Recovering OC Arrears: VCAT Says “Balance Brought Forward” is Not Enough

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VIC

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.

 

If you are pursuing outstanding owners corporation arrears and need guidance on your debt recovery options, contact our Victorian Debt Recovery team on 1300 144 436 for advice.

 

Prepared by Leila Idris, Partner, and Ruby Huntingon, Lawyer, Grace Lawyers

 

Last updated on 18 September 2026

Australia’s AML/CTF Reforms: What Every Strata Manager Needs to Know

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NATIONAL

Australia has obligations and responsibilities on an international level to prevent money laundering, terrorism financing and proliferation financing domestically. A 2015 review conducted by the Financial Action Task Force, the watchdog responsible for international Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) compliance, identified significant deficiencies in Australia’s AML/CTF framework which resulted in reforms to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the Act) that came into effect on 31 March 2026 and 1 July 2026.

The main aim of the reforms is to mitigate the risk of money laundering and terrorism financing in Australia. Through the introduction of more stringent customer identification processes, and a requirement for companies to self-identify risks associated with their services, the reforms mandate a more hands on approach focussed on individual compliance and reporting.

Which businesses are captured by the new Tranche 2 AML/CTF obligations?

One of the most significant reforms introduced in 2026 is the expansion of the definition of “designated services” and the introduction of “Tranche 2” obligations, which imposes reporting obligations on further entities including:

  • Accountants
  • Conveyancers
  • Jewellers
  • Lawyers
  • Precious stone and metal dealers
  • Real estate professionals

How do the AML/CTF Reforms affect strata managers?

The Minister for Home Affairs has announced an exemption to Strata Managers being considered real estate professionals, unless they represent company title schemes. Whilst all strata managing companies do not necessarily provide designated services, as best practice, all Strata Managers should be alert and exercise caution in the event of any suspicious transactions.

Strata Managers managing company title schemes where they are the Secretary of the Scheme or their business address is the address for service for the company title may be required to enrol and register through the AUSTRAC website and implement AML/CTF policies, procedures and risk mitigation measures.

If you are unsure whether your company is required to enrol, you should go to the AUSTRAC website and complete the survey to confirm.

What AML/CTF Policies Should Strata Management Companies Implement?

Strata management companies confirmed to be outside the exemption, and managing company title schemes should implement policies including:

  • Customer Due Diligence (CDD) to verify the identity of clients and beneficial owners. This will ensure only properly identified individuals are authorised to provide instructions to the strata manager relating to a scheme’s funds.
  • Risk Assessments identifying the most significant risks for the strata managers and providing options for mitigation or escalation.
  • Compliance Officer and personnel designated to oversee the implementation and ongoing training and compliance with the AML/CTF program.
  • Record keeping documents and instructions for submitting Suspicious Matter Reports and Threshold Transaction Reports (TTRs).

Why is AML/CTF training essential for strata management staff?

Staff members who deal directly with customers, manage, or assist with the management of company title schemes, including relevant strata managers, assistant strata managers and front of house office staff must undergo training to understand warning signs and risks associated with transactions and customers.

What is threshold transaction reporting and when is it required?

As best practice, all strata management companies should implement a policy around how to handle and report threshold transactions. Any payment made in cash over $10,000.00 must be reported to AUSTRAC within 10 business days of the transaction occurring. TTRs must be submitted through AUSTRAC’s online portal and must include:

  • Your business or company.
  • The date of the report.
  • Details of the individual completing the report (usually the person who received the funds or the compliance officer for the company).
  • Details of the customer who made the cash payment.
  • Any other party involved in the cash payment.

For more information on threshold transaction reporting, please view AUSTRAC’s website.

What is a suspicious matter report and when should it be lodged?

Sometimes, when individuals are participating in fraudulent acts or payments, they will deposit or make payments of a large amount in smaller amounts just under $10,000.00 (for instance, they may make several payments of $9,999.00 to avoid triggering threshold transaction reporting).

If repeat amounts are being paid in such a manner, the Strata Manager should report the transactions to AUSTRAC in the same manner as outlined above for TTRs.

