A common shortcut in owners corporation debt recovery may now come at a significant cost. Owners corporations (OCs) and their managers have commonly included historical arrears in Final Fee Notices as a single “balance brought forward”, often due to the way accounting software generates notices. In Owners Corporation PS415135N v Imam [2026] VCAT 704 (Imam), VCAT held that these lump sum amounts are not recoverable where the individual amounts making up the balance are not itemised in the Final Fee Notice.
The decision has important implications for OCs and OC managers, who should review their debt recovery processes and ensure Final Fee Notices comply with the statutory requirements.
Final Fee Notices must itemise each amount claimed
Sections 31 and 32 of the Owners Corporations Act 2006 (Cth) (OCA) govern the OC’s processes on how it can recover outstanding fees and charges owed. Section 30 of the OCA permits the OC to recover any money owed to it in any court of competent jurisdiction as a debt due to the owners corporation, subject to the statutory scheme under sections 31 and 32 of the OCA.
If an OC seeks payment of fees and charges which are due and payable, it must first issue a Fee Notice meeting the requirements outlined in section 31 and complying with the approved Consumer Affairs Victoria (CAV) Fee Notice form. If the arrears are not remedied within 28 days of the Fee Notice, the OC may issue a Final Fee Notice in accordance with section 32 of the OCA and the approved CAV form for Final Fee Notices.
The CAV approved forms outline the proper structure for Fee Notices and Final Fee Notices to address the ‘Date due’, Description of fee/charge/interest/arrears’, and ‘Amount’ of the arrears. This requires the individual amounts comprising the arrears to be separately itemised.
VCAT rejects the use of historical notices to explain lump sums
It is common practice for OC Managers to rely on its software in preparing Fee Notices and Final Fee Notices, which can result in lump sum items being listed on Final Fee Notices to avoid excessive reproduction of historical amounts. Historically, OCs have sought to substantiate these lump sums at VCAT by providing the corresponding Fee Notices issued to the lot owner. However, Imam has changed this approach, making it no longer sufficient for the Tribunal.
Member Reid fundamentally disagreed with this approach by stating:
“Trawling back through a series of earlier notices and undertaking an accounting exercise to understand a final fee notice is not something lot owners should have to do.”
VCAT will not separate recoverable amounts from a lump sum
In Imam, the lump sum contained amounts that the OC did not have a right to seek from the lot owner, including legal fees incurred and other reasonable costs. The OC contended that, despite the lump sum containing recoverable and unrecoverable components, VCAT should be able to award the parts of the lump sum it considers recoverable.
Member Reid disagreed, stating that the lump sum cannot be split into arrears that are recoverable and not recoverable. Further, an OC cannot claim a lump sum even if the total only contains recoverable arrears. The issue lies with the fact that:
“such an amount does not meet the informational requirements of the Approved Form [CAV forms and] would still mean that such an amount is not recoverable.”
Member Reid acknowledged that VCAT members have commonly accepted lump sum amounts on Final Fee Notices, but departed from that approach, stating:
“There is benefit to consistency in decision making however this is not of itself sufficient reason to continue to make decisions in the same way over a long period of time.“
Practical implications for owners corporations and managers
The decision in Imam is likely to have significant operational implications for owners corporations and their managers. Many debt recovery processes have historically relied on accounting software that automatically carries forward historical arrears as a single line item in subsequent notices. Following Imam, this approach may expose an owners corporation to the risk that otherwise recoverable charges become unrecoverable because the Final Fee Notice does not meet the informational requirements of the approved form.
Owners corporations should therefore carefully review their debt recovery procedures and the functionality of any software used to generate Fee Notices and Final Fee Notices. In particular, managers should ensure that each outstanding fee, charge, interest amount or arrear is separately identified with the relevant due date and amount owing. While this may result in longer and more detailed notices, it will provide greater transparency to lot owners and reduce the risk of a recovery application being challenged on procedural grounds.
The decision also highlights the importance of treating statutory notice requirements as substantive obligations rather than mere administrative formalities when pursuing debt recovery claims.
Key takeaways
Following the decision in Imam, OCs and OC managers should:
- Strictly comply with the CAV approved forms and the requirements of sections 31 and 32 of the OCA when relying on a Final Fee Notice to recover a debt at VCAT.
- Individually itemise each amount claimed in the Final Fee Notice, including the relevant due date, description of the fee, charge, interest or arrears and amount owing.
- Avoid relying on lump sum amounts, even where the amounts making up the lump sum may otherwise be recoverable.
- Not rely on ledgers or previous Fee Notices to explain or substantiate a lump sum included in a Final Fee Notice.
- Review their accounting software to ensure Final Fee Notices properly itemise outstanding amounts rather than carrying them forward as a lump sum.
Summary
A recent VCAT decision has changed how owners corporations recover levy arrears. In Owners Corporation PS415135N v Imam [2026] VCAT 704, the Tribunal found that lump sum “balance brought forward” amounts in Final Fee Notices are not recoverable unless each component is separately itemised. Owners corporations and managers must now ensure Final Fee Notices strictly comply with statutory requirements by identifying each fee, charge, due date and amount individually. Reliance on ledgers or prior notices to explain lump sums will no longer be sufficient.
This post appears in Strata News #813.
Leila Idris
Grace Lawyers
E: Leila.idris@gracelawyers.com.au
This article has been republished with permission from the author and first appeared on the Grace Lawyers website.
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