Unpaid levies are one of the most common financial problems in strata schemes, and one of the least discussed. Most owners are aware that levies must be paid, but few understand what happens when they are not, what rights the Owners Corporation has, or what new protections now exist for owners who are genuinely struggling. This guide covers all of it: the consequences of non-payment, the recovery process step by step, the hardship framework introduced in 2025, and what both owners and committee members need to know.

Why levy arrears matter to every owner

When one owner does not pay their levies, the shortfall does not disappear. The Owners Corporation still has bills to pay: insurance premiums, cleaning contractors, strata management fees, utilities, and maintenance costs. If the levy income falls short of what is needed, the scheme has three options: draw down on fund balances, delay paying creditors, or require compliant owners to effectively cover the gap until recovery action succeeds.

This is why arrears are not simply a private matter between the non-paying owner and the OC. They are a collective problem that affects every owner's money. A scheme with persistently high arrears will also have a reduced capital works fund balance over time, which increases the risk of a special levy for everyone.

Audience	Relevance	Why it matters
Lot owners in arrears	Essential	Understanding the consequences of non-payment and the available hardship options helps you respond early and effectively.
Compliant lot owners	Important	Arrears in your scheme directly affect your funds. You have a right to know the arrears position and what recovery action is being taken.
Committee members	Critical	You have a duty to actively pursue arrears. Failing to do so is a governance failure that exposes the OC and all owners to financial harm.
Strata managers	Essential	You manage the recovery process and must advise the committee on appropriate escalation at each stage.
Prospective buyers	Useful	A scheme with high arrears and poor recovery practices is a financial risk. Check the arrears schedule in the Section 55 report before purchasing.

What happens the moment a levy is overdue

Interest on overdue levies

Under Section 85 of the Strata Schemes Management Act 2015 (NSW), there is a one-month grace period after the due date. If the levy is paid within that month, no interest is charged at all. Once that month has passed without payment, simple interest at 10% per annum applies to the outstanding amount from the original due date. The rate is prescribed by the Act, though a scheme's by-laws may specify a different rate, and the OC can resolve by special resolution to charge no interest in particular circumstances.

Because the interest is simple rather than compound, it accumulates at a steady rate: 10% of the original unpaid amount per year, regardless of how long the debt has been outstanding. On a $1,000 unpaid levy, that is $100 per year, or approximately $8.33 per month. While the rate is not punishing compared to some debt instruments, it adds up steadily the longer the debt goes unresolved and sits alongside any recovery costs that accumulate in parallel.

Loss of voting rights

Under Schedule 1 of the Act, an owner who has any unpaid levy amount outstanding at the time a meeting notice is given, and who does not clear that debt in full before the meeting begins, loses the right to vote at that general meeting (except on motions requiring a unanimous resolution). The Act refers to such an owner as an 'unfinancial owner.'

This is an important distinction from the interest grace period. You can be within the one-month window where no interest has yet accrued, but if a meeting notice is issued and your levy remains unpaid, you will still be an unfinancial owner and unable to vote. Paying the outstanding amount in full before the meeting begins restores voting rights for that meeting. The strata manager or chairperson should announce which owners are unfinancial before voting begins at any general meeting.

The recovery process: stage by stage

The strata manager will follow a structured escalation process when levies go unpaid. The precise timing varies between schemes and management agreements, but the stages are consistent.

Stage	What happens	What it means for the owner in arrears
1	Reminder notice	Shortly after the due date, the strata manager issues a reminder notice showing the overdue amount. If still within the one-month grace period, no interest has yet accrued. If the month has passed, interest at 10% per annum (from the original due date) will also be shown.
2	Formal letter of demand	If the reminder is ignored, a formal letter of demand is issued, typically giving the owner a defined period to pay in full or contact the strata manager to discuss a payment plan. Legal costs associated with this letter may be recoverable from the owner.
3	Mandatory pre-recovery notice (from 27 Oct 2025)	Before commencing any recovery action, the OC must give the owner at least 30 days written notice of its intention to proceed, and must offer the option of a payment plan. This is a legally required pause. If you receive this notice, act immediately. A compliant payment plan stops further recovery action.
4	Debt recovery referral	If the 30-day notice period has passed, no payment plan has been agreed, and the debt remains unpaid, the matter may be referred to a debt recovery agent or solicitor. Recovery costs including legal fees can be added to the debt and recovered from the owner. The owner is now liable for the original levy, interest, and costs of recovery.
5	NCAT application	The OC can apply to the NSW Civil and Administrative Tribunal (NCAT) for an order requiring the owner to pay the outstanding levies, interest, and costs. NCAT applications are relatively straightforward for levy recovery matters. There is no requirement to attempt mediation before applying to NCAT for unpaid levies.
6	Local Court proceedings	For larger debts, or where a NCAT order has not been complied with, the OC may commence proceedings in the Local Court or District Court. A court judgment creates an enforceable debt that can be registered against the owner's property title.
7	Charge on title	In serious cases involving persistent non-payment, an OC may be able to take steps to have the debt registered as a charge against the lot on the property title. This is a significant step that affects the owner's ability to sell or refinance the property without first clearing the debt.