Strata Managers should not report repeat transactions that are payments of strata levies (for instance, if every month a Lot Owner pays $9,950.00 as payment of Strata Levies, this would not be considered a suspicious matter and reporting would not be required).

How should strata managers manage property ownership changes for AML/CTF compliance?

When a Lot in a strata scheme or a community association is sold, the Purchaser’s representative must send to the Strata Manager a Notice of Interest confirming the sale pursuant to section 22 of the Strata Schemes Management Act 2015 (NSW) and section 20 of the Community Land Management Act 2021 (NSW).

The Notice should include:

  • Name and address of the new Lot Owner
  • Date of settlement
  • Address of the Lot in question
  • Signatures of the representatives of the Purchaser and Vendor

Once the Strata Manager has received the Notice, they should add the new Lot Owner to the register and send an acknowledgement email or letter to the address on the Notice.

Strata Managers should maintain due diligence regarding these notices, and if any details are missing from the Notice, they should immediately contact the Purchaser’s representative to update and confirm the details.

Should strata managers conduct their own verification of identity checks?

Strata Managers should note a thorough verification of the new Lot Owner may be required as a risk mitigation measure, despite the Purchaser’s representative’s obligations to complete the verification of identity process. We recommend Strata Managers complete their own verification of identity as best practice and should familiarise themselves with all Lot Owners to ensure no fraudulent activity or payments are made or received.

What are the safest payment methods for strata levy transactions?

Once a new Lot Owner is added to the register, they will be set up with an account for payment of levies. We recommend your Strata Managing Company utilises a payment system through secure platforms such as:

  • BPAY
  • StrataPay
  • DEFT Payments

The platforms have security measures in place to prevent fraudulent activity and heightened authentication options, including with unique client identification numbers and frequent changes to passwords.

How can strata managers detect potential fraudulent payments?

Whilst the payment platforms have stringent methods in place to prevent fraudulent activity, Strata Managers should monitor all payments and note any repeat payments of the exact same amount (outside usual levy amounts) or unexplained changes in accounts paying the levies.

Summary

Australia’s 2026 AML/CTF reforms mark a significant shift in the compliance obligations of businesses involved in financial transactions, including many operating within the strata sector. By implementing robust customer due diligence, risk assessment, reporting and record-keeping processes, strata managers can play an important role in preventing money laundering and terrorism financing. Proactive compliance, ongoing staff training and vigilant monitoring of transactions will help protect strata schemes, ensure regulatory compliance and reduce the risk of fraudulent activity within the industry.

 

If you require guidance on understanding your AML/CTF obligations, please contact our offices on 1300 144 436 and we would be happy to assist.

 

Written by Anna Hahm, Strata and Property partner, and Holly Mack, lawyer, Grace Lawyers

 

Last updated on 4 August 2026

VCAT Clarifies Cost Allocation Between Limited and Unlimited Owners Corporations

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VIC

In large developments with multiple owners corporations (OCs), disputes can arise over who pays for what. When costs incurred by limited OCs are shifted onto unlimited OCs, disputes can arise—especially when the allocation appears unfair, discriminatory, or oppressive. Recent rulings by the Victorian Civil and Administrative Tribunal (VCAT) have clarified that such practices may breach section 167(1)(d) of the Owners Corporations Act 2006 (Vic), prompting a closer look at how costs should be fairly and lawfully apportioned.

How the Law Defines OC Responsibilities and Cost Allocation

  • Functions of OCs: Under Section 4 of the OCA, an OC is tasked with managing and administering the common property. This responsibility extends to repairing and maintaining common property, including chattels, fixtures, fittings, and services that are either part of the common property or contribute to its enjoyment.
  • Limited vs Unlimited OCs: The Subdivision Act 1988 (Vic) distinguishes between limited and unlimited Owners Corporations (OCs) in sections 3(1), 27B and 27C. A limited OC is established to manage specific areas of common property that are used exclusively by its members. For example, if an area is marked “Common Property 2” and governed by OC 2, then OC 2 must bear the costs of its repair and upkeep. In contrast, an unlimited OC is established to manage the designated areas of common property under its control, except where those areas fall within the responsibility of a limited OC.
  • No fixed rule for cost sharing: The legislation does not spell out how administrative costs must be divided between OCs. OCs must therefore apply common sense, fairness and due diligence.

