This article is about the changes to strata laws effective 27 October 2025 that will significantly impact how owners corporations manage and recover overdue levies.
What is Happening?
On 27 October 2025 major changes to the strata laws regarding the collection of overdue strata levies commence.
What Do the Changes Involve?
The changes to the law will require an owners corporation to give owners a greater opportunity to enter into payment plans to pay off overdue levies over a period of 12 months, make it difficult for the owners corporation to reject requests for payment plans made by owners and prevent owners corporations recovering interest on overdue levies and recovery expenses without an order by NCAT or a Court.
What is Happening to Levy Notices?
Levy notices sent by strata managers to owners will now need to be accompanied by a financial hardship information statement to help owners understand their rights and obligations if they are finding it difficult to pay their strata levies. That statement is available on NSW Fair Trading’s website and encourages owners to contact their strata manager or strata committee if they are experiencing financial hardship to discuss options for paying their levies including options for an affordable payment plan or waiving interest on overdue levies.
What is Happening to Payment Plans?
There will no longer be a need for payment plans concerning overdue levies to be approved at a general meeting. A strata committee or strata manager with delegated authority will now be able to approve payment plans. A payment plan will still be limited to a period of 12 months. An owner must make a request for a payment plan using a prescribed form.
How Long Does the Owners Corporation have to Decide if it Will Accept a Payment Plan?
The owners corporation or strata committee has 28 days after receiving an owner’s request, on the prescribed form, for a payment plan to give a written response to the owner. The owners corporation or committee must give reasons for rejecting the request including an explanation of how the reasons apply in the particular case.
Can an Owners Corporation Reject a Request for a Payment Plan?
An owners corporation will only be entitled to reject a request by an owner to enter into a payment plan to pay overdue levies in limited circumstances. An owners corporation can reject a request for a payment plan if accepting the plan would cause insufficient funds to be in the administrative fund or capital works fund either because:
- the fund would be in deficit; or
- for the administrative fund – there would be insufficient funds to pay expenses;
- for the capital works fund – there would be insufficient funds to pay for maintenance and repairs to the common property.
What if a Payment Plan is Rejected?
If a request for a payment plan is rejected, the owner may apply to NCAT for an order to require the owners corporation to accept the payment plan if NCAT is satisfied that the rejection of the plan by the owner’s corporation was not reasonable.
Can the Owners Corporation Charge for a Payment Plan?
No. An owners corporation cannot charge an owner for considering, accepting or monitoring a payment plan.
Can the Owners Corporation Still Take Legal Action Against an Owner if there is a Payment Plan in Place?
If there is a payment plan in place which an owner is adhering to the owners corporation will not be able to take legal action against the owner to recover the overdue levies that are covered by the payment plan.
What Steps Must an Owners Corporation Take Before it can Take Legal Action to Recover Overdue Levies?
An owners corporation will now not be able to take legal action against an owner to recover overdue levies unless it first gives the owner at least 30 days’ notice of that action. Further, the owners corporation will not be able to take action to recover interest on overdue levies and debt recovery expenses unless it first has offered the owner the option of entering into a payment plan for payment of the overdue levies.
Can an Owners Corporation Still Recover Interest and Debt Recovery Expenses?
Not without an order by NCAT or a Court. This indicates that debt recovery expenses will no longer be allowed to be recorded in the levy register or on an owner’s ledger until they are awarded by NCAT or a Court.
Can Payments Made by an Owner Still be Allocated Towards Debt Recovery Expenses?
Any payments made by an owner in levy arrears will first need to be applied to the overdue levies in order of due date, then allocated to interest and only then allocated to debt recovery expenses but only those that are ordered by NCAT or a Court to be paid. However, an owner can specify how his or her payments must be applied and the owners corporation must comply with that request. The owners corporation must also apply payments made by an owner in accordance with any order made by NCAT or a Court.
What Happens if the New Laws are Not Followed?
If the new laws are not followed by an owners corporation, for example, because a 30 day notice is not sent to an owner, or no offer of the option to enter into a payment plan is made, before legal action is taken against an owner, that might invalidate the legal action or, more likely, result in the owners corporation being deprived of the right to recover its costs or interest on overdue levies or both.
Conclusion
The new strata laws commencing on 27 October 2025 introduce substantial changes to levy collection practice and procedure. It is important that strata managers familiarise themselves with these changes to help ensure they follow the correct procedure to recover overdue levies.
Adrian Mueller JS Mueller & Co Lawyers E: adrianmueller@muellers.com.au P: 02 9562 1266
This post appears in Strata News #767.
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Read next:
- NSW: Q&A Levy recovery can only begin one month after the due date
- NAT: Levy arrears in strata: fairness, reform and respectful recovery
- NSW: Q&A Special Levies, Levy Payments and Overdue Levies
This article has been republished with permission from the author and first appeared on the JS Mueller & Co Lawyers website.
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