NSW: How can an owners corporation reclaim money paid to an owner in error?

This article discusses the time limit to recover an incorrect payment from a lot owner in NSW strata and how the owners corporation may seek repayment.

Question: Can an owners corporation reverse a past committee decision and recover an incorrect reimbursement paid to an owner three years ago?

A lot owner was reimbursed $1,150 in April 2022 for water tank maintenance, specifically replacement of a pump. I believe this cost should have been the lot owner’s responsibility, and the owners corporation should not have paid the reimbursement.

After reviewing the reimbursement, the strata manager says that, due to the timeframe, we cannot do anything. Is there a time limit on raising this with the owner or recovering the money?

Can the owners corporation overturn the committee’s past decision and recover the money by issuing a levy notice to that owner for the reimbursed amount?

Answer: The general law principle seems to apply: the overpaid party should inform the underpaid party of the mistake and ask for reimbursement.

One cannot advise on a specific situation without fully reviewing the situation, and I would definitely encourage the inquirer to seek legal advice. I can provide some general observations.

The scenario describes an owners corporation (OC) accidentally paying money for something that a lot owner should have paid for. That the relationship is between an OC and a lot owner is incidental. In other words, this can happen in other contexts: between owner and tenant, between neighbours, or between any persons.

Section 3 of the Strata Schemes Management Act 2015 (NSW) (SSMA) states that: The objects of this Act are as follows –

1. to provide for the management of strata schemes,
2. to provide for the resolution of disputes arising from strata schemes.

What this implies is that the SSMA does not govern those matters which do not arise exclusively out of strata schemes. The scenario outlined in the inquiry seems like such a scenario. It (wrongly paying someone else’s bills) can occur whether or not it is in a strata scheme. It just so happens that in this scenario, it is within a strata scheme. Accordingly, the general law principle seems to apply: the overpaid party should inform the underpaid party of the mistake and ask for reimbursement.

The limitations period for “general” claims is, pursuant to section 14(1) of the Limitations Act 1969 (NSW), a period of six (6) years from when the action first accrues. Whilst there are different time periods for other causes of action, a scenario where one party seeks recovery of monies from another party falls within the “general” claim. There is a question when the period accrues:

• from when the error was made;
• or from when the error was discovered.

This would depend on when one ought to have discovered the error, but when in doubt err on the side of the earlier date.

Section 86 of the SSMA had recently been amended. The amendments restrain the ability of an OC to engage in levy recovery from a lot owner, e.g. subsections (6) to (8). There is a question whether this section is engaged in this scenario, as this section is in respect of:

1. contribution that is payable by the owner;
2. any interest payable on that unpaid contribution; and
3. the reasonable expenses of the owners corporation incurred in recovering those amounts,

and strictly speaking, it would appear the overpaid amount falls outside the scope of section 86. A Court may be willing to read down this section, to say the “overpaid” amount is actually a contribution/levy payable by the owner, but that seems the less likely outcome.

Whilst these are some general observations, I strongly encourage the inquirer to seek legal advice addressing their specific circumstances.

Matthew Lo
Kerin Benson Lawyers
E: enquiries@kerinbensonlawyers.com.au
P: 02 8706 7060

This post appears in Strata News #784.

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