As Member Rowland put in the recent case of Ward v Owners Corporation PS723358X-1 [2025] VCAT 823 (Ward) at [24] and [25]:

 

“…owners corporations must use common sense and practicality in dividing administrative and service costs between owners corporations depending on the unique distribution of lot liability between all lots across all owners corporations. In carrying out this function, owners corporations must act honestly and in good faith and exercise due care diligence as required by section 5 of the Owners Corporations Act 2006 (Vic).”

 

Case Spotlight – Ward v Owners Corporation PS723358X-1 [2025] VCAT 823

Facts

In Ward, the case concerned:

  • A subdivision with an unlimited OC (OC 1) and 4 limited OCs. The 4 limited OCs governed 456 apartments across 10 apartment towers. The unlimited OC governed the apartment towers and townhouse lots.
  • The applicants (townhouse owners) contended that costs have been unfairly allocated to OC 1 when the 4 limited OCs are receiving a benefit for which they are not making a proper contribution.

Disputed costs

Member Rowland undertook the exercise of determining whether specific costs (such as insurance, security, facility management fees, owners corporation management services, water and fire system services) should be shared through the unlimited OC so that all lots share equally (subject to their lot liability) or whether they should be shared through the limited OCs so that costs are shared only among the affected lot owners.

Findings

The Tribunal found that the unlimited OC had not acted in good faith and diligence because:

  • OC 1 allocated the entire cost of a facility management contract and owners corporation management services to the unlimited OC which unfairly discriminated against townhouse owners.
  • The facility management contract did not extend to townhouse lots.
  • Townhouse owners benefited less from the owners corporation management services because there was work carried out purely for the limited OCs including preparing budgets, annual statements, arranging repairs, maintenance and services for each of the limited OCs.

Member Rowland found that this was unfairly discriminatory and made orders that:

  • The facility management and owners corporation management companies were to estimate the time spent on each of the OCs and apportion the costs accordingly.
  • Misallocations to be corrected.

Although Member Rowland acknowledged the difficulty and cost in precisely apportioning these costs, she said that a reasonable estimate ought to be made.

Earlier VCAT Decisions on Cost Allocation

 Member Rowland’s approach is consistent with the previous decisions of Member Dea in Sukeda v Owners Corporation 2 Plan No 529462 [2016] VCAT 533 (Sukeda) and Judge Millane in Owners Corporation No. 5 PS326559B v Owners Corporation No. 1 PS326559B [2018] VCAT 765 (OC 5).

Sukeda

In this case:

  • Similar to Ward, OC 2 was an apartment building among townhouse lots that were only affected by the unlimited OC.
  • A townhouse owner challenged the limited OC (OC 2)’s charges to the unlimited OC for caretaking services for waste management, replacement of lights in the apartment building, internal cleaning, window cleaning, fire protection and extinguisher services, and plumbing services.
  • Member Dea held that these were expenses of a limited OC (OC 2) and not the unlimited OC and required that OC 2 refund the unlimited OC for the wrongly allocated expenses.
  • OC 2 argued that budgets were validly passed at AGMs and therefore the unlimited OC was stopped from claiming back those funds but this argument was rejected by the Tribunal.

OC 5

In this case:

  • Judge Millane found that the limited OC (OC 5) was responsible for the repair and maintenance of a historic chimney as it was designated as common property 5 on the plan of subdivision.
  • This is consistent with the current section 27C(3) of the Subdivision Act in that the creation of a limited OC is to manage and administer the limited OC where its members have an exclusive right to use the common property.

Key Takeaways – Practical Lessons

  1. Check which OC really benefits
  • Costs should follow the OC that benefits from the service.
  • Cost allocation should not automatically be applied to the unlimited OC.
  1. Use reasonable estimates
  • If costs are shared across multiple OCs (such as owners corporation management services), service providers should provide a reasonable estimate of the time spent or resources used for each OC.
  1. Document decisions
  • Keep records of resolutions, invoices and apportionment methods/calculations.
  • Passing a budget or blanket resolution at an AGM will not protect an OC against challenge.
  1. Apply consistency
  • Costs such as insurance that benefit all lots can be paid by the unlimited OC.
  • However, services that are clearly confined to certain common property should be allocated costs to the relevant OC.

