Unpaid lot owner contributions can affect the ability of owners corporation to meet its financial obligations.
Below we set out a simple step-by-step guide to debt recovery from lot owners.
Step 1
Issue OC Fee Notice — minimum due date for payment is 28 days.
The fee notice must:
- state that the lot owner has an obligation to pay the fees and charges within 28 days after the date of the notice;
- state that interest at the rate specified in the notice will be payable in respect of any overdue fees and charges (if interest is to be charged); and
- include details of the dispute resolution process that applies under the rules in respect of disputed fees and charges.
[Section 31 of the Owners Corporation Act]
Step 2
If payment is not made within 28 days of the due date, issue final notice — minimum due date for payment after final notice (before proceedings can be issued) is a further 28 days.
The final notice must:
- state that the lot owner has an obligation to pay the overdue fees and charges and interest immediately; and
- (if applicable) state:
- the interest that is payable in respect of the overdue fees and charges at the date of the final notice; and
- the amount of interest that will accrue daily until the payment of the overdue fees and charges; and
- state that the Owners Corporation intends to take action under Part 11 to recover the amount due if the overdue fees and charges and interest owing are not paid within 28 days after the date the final notice is given.
[Section 32 of the Owners Corporation Act]
Step 3
If payment is not made, in some instances, a lawyer’s letter of demand may be appropriate. There are no rules as to the content of such a letter. They can be tailored to the particular circumstances.
Step 4
If payment is still not made, issue an application at VCAT. This can be done by the OC itself or by solicitors acting for the OC. A special resolution is not necessary.
[Section 18(2) of the Owners Corporation Act]
Step 5
Generally speaking the hearing will take place about 4-6 weeks after the application is issued. The appearance at the hearing can be done by the OC manager or by a solicitor acting for the OC, although permission will be required from VCAT for the solicitor’s appearance.
Step 6
Depending on attendance and arguments made by the parties, an order will be made requiring payment to OC.
Step 7
If payment is still not made, enforcement proceedings will be required. The assistance of a solicitor will be required.
If the lot owner is an individual, the options are:
- attachment of earnings;
- bankruptcy application; or
- warrant to seize chattels or real estate.
This will require the issue of further proceedings in the Magistrates, County, Supreme or Federal Court depending on the enforcement proceeding selected.
If the lot owner is a corporation, the options are:
- the service of a creditor’s statutory demand for payment of a debt followed by an application to wind-up the lot owner and appoint a liquidator; or
- warrant to seize chattels or real estate.
This will require the issue of further proceedings in the Supreme or Federal Court, depending on the enforcement proceeding selected.
More information
For more information, please contact Anton Block, Principal Lawyer and Head of Owners Corporation, on (03) 8600 8833 or ablock@kcllaw.com.au.
Note: This update is a guide only and is not intended to constitute legal advice.