluded that the provision does not depend upon, or itself create, a pre-existing obligation on the lot owner to pay those debt recovery costs. Rather, the claim under section 165(1)(ca) is a claim for an order from VCAT requiring the lot owner to pay reasonable recovery costs.
That distinction is important.
The fact that an owners corporation has incurred debt recovery costs does not, without more, make those costs a debt due and payable by the defaulting lot owner. Nor can that result be achieved simply by adding the costs to the lot owner’s ledger, including them in a fee notice or passing a resolution purporting to make them recoverable.
In Singh, the Tribunal considered resolutions which purported to make debt recovery costs recoverable directly from defaulting lot owners and concluded that they were of no lawful effect. The statutory mechanism is instead for the owners corporation to seek an order from VCAT under section 165(1)(ca) for reasonable costs incurred in recovering the unpaid amount. Costs of the VCAT proceeding itself are dealt with separately under the Victorian Civil and Administrative Tribunal Act 1998 (Vic).
The distinction also has practical consequences for Final Fee Notices. Singh warned against including amounts in a Final Fee Notice that are not, at that point, legally due and payable by the lot owner. The Tribunal observed that doing so creates uncertainty about what the lot owner is actually required to pay and warned that the practice may jeopardise a subsequent claim for reasonable recovery costs under section 165(1)(ca).
Imam brings that issue into sharper focus. There, the Tribunal held that a lump sum “balance brought forward” did not satisfy the informational requirements of the approved Final Fee Notice form and could not be rescued by asking the Tribunal to work backwards through earlier notices or dissect the lump sum into recoverable and unrecoverable components.
Read together, Imam and Singh provide two related cautions for owners corporations and managers. A Final Fee Notice should clearly identify and itemise the amounts said to be due and payable by the lot owner. Just as importantly, amounts claimed as debt recovery costs under section 165(1)(ca) should not be treated as an existing debt of the lot owner merely because those costs have been incurred. Recovery of those costs requires an order from VCAT.
I prefer this version because it doesn’t overstate Imam and it makes the practical point much clearer: there are really two separate traps, itemisation and legal recoverability.
I would also avoid saying Imam and Singh “point to the same conclusion from two directions”. It is a good turn of phrase, but legally they are doing different work. Imam is principally about the informational requirements of the approved Final Fee Notice and the inability to cure an unidentified lump sum; Singh is principally about the statutory basis upon which reasonable debt-recovery costs may be recovered. Keeping those propositions separate actually makes the article stronger.
Does one defective entry invalidate the entire Final Fee Notice?
Importantly, not necessarily.
VCAT did not find that the inclusion of an inadequately described lump sum automatically rendered the whole Final Fee Notice invalid.
Member Reid considered that a Final Fee Notice containing an unrecoverable amount could still be substantially in the approved form.
If another amount appearing on that notice is adequately described, for example, a standard levy with its due date, description and amount, and the requirements of sections 31 and 32 have otherwise been satisfied, that individual amount may still be recoverable.
That distinction is important.
The problem in Imam was that the Final Fee Notice contained no such independently recoverable levy. It consisted of the lump sum, interest on that amount and a $149 Final Fee Notice charge which VCAT found the owners corporation had no statutory entitlement to place on the notice.
The result was that the owners corporation failed to establish an entitlement to recover any fees or levies to the date of the Final Fee Notice.
Its claims for further interest, reasonable recovery costs and legal costs consequently also failed, and the application was dismissed.
A warning about accounting software
There is a particularly useful observation in the decision for owners corporation managers.
The owners corporation submitted that requiring every unpaid amount to be itemised could result in a Final Fee Notice running to 30 pages, and that its software could itemise unpaid amounts going forward but could not completely remove a reference to a brought-forward balance.
VCAT was unmoved.
Member Reid acknowledged that the decision may require some owners corporations to update the software used to generate Final Fee Notices and that some notices may become very long.
However, those practical inconveniences were not considered sufficient to alter the requirements of the approved form.
That is an important compliance issue.
An automatically generated notice should not be assumed to be compliant simply because it has been produced by owners corporation management software.
What should owners corporations and managers do?
The practical consequence of Imam is that owners corporations and managers should review their debt recovery processes before proceedings are commenced.
In particular, Final Fee Notices should be checked to ensure that amounts sought to be recovered are individually identified by reference to their due date, description and amount, rather than being rolled into an unexplained “balance brought forward” or “opening balance”.
Managers should also review the way their accounting software generates Final Fee Notices and consider whether historical arrears are being automatically consolidated.
And where legal fees, debt recovery expenses or administrative charges have been placed on a lot owner’s account, careful consideration should be given to whether there is a lawful basis for doing so. VCAT reiterated in Imam that there is no power under the Act to require a lot owner to pay administrative or legal costs on a user-pays basis in the absence of an authorising court or tribunal order.
The Takeaway
Imam demonstrates that fee recovery is not simply an exercise in proving what the owners corporation’s ledger says is owing.
The statutory notice process matters.
A debt may exist in the owners corporation’s accounting records, and the owners corporation may have documents capable of explaining precisely how that debt arose. But if the amount is presented on the Final Fee Notice merely as an accumulated lump sum, VCAT has now held that it does not satisfy the informational requirements of the approved form and cannot be recovered in that fee recovery proceeding.
For owners corporations and managers, the lesson is relatively straightforward: Before commencing debt recovery proceedings, check the Final Fee Notice, not just the ledger.
This article was first published on 30 September, 2026 and was written by Julia Moroz, Director & Principal and Michael Skolarikis, Lawyer in our Melbourne office.
© 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.