Conclusion

VCAT’s decisions reinforce that cost apportionment between limited and unlimited Owners Corporations must reflect actual benefit and use. Blanket charges to unlimited OCs risk breaching statutory duties and may be deemed oppressive or discriminatory under section 167 of the OCA. OCs should adopt transparent, fair and well-documented methods for allocating costs—guided by common sense, legal principles and practical estimates. OCs are encouraged to review their arrangements now to avoid potential disputes later.

 

Written by Leila Idris, Partner, and Katrina Lay, Associate, Grace Lawyers

 

If your owners corporation is having difficulties with their cost-sharing practices, contact our Victorian team on 1300 144 436 to ensure allocations reflect actual benefit and comply with the law.

Magistrates’ Court Lacks Jurisdiction in Owners Corporation Debt Recovery

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VIC

Owners Corporation v Nguyen & Ors [Magistrates’ Court of Victoria, 8 July 2025]

Introduction

In a decision of substantial consequence for Victoria’s strata law landscape, the Magistrates’ Court in Owners Corporation v Nguyen & Ors [1] has held that it does not have jurisdiction to determine debt recovery claims brought by Owners Corporations (OCs) against lot owners under the Owners Corporations Act 2006 (Vic) (OCA). The ruling confirms that such matters fall exclusively within the jurisdiction of the Victorian Civil and Administrative Tribunal (VCAT).

This case reaffirms and builds upon the earlier controversial decision in Owners Corporation v Buckley [2024] VMC 12 and clarifies the interpretive conflict between the OCA and the Magistrates’ Court Act 1989 (Vic) (MCA).

Background

The plaintiff OC sought to recover unpaid fees from two lot owners, Mr Nguyen and Ms Vu, amounting to over $25,000. The claim was based on fee notices and final fee notices issued under sections 31 and 32 of the OCA. The defendants challenged the Magistrates’ Court’s jurisdiction, relying heavily on Buckley [2].

A preliminary question was set down for hearing whether the Magistrates’ Court retains concurrent jurisdiction with VCAT to hear claims for money owed to an OC by a lot owner.

Key Legal Issue

The Court was asked to determine whether:

“Parliament intended that VCAT has exclusive jurisdiction for the recovery of money owed by a lot owner, or whether the Magistrates’ Court retains concurrent jurisdiction under s 100(1) of the MCA and s 30 of the OCA.”

Statutory Framework

Owners Corporations Act 2006 (Vic)

  • Section 30(1): Permits OCs to recover “money owed” in any court of competent jurisdiction.
  • Section 30(2): States that such recovery by a lot owner is “subject to” compliance with ss 31, 32 and Division 1 of Part 11.
  • Division 1 of Part 11: Titled “Applications to VCAT” and contains the procedure and powers applicable to OC disputes.
  • Section 32(2)(c): Requires that final notices state the OC “intends to take action under Part 11”—i.e., apply to VCAT.

Magistrates’ Court Act 1989 (Vic)

  • Section 100(1): Provides the Court’s general civil jurisdiction over debts and liquidated demands up to $100,000.

Decision

Magistrate M A Hoare ruled unequivocally that:

“There is a clear and unmistakeable implication to alter or remove the Court’s jurisdiction with respect to claims for recovery of money owed by a lot owner under the OCA.”

 

Key findings included:

  1. Exclusive Language of the OCA: The phrase “subject to” in s 30(2), combined with mandatory procedural requirements and express reference to VCAT throughout Division 1 of Part 11, indicated a legislative intent to confer exclusive jurisdiction on VCAT.
  2. Contradictory Notices: The required wording in final fee notices refers only to initiating action under Part 11 (VCAT), not in a court. Permitting action in the Magistrates’ Court undermines statutory clarity and leads to inconsistency.
  3. Costs and Fairness Considerations: VCAT’s discretionary and cost regime (under s 109 of the VCAT Act) and fairness-based decision-making (ss 165–167 OCA) are incompatible with the fixed judicial processes of the Magistrates’ Court.
  4. Purpose and Context: A holistic reading of the OCA—especially in light of the Act’s stated purpose to create an appropriate dispute resolution mechanism—supports exclusive VCAT jurisdiction with respect to recovery of money owed by lot owners.