Financial hardship: new rights for owners who are struggling

A significant set of reforms that took effect on 27 October 2025 under the Strata Schemes Legislation Amendment Act 2025 (NSW) fundamentally changed how OCs must handle levy arrears and respond to owners experiencing financial hardship. These changes give struggling owners meaningful rights and introduce mandatory steps the OC must follow before commencing any recovery action.

The financial hardship information statement

From 27 October 2025, every levy notice issued by an OC must include, or be accompanied by, a financial hardship information statement. This statement must set out:

• That the owner may request a payment plan if they are experiencing financial hardship
• How to make that request to the OC or strata manager, using a prescribed standard form
• The contact details for the National Debt Helpline

This requirement applies to all levy notices, not just overdue notices. It is a proactive disclosure intended to ensure owners know about their options before debts escalate.

The right to request a payment plan

Under the amended Act, any owner wishing to enter a payment plan must use a prescribed standard form (Form 1 — Request for a Payment Plan for Overdue Contributions). Once a request is received:

• The strata committee must respond in writing within 28 days.
• The committee cannot apply a blanket policy of refusing all requests. Each request must be assessed individually.
• Any refusal must be reasonable. The regulations prescribe what constitutes a reasonable refusal, generally limited to cases where a plan would materially impact the scheme's ability to meet its financial obligations.
• Payment plans are capped at 12 months, though a further plan may be agreed once the first expires.
• While an owner is complying with an agreed payment plan, the OC cannot commence or continue recovery action against them.
• If the OC unreasonably refuses a payment plan, the owner can apply to NCAT for an order requiring the OC to enter into one.

How to request a payment plan

If you are struggling to pay a levy, take the following steps:

• Contact your strata manager in writing as soon as possible, ideally before the levy becomes overdue.
• Obtain and complete the prescribed Form 1 (Request for a Payment Plan for Overdue Contributions), which is available from your strata manager or NSW Fair Trading.
• Provide an honest account of your circumstances and propose a realistic repayment schedule within the form.
• Keep a copy of your submitted form and all correspondence in case the matter needs to be referred to NCAT.

Early and honest communication is the single most effective thing you can do. Strata managers and committees deal with hardship requests regularly. A genuine, proactive request is almost always received more favourably than silence followed by a recovery action.

For committee members: your duty to pursue arrears

The strata committee does not have the option to ignore arrears. Under the Act, the OC has a duty to manage the scheme's finances prudently, which includes actively recovering unpaid contributions. Allowing large debts to accumulate without taking recovery steps is a governance failure that can expose committee members to criticism from other owners and, in extreme cases, to claims that the committee has not acted in the interests of the scheme.

The committee's specific responsibilities

• Review the levy arrears schedule at every AGM, and request updates from the strata manager at committee meetings for any significant outstanding debts.
• Authorise the strata manager to proceed with each stage of the recovery process in a timely manner. Delays at each stage extend the period over which the scheme is deprived of the funds.
• Respond to payment plan requests promptly and in good faith. Assess each request individually and document the committee's reasoning. If a plan is refused, record why.
• Consider the interests of compliant owners. Every dollar sitting in arrears is a dollar that is not available for maintenance or in the capital works fund.
• Do not allow personal relationships with owners in arrears to influence recovery decisions. The committee acts on behalf of all owners, not selectively.

Setting a clear arrears policy

Committees are well served by having a documented arrears policy that specifies the timeline for each recovery stage: how many days after the due date a reminder is sent, when a formal demand letter is issued, when the matter is referred to a recovery agent, and when an NCAT application will be made. A clear policy removes ambiguity, ensures consistent treatment of all owners, and demonstrates to compliant owners that the committee is governing the scheme responsibly.

