Can an unfinancial owner who owes more than $10K be denied access to the swimming pool?

In NSW, the Strata Schemes Management Act 2015 (SSMA) governs the rights and responsibilities of lot owners in a strata scheme, including the implications of being unfinancial.

Under Schedule 1, Clause 23(8) of the SSMA, an owner who has not paid their levies (including interest and recovery costs) is considered an "unfinancial owner." This status restricts their participation in certain strata matters, such as:

• Voting at general meetings (except on motions requiring a unanimous resolution) (SSMA Schedule 1, Clause 23(8)​).
• Being elected to the strata committee (SSMA Section 32(2)).

However, the Act does not explicitly prevent unfinancial owners from using common property facilities such as the swimming pool, gym, or barbecue areas. Restrictions on the use of such amenities must be set out in the by-laws of the strata scheme.

Can an unfinancial owner be denied access to the swimming pool?

If the strata scheme's registered by-laws include provisions restricting access to common facilities for lot owners with unpaid levies, enforcement may be possible. However, owners corporation should seek legal advice to determine whether such a by-law could be deemed harsh, unconscionable, or oppressive under SSMA Section 150, which may render it invalid.

It is also important to note that legal interpretations evolve over time. Even if legal advice was obtained when the by-law was first drafted, it may be prudent for the owners corporation to seek updated legal advice, as changes in legislation and case law may have altered the enforceability of such provisions. Legal advice given several years ago may no longer be relevant under current strata law.

What if the owner has been served by the courts?

If the owner has been served with court orders for debt recovery, this does not automatically strip them of access to common property facilities. The owners corporation would first need to have a valid, registered by-law restricting access in order to enforce such a rule. Even then, enforcement may require an NCAT order under SSMA Section 147 to ensure compliance, particularly if the owner challenges the restriction.

Key Considerations for the Owners Corporation

1. Check the by-laws – If the strata scheme does not have a by-law restricting access for unfinancial owners, the owners corporation cannot legally enforce such a restriction.
2. Assess the enforceability of the by-law – Even if a by-law exists, it may be challenged under SSMA Section 150 if it is deemed harsh, unconscionable, or oppressive.
3. Seek updated legal advice – Even if legal advice was obtained when the by-law was first introduced, it is advisable to reassess its validity given possible changes in law and case law developments. What was enforceable a few years ago may not be today.
4. Apply to NCAT if necessary – If an enforceable by-law exists, the owners corporation can apply to NCAT for an order ensuring compliance.

Final Thought

Owners corporations with by-laws restricting access to facilities for unfinancial owners should not assume their enforceability without legal review. As strata law evolves, seeking updated legal advice is essential to ensure compliance with the current legislative and case law landscape. A by-law that once seemed enforceable could now be deemed harsh, unconscionable, or oppressive under SSMA Section 150, leaving the owners corporation unable to impose the intended restriction.

Importantly, without a valid, registered by-law, none of these restrictions are enforceable. Under strata law, there is no automatic right to deny an unfinancial owner access to common property facilities. If an owners corporation wants to impose such restrictions, it must first ensure a properly drafted by-law is in place—and even then, its validity may be subject to legal challenge.