Debt Recovery For Overdue Strata Levies: Recovering Legal Expenses

An Owners Corporation is entitled to “recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts” under Section 80 of the Strata Schemes Management Act (1996).

The good news is that legal costs are considered expenses for the purposes of section 80 however there are restrictions imposed on the recovery of expenses to be aware of.

What are the limitations?

 In The Owners Strata Plan P 36131 v Dimitriou [2009] NSWCA 27, the Court considered the nature of “expenses” under section 80 of the Act and held that legal costs and expenses incurred in recovery of a debt, including court proceedings, may be claimed by an Owners Corporation under section 80.

However, the Court imposed several limitations on the recovery of legal costs, including those set out below:

• Legal costs and disbursements must be proven by the claiming party to be reasonably incurred;
• Legal costs and disbursements must be proven by the claiming party to be reasonable in amount;
• The Owners Corporation’s conduct in commencing proceedings must be reasonable; and
• Any claim for expenses, including legal costs, must be made in the same proceedings as the claim for the unpaid levies.

These limitations have been upheld in later cases. In particular, there has been emphasis on legal costs being reasonably incurred and reasonable in amount.

Owners Corporations should take care when making any payment arrangements with lot owners or when commencing proceedings for recovery of overdue levies to ensure their right to claim expenses is not lost, either through unreasonable conduct of the Owners Corporation or by trying to claim expenses after the levies have been fully recovered.

Whilst seemingly straightforward, the recovery of levies can become complicated very quickly.

For advice on levy recovery and further information on what amounts can be claimed from a recalcitrant lot owner, please contact either: