This article discusses recovering levy arrears on utility lots for an owners corporation in Victoria, explaining why VCAT must be used first and how committees can protect unpaid levies when a utility lot is sold.
Question: How can the owners corporation ensure it recovers long-term levy arrears on a utility lot if it is sold? Is the Magistrates Court a more cost-effective option than VCAT?
Our strata scheme has several utility lots that can be sold separately from the habitable lots. The annual levy for these accessory lots is approximately $85 pa. An owner has paid no fees for over 5 years with an outstanding balance of more than $1,800, including interest, late fees, etc.
We have had situations in the past where the buyer did not obtain an owners corporation certificate regarding fees, resulting in drawn-out owners corporation legal costs. How can the committee ensure the arrears are addressed if the unit is sold?
Is an application to the Magistrates Court for arrears a more economical approach than an application to VCAT?
Answer: Levy arrears must be pursued through VCAT first, but there are practical steps the committee can take to protect recovery on sale.
A great deal has happened in Victoria in recent times, with Owners Corporation v Buckley [2024] VMC 12, and there have been some judgments after that enforcing the lack of jurisdiction in the Magistrates Court.
An owners corporation that relies on amounts outstanding under a final fee notice issued to a lot owner doesn’t have jurisdiction to bring its claim in the Magistrates Court. It has to go through VCAT.
The process is to file a VCAT application together with your evidence, which consists of your summary of proofs and your exhibit bundle. Generally, the application will be determined on the papers without the presence of the parties or their representatives, unless a defence has been filed or points of defence have been raised. Once you have that judgment, you can register it in the Magistrate’s Court and enforce it.
That said, if any levies are unpaid at the settlement of a property sale, the purchaser becomes jointly and severally liable for those amounts. You also need to be careful about the statute of limitations, which is six years. If you want to have any hope of recovering amounts that are getting close to six years, look into securing that by way of a judgment post haste.
If people who live in the building know that a lot is selling and that there is a separate utility lot, speak to the agent. Try to get a copy of the contract. Speak to the solicitor or, if the owner is an owner-occupier and they’re still in the building, remind them that they are also selling the utility lot, or you the car space, or whatever it is. Remind them that one does not go with the other.
Watch for any notification of a sale, for example, a sale sign. If the settlement has already taken place and you receive the certificate with the details of the new owner, contact the solicitor soon, as the longer you leave it, the harder it will be to get a response from the solicitor or the new owner and to sort it out.
Petra Lohmann
Bugden Allen
E: petra@bagl.com.au
P: 02 9199 1055
Nancy Torry
Bugden Allen
E: nancy@bagl.com.au
P: 02 9199 1055
This post appears in Strata News #777.
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Read next:
- NAT: Levy arrears in strata: fairness, reform and respectful recovery
- VIC: Q&A Levies, Lot Allocations and Entitlements
- VIC: Q&A Owners Corporation Levy Increases and Due Dates
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