When a New South Wales (NSW) owners corporation secures a court judgment for unpaid strata levies, the battle isn’t always over. Often, the lot owner (the judgment debtor) will apply to the court to pay the debt in small instalments.
Because court Registrars usually approve these applications without consulting the owners corporation, you might only find out about an instalment order after it has already been made.
Here is what you need to know about how these orders affect your cash flow, and how you can object to them.
Why an Instalment Order Can Stall Levy Recovery
If the court Registrar grants an instalment order, all active debt enforcement is stayed (paused).
As long as the lot owner makes their scheduled payments, the owners corporation is legally blocked from taking further debt recovery steps. This makes it crucial for the strata committee to review the order immediately and decide if the weekly, fortnightly or monthly payment amount is commercially acceptable.
When Can an Owners Corporation Object to a Payment Plan?
If the proposed payments are too low, too slow, or threaten the scheme’s financial health, the owners corporation has the right to object.
Under Section 17J of the Strata Schemes Management Regulation 2016, an owners corporation can reasonably refuse or object to a payment plan if accepting it would leave the scheme short on funds. Specifically, a refusal is justified if the plan would cause:
- A deficit in the administrative or capital works fund.
- An inability to meet required day-to-day expenses or court orders.
- A failure to meet compliance obligations.
- A delay in essential common property repairs and maintenance.
The Cost of Waiting: If a payment plan takes years to clear a debt while building maintenance is delayed, the owners corporation has strong commercial grounds to object.
The Objection Process: What Happens Next?
To challenge the order, the owners corporation must file an objection supported by affidavit evidence. This evidence must clearly explain the financial hardship or operational strain the slow payment plan forces onto the strata scheme.
Once the objection is filed, the case is listed for a court hearing before a Judge.
- Fresh Review: The Judge reviews the situation from scratch.
- Shifted Burden: The responsibility shifts entirely to the lot owner. They must now convince the Judge why the low instalment order should stay in place.
- The Outcome: If the owner fails to satisfy the court, the Judge can vary or rescind (cancel) the order, allowing the owners corporation to resume full debt enforcement.
Fausto Di Palma JS Mueller & Co Lawyers E: enquiries@muellers.com.au P: 02 9562 1266
This post appears in Strata News #795.
This article has been republished with permission from the author and first appeared on the JS Mueller & Co Lawyers website.