What happens to arrears when a property is sold

Outstanding levy arrears do not simply disappear when an owner sells their property. The way they are handled at settlement is important for both the seller and the buyer to understand.

The Section 184 certificate

When a strata property is sold, the buyer's solicitor will request a Section 184 certificate from the OC (or strata manager). This certificate confirms:

• The amount of levies owing as at the certificate date
• Any outstanding amounts relating to a special levy
• Any orders, judgments, or proceedings relating to the scheme or the lot

The certificate is a snapshot of the financial obligations attached to the lot at a point in time. It is typically requested a few days before settlement so the figures are current.

Adjustment at settlement

Outstanding levies shown on the Section 184 certificate are typically adjusted between the buyer and seller at settlement. In most cases, the seller's solicitor deducts the outstanding levies from the seller's net proceeds, and those funds are paid to the OC at settlement. The buyer takes possession of a property with a clear levy account.

If there are outstanding interest charges and recovery costs in addition to the unpaid levies, these are also included in the adjustment. A seller who has allowed arrears to accumulate over a long period may find a substantial amount deducted from their settlement proceeds.

For buyers: what to check

If you are buying a strata property, ensure your solicitor reviews the Section 184 certificate carefully and requests it as close to settlement as possible to capture any levies that have fallen due in the days before completion. Also review the Section 55 report from the strata inspection to understand the scheme's broader arrears position, not just the arrears on the lot you are buying.

Frequently asked questions

I missed a levy payment by accident. What should I do?

Pay it immediately, including any accrued interest shown on your account, and contact your strata manager to confirm the payment has been received and allocated correctly. If the payment reference was incorrect and the payment has not been allocated, provide proof of payment and ask the strata manager to trace it. A single missed payment that is promptly rectified will not trigger formal recovery action.

Can the OC cut off my access to common areas if I do not pay?

No. The OC cannot restrict an owner's access to their lot or to common areas as a consequence of unpaid levies. Levy recovery must proceed through the legal channels described in this article. Any attempt by a committee to physically restrict access would itself be a breach of the owner's rights and could give rise to a separate NCAT application by the owner.

I am renting out my property. My tenant is living there but I cannot afford the levy. What are my options?

Your tenancy income does not affect your legal obligation to pay levies, but it is relevant context for a hardship request. Contact your strata manager to request a payment plan and explain your circumstances. If your difficulty is temporary, a short-term arrangement may be available. If it is ongoing, seeking financial counselling through the National Debt Helpline (1800 007 007) is advisable, as they can help you explore all available options.

The previous owner left significant arrears. Am I responsible for them?

Generally, no. Outstanding levies at settlement are adjusted between buyer and seller, so you should take possession with a clear account. However, if the Section 184 certificate was not obtained or was inaccurate, and arrears were not properly adjusted, you may have a claim against the vendor or their solicitor for the shortfall. This is a legal matter for your solicitor to advise on promptly after settlement.

As a committee member, can we waive interest on an owner's arrears?

Yes, in appropriate circumstances. The committee can resolve to waive or reduce interest on outstanding levies, particularly where the owner has demonstrated genuine hardship or has made good faith efforts to repay. The decision should be documented in committee minutes with reasons, and applied consistently. A committee that waives interest for one owner should be prepared to apply the same standard to other owners in comparable circumstances.

An owner in our scheme has not paid levies for over a year. The debt is now very large. What can the OC do?

At this stage, the matter should already be with a debt recovery agent or solicitor if it has not been escalated. The OC should obtain a judgment through NCAT or the Local Court, which creates an enforceable debt. If the owner refuses to comply with the judgment, enforcement options include a writ of execution against the owner's assets, a garnishee order against bank accounts, and in serious cases, steps to register the debt against the property title. A solicitor specialising in strata law can advise on the most appropriate enforcement pathway given the specific circumstances.

Can an owner in arrears still attend the AGM?

Yes. An owner in arrears retains the right to attend general meetings and to speak on matters being discussed. They lose only the right to vote on any resolution, and this restriction applies automatically once arrears exceed one month. The strata manager or chair of the meeting should be aware of which owners are ineligible to vote before the meeting begins.

Related reading

• Understanding your strata levy notice — learning.netstrata.com.au
• What is a special levy and when can the OC raise one? — learning.netstrata.com.au
• How to read a Section 55 financial report — learning.netstrata.com.au
• Disputes and resolution: conflict resolution processes — learning.netstrata.com.au
• Financial management: levies, funds and budgeting — learning.netstrata.com.au