What happens when strata levies aren't paid? A guide to levy arrears in NSW

A strata scheme needs funds for insurance, maintenance, cleaning, and repairs. It relies on regular levy payments from every owner to keep the strata scheme running. When one or more owners stop paying, levies fall into arrears, creating a shortfall.

For a strata committee, arrears can be more than a financial issue; they can become personal. You are usually dealing with someone who lives in your building.

Chasing a debt from a neighbour can be uncomfortable. Committees sometimes let arrears linger, and often wait too long to act.

What does it mean for strata levies to be in arrears?

An owner falls into arrears as soon as they miss a levy payment. The levy notice, which owners must receive at least 30 days in advance, sets out the due date. Failing to meet that date – even by a day – technically places the owner behind on payments. Under NSW law, an owner who hasn't paid all due contributions is an ‘unfinancial owner’.

Unfinancial owners can't vote at general meetings. They can vote only on motions needing a unanimous resolution. If a strata committee member falls behind on payments, this can impact their role on the committee.

What interest applies to unpaid levies?

Interest starts accruing if a levy is still unpaid one month after its due date. Under Section 85(1) of the Strata Schemes Management Act 2015 (NSW), the rate is 10% per year. This is simple interest, starting from the original due date.

The owners corporation can choose not to charge interest in a specific case. However, this needs a resolution at a general meeting. The strata manager or committee can’t waive it on their own.

Owners corporations can offer an early payment option. If owners pay before the due date, they can get a 10% discount. This requires a resolution at a general meeting to put in place.

What's changed under the 2025 reforms?

In October 2025, the Strata Schemes Legislation Amendment Act 2025 introduced major changes to levy collection and debt recovery.

If your scheme has older debt recovery policies, it's worth checking they still comply.

The key changes are:

• Every levy notice must now include a Financial Hardship Information Statement
• The strata committee or strata manager can approve payment plans, which means a general meeting resolution isn’t needed
• Recovery proceedings can't start until the owner gets a written notice, up from the previous 21 days
• The owners corporation can’t seek recovery if a payment plan is being followed
• Payments from an owner in arrears must be applied in a set order: overdue levies first (oldest first), then interest, then recovery costs

These changes aim to help owners clear their arrears before legal action starts. They also ensure the scheme has clear rights if an owner refuses to engage.

What are the options if an owner can't pay?

If an owner is having trouble paying, it’s best to reach out early. Do this before the debt grows and before recovery starts. There are real options available.

Payment plans

An owner and the owners corporation can set up a payment plan for overdue contributions. Since the 2025 reforms, the strata committee or manager can approve this directly. There's no need to wait for a general meeting.

Plans are capped at 12 months, but a further plan can be agreed to after that.

The owners corporation must reply to any request for a payment plan within 28 days. If they refuse, they need to give written reasons.

If an owner feels their request was unfairly denied, they can apply to the NSW Civil and Administrative Tribunal (NCAT). This can lead to an order that makes the owners corporation agree.

As long as there is a compliant payment plan, the owners corporation cannot take legal action to recover that debt.

Waiving interest

In real hardship cases, the owners corporation can decide at a general meeting to waive interest on a contribution. An owner can apply to NCAT for an order to stop interest charges. This is possible if they think the owners corporation should have reasonably waived it.

What if the owner doesn't pay and won't engage?

If informal steps fail to clear the arrears, the owners corporation can use legal methods to recover the debt.

Under Section 86 of the Strata Schemes Management Act 2015, the owners corporation can get back unpaid contributions. They can also recover interest and reasonable recovery costs. This applies once a court or NCAT orders these costs.

The process usually follows this sequence:

1. Reminder notices are sent when a levy is overdue, usually at 30 and 45 days
2. You must give a formal written notice at least 30 days before starting legal proceedings
3. If the debt is still unpaid at the end of 30 days, it can be referred to a debt collection lawyer
4. Court proceedings allow the owners corporation to recover debts in a proper court. NCAT can hear applications too, but courts are usually preferred for enforcement.

If a property sells with unpaid levies, the old owner and the new owner share responsibility for that debt. Arrears don't just vanish at settlement. They are assessed and paid as part of the conveyancing process.

Why arrears are harder than they look for a strata committee

The legal process for recovering arrears is clear enough, but the human side is harder.

Strata committee members are volunteers. You might sit across from the owner in arrears at every annual general meeting. You might see them walking their dog every morning. People often delay sending a formal demand letter to a neighbour, or referring their debt to a lawyer. This can go on for months. 

But arrears don't get easier with time. The debt grows with interest and the scheme's cash position is affected. The longer it drags, the more complicated the conversation becomes. 

A professional strata manager makes a big difference in situations like this. They handle the notices, the follow-up and if it comes to it, the referral to a lawyer. The committee stays informed without having to be the ones knocking on doors. The process stays consistent and legally compliant. And the relationship between neighbours doesn't have to become collateral damage.

Are you looking for a strata manager you can trust? We can help.

Contact Us

Strata Master was founded in 1984, and we offer a truly customer-focused fixed fee strata management service. Contact our Strata Management team or call 02 9909 5300 We would be happy to assist.