Implications

  • OCs must file fee recovery claims against lot owners at VCAT, following all pre-litigation notice requirements under ss 31 and 32 of the OCA.
  • Attempting to circumvent this process by commencing Magistrates’ Court proceedings may result in dismissal for lack of jurisdiction and wasted costs.

Conclusion

The Magistrates’ Court’s ruling in Owners Corporation v Nguyen & Ors clarifies ambiguity following the decision of Buckley in the interplay between the OCA and general civil jurisdiction conferred under the MCA. It affirms VCAT’s primary role in adjudicating disputes between owners corporations and lot owners, emphasising the necessity of strict compliance with the procedures and remedies prescribed by the OCA.

This decision is likely to have a significant ripple effect across Victoria’s property and strata management sectors in decisions related to OC debt recovery against lot owners. VCAT will likely see a further influx of OC debt recovery applications since the decision of Buckley.

 

Written by Leila Idris, Partner, and Katrina Lay, Lawyer, Grace Lawyers VIC

 

If your OCs require assistance with recovering unpaid fees or contributions through VCAT, our team can assist and guide you through the process from preparation of compliant notices to representation at the Tribunal. Call us on 1300 144 436 to learn more.

 

[1] Owners Corporation v Nguyen & Ors [Magistrates’ Court of Victoria, Magistrate M A Hoare, 8 July 2025]

[2] Owners Corporation v Buckley [2024] VMC 12

Navigating Limitation Periods for Building Defects in Victoria

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VIC

In Victoria, navigating building defect claims requires a clear understanding of applicable limitation periods. Owners Corporations and lot owners must be aware that time limits vary depending on the type of defect and the governing legislation. Whether dealing with general defects, cladding issues, plumbing faults or multiple occupancy permits, knowing these timelines is crucial to preserving legal rights. This article outlines key statutory limitation periods, helping property owners take informed action before time runs out.

Limitation Periods Under the Building Act 1993 (Vic) (“Building Act”)

General Building Defects

The primary legislation governing building defects in Victoria is the Building Act 1993 (Vic). Under Section 134(1), a building action arising from building work must be commenced within 10 years from the date of issue of the occupancy permit or certificate of final inspection.

Cladding defects

For cladding defects in building work with occupancy permits or certificates of final inspection issued between 16 July 2019 and 1 December 2023, a claim must be started within 15 years from the date of issue. This extension is set out in section 134(2) of the Building Act, as amended by the Building Amendment (Registration and Other Matters) Act 2021 (Vic). It is important to understand that this 15-year limitation only applies to cladding defects within this specific timeframe – claims for defects outside these dates remain subject to the usual 10-year limit.

Extension of limitation period

Can the 10-year limitation period be extended? In a key case Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165, the Victorian Court of Appeal confirmed that the 10-year time limit in the Building Act applies to all building-related claims, whether the claim is in negligence or for breach of contract.

While the 10-year limit on building claims is usually strict, there is now a very narrow exception. Under section 134(2A) of the Building Act, a court may extend the period in accordance with section 77 of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT). These limited circumstances may apply only if:

  • The matter was first commenced in VCAT within the 10-year limit; and
  • The Tribunal lacked jurisdiction to deal with it because it involved federal subject matter, and the proceeding was struck out and referred to a Court; and
  • The Court is satisfied it is fair and reasonable to extend the time.

Plumbing action

If you are dealing with defects in respect to plumbing work, the limitation period under section 134A of the Building Act is 10 years from the date of issue of the compliance certificate.

Multiple Occupancy Permits and their Impact

In developments where multiple occupancy permits are issued for different stages of construction, determining the relevant limitation period for each stage can be challenging. Each occupancy permit typically signifies the completion of a particular stage or section of the building. As a result:

  1. Separate limitation periods for each occupancy permit: The 10-year period applies separately to each permit issued for a specific part of the building.
  2. Risk of different expiry dates: The limitation periods for different sections of the building may expire at different times, depending on when the respective occupancy permits were issued.
  3. Complexity in legal claims: Property owners seeking to claim for defects are recommended to seek legal advice on which relevant occupancy permit applies to the building work to avoid losing legal recourse.

This issue was clarified In Lendlease Engineering Pty Ltd v Owners Corporation 1 [2022] VSCA 105. The Court held the 10-year limitation period starts from the first occupancy permit issued for the relevant building work – not from the later or final permits.

Limitation period under the Domestic Building Contracts Act 1995 (Vic) (“DBCA”)

Prior to issuing a VCAT proceeding for building action, the Owners Corporations (and any other lot owners) is required to obtain a certificate of conciliation from the Domestic Building Dispute Resolution Victoria (DBDRV).

By section 45(3)(a) and (b) of the DBCA, a domestic building dispute must be referred to the DBDRV within 10 years after the date of issue of the occupancy permit or certificate of final inspection.

In Warren’s Plumbing and Drainage Services Pty Ltd v Sharma [2018] VCAT 883, the Tribunal has taken the view that where a VCAT application is lodged shortly prior to the expiration of the limitation period, the proceeding is stayed pending the lodging of a certificate of conciliation issued by the DBDRV.

What If There Is No Occupancy Permit or Final Certificate of Inspection?

In some cases, building work is done without a building permit or is never properly signed off with an occupancy permit or certificate of final inspection. If the building work does not have an occupancy permit or certificate of final inspection, the Limitation of Actions Act 1958 (Vic) (“LAA”) may apply instead. Under section 5 of the LAA, the limitation period is 6 years from the date the cause of action accrued.

In Gledhill v Scotia Property Maintenance Pty Ltd [2019] VCAT 422, the Tribunal made clear that if no building permit was issued, and there is no occupancy permit or certificate of final inspection, the 10-year limitation period under section 134 of the Building Act does not apply.

Insurance Applications

Domestic Building Insurance (DBI)

DBI provides protection for property owners for incomplete or defective building work where the builder has died, disappeared or become insolvent where the building contract is more than $16,000.

Where DBI cover applies, the relevant period of insurance cover is determined by the nature of the defect:

  • Structural defects: 6 years from the date of the occupancy permit.
  • Non-structural defects: 2 years from the date of the occupancy permit.

The Victorian Managed Insurance Authority (VMIA) manages claims for DBI since May 2010.

Generally, you need to lodge a VMIA claim within 180 days (6 months) of becoming aware of the builder’s insolvency.

Plumber insurance

The plumber insurance provides protection for property owners for incomplete or defective plumbing works that require a compliance certificate. The date that an insurance claim can be made is within 6 years from the date that the plumber issued a compliance certificate in relation to that domestic plumbing work. The insurance coverage applies regardless of whether the plumber has ceased to operate as a licensed practitioner, retires or ceases plumbing work.

Conclusion

In Victoria, limitation periods for building defect claims vary based on the type of defect and applicable legislation. General building defects have a 10-year limit under the Building Act, while cladding defects within specific dates have a 15-year period. Plumbing defects follow a 10-year timeframe, and multiple occupancy permits can complicate time limits. Owners Corporations and lot owners must be proactive, tracking key dates and seeking legal advice to protect their rights before the limitation period expires.

Written by Leila Idris, Partner, Grace Lawyers VIC

At Grace Lawyers, we can assist you in understanding these time limits and taking the right steps to safeguard your interests. Call us on 1300 144 436 to learn more.

 

Summary Table

Type of Claim/ProcessLimitation PeriodTrigger DateRelevant Law/Notes
General Building Defects10 yearsDate of Occupancy Permit or Certificate of Final InspectionBuilding Act 1993 (s134(1))
Cladding Defects15 yearsDate of Occupancy Permit or Certificate of Final Inspection (issued 16 Jul 2019 – 1 Dec 2023)Building Act 1993 (s134(2)); limited to specified period
Plumbing Defects10 yearsDate of Compliance CertificateBuilding Act 1993 (s134A)
Multiple Occupancy Permits10 years (separate for each permit)Date of the first Occupancy Permit relevant to the building workSee Lendlease Engineering Pty Ltd v Owners Corporation 1 [2022] VSCA 105
No Occupancy Permit / Certificate Issued6 yearsFrom when cause of action accrued (i.e. defect was known or discoverable)Limitation of Actions Act 1958 (s5); see Gledhill v Scotia Property Maintenance Pty Ltd [2019] VCAT 422
VMIA Claim180 daysFrom when owner becomes aware of builder’s insolvency/disappearanceDomestic Building Insurance Ministerial Order;

Applies if DBI cover is triggered for structural defect (6-year insurance period cover) and non-structural defect (2-year insurance period cover)

Plumber Insurance Claim6 yearsFrom date of Plumbing Compliance CertificateMinisterial Orders – Plumbing Insurance;

Insurance claim may be made regardless of whether the plumber ceases to practice

 

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should obtain independent legal advice on their specific legal issues.

Can OCs Change Information in Approved Forms for Fee Notices?

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VIC

On 3 December 2024, we published an article on Changes to Approved Forms for Fee Notices and Final Fee Notices. These changes now require the inclusion of prescribed information regarding payment plans and financial hardship.

Lot owners experiencing financial hardship in paying their Owners Corporation levies on time may contact the Owners Corporation or the Owners Corporation Manager to request a payment plan. However, under the Owners Corporations Act 2006 (Vic), there is no statutory obligation for an Owners Corporation to accept a payment plan. The decision is at the discretion of the Owners Corporation on a case-by-case basis, depending on whether the proposed plan is suitable for resolving the outstanding levies.

When might a payment plan be deemed unsuitable?

A payment plan may not be suitable to the Owners Corporation if:

  • The lot owner has previously entered into payment plans but failed to adhere to them.
  • The proposed payment plan is too long, unrealistic, or does not demonstrate an ability to repay the outstanding levies within a reasonable time.
  • The proposed payment plan does not indicate an ability to meet payment of Owners Corporation levies that will become due while also adhering to the proposed payment plan.

Ensuring compliance with Approved Forms

While Owners Corporations can exercise discretion regarding payment plans, it is crucial that Owners Corporation Managers ensure their Fee Notices and Final Fee Notices comply with the approved forms published on the Consumer Affairs Victoria website. No additional statement beyond the prescribed content should be included in these notices.

For instance, your Fee Notices and Final Fee Notices must not include a statement such as: “The Owners Corporation has a right not to accept a payment plan”.

The information attached to the approved forms contains the following:

Can owners corporations change, add or delete information in fee notices?

The layout of the forms can be varied to suit computer-generated systems, mailing and payment processes but must contain all information specified in the approved forms.

The main title of the notice must be ‘Owners corporation fee notice’ or ‘Owners corporation final fee notice’.

(Payment methods can be inserted into the space provided or incorporated into a tear off remittance slip. If space is limited, payment methods can be provided on a separate page).

The form can also include details such as:

  • Other reference numbers and information needed as part of an internal administration system (e.g. owner reference number).
  • The manager’s name, ABN registration number and contact details.
  • Website and email details.

Otherwise no other information can be changed, added or deleted. Fee notices are approved forms under the Act. Any notice that contains information that differs from the approved form may be invalid.

Recommended actions for Owners Corporation Managers

Given the strict limitations that the approved forms cannot be modified other than as permitted, Owners Corporation Managers should consider alternative ways to clarify the discretionary nature of payment plans. This can be done by including the relevant information in:

  • The covering letter accompanying your Fee Notices and Final Fee Notices.
  • The resolutions passed at the Annual General Meeting regarding the Owners Corporation’s debt recovery process.

In summary, while Owners Corporations can exercise discretion over payment plans, they must ensure strict compliance with the approved forms for Fee Notices and Final Fee Notices. Any deviations from these forms can render notices invalid. For clarity on payment plans, consider using supplementary materials like covering letters or AGM resolutions.

 

Written by Leila Idris, Partner and Eleni Tasiopoulos, Lawyer, Grace Lawyers

If you need assistance with updating your templates for Fee Notices, Final Fee Notices, covering letters and wording for resolutions in your Owners Corporation debt recovery process, please contact Leila Idris or our Melbourne team at Grace Lawyers on 1300 144 436.