What happens when a building needs the work and a large share of its owners cannot raise the money.
Every large residential scheme in New South Wales eventually reaches the same point. An engineer’s report lands, the remediation cost runs to seven figures, the capital works fund holds a fraction of it, and a meaningful share of owners simply cannot produce two instalments of fifteen thousand dollars at short notice.
The instinct in that moment is to slow down. It is the wrong instinct, and it is the one that creates legal exposure. The obligation to repair does not wait for the money to arrive.
What follows sets out how the funding actually works, who is responsible for each step, what finance is available on what terms, and what happens when owners still fall behind.
The duty comes first
Section 106 of the Strata Schemes Management Act 2015 requires an owners corporation to properly maintain and keep the common property in a state of good and serviceable repair, and to renew or replace common property fixtures and fittings. It is a strict duty.
The point that catches committees out is that a shortage of money is not a defence. A tribunal will not accept that a scheme could not afford the repairs. It will order the work done and leave the owners corporation to find the funds. Chronic underfunding of the capital works fund is a separate failure in itself, and it does not excuse the repair obligation.
That principle gained sharper teeth on 27 October 2025, when NSW Fair Trading acquired direct compliance powers over the repair and maintenance of common property. Schemes that defer indefinitely are now exposed on two fronts: owner claims through NCAT, and regulatory action.
The sequence is fixed. Establish what must be done, then work out how to pay for it. Never the reverse.
Who is actually in charge
There is persistent confusion on this, so it is worth being precise.
The owners corporation, in general meeting, is the decision-maker. Only a general meeting can strike a levy, approve a borrowing, or approve a works contract above the delegated limits. This is the body carrying the section 106 duty.
The strata committee manages the process between meetings — commissioning reports, running the tender, negotiating with the project team, approving payment plans, and framing the motions. Under the 2025 reforms the committee can now enter payment plans directly, without a general meeting resolution.
The strata managing agent executes. The agent issues levy notices, maintains the ledgers, applies interest, sends the statutory notices, and instructs the recovery solicitor under delegated authority. The agent does not decide whether to pursue an owner. It acts on instruction.
The building manager has no role in funding or recovery whatsoever. Building managers carry expanded statutory duties and disclosure obligations since October 2025, but levy recovery is not among them.
NCAT and NSW Fair Trading sit outside the scheme as the enforcement backstop — for owners forcing repairs, and for the owners corporation recovering contributions.
What the borrowing power actually permits
Section 100 gives the owners corporation an express power to borrow money and to secure repayment in any manner agreed with the lender — with one carve-out that shapes the entire market. The repayment cannot be charged on the common property. A resolution approving the loan must also be passed at a general meeting before the owners corporation borrows or gives security.
Who lends, and against what
Strata finance in Australia is a specialist market rather than a mainstream banking product. Lannock Strata Finance is the longest-established lender in the sector; Macquarie offers a strata improvement product; several smaller lenders and brokers operate alongside them. Most schemes approach the market through the managing agent or a broker, and more than one indicative offer is worth obtaining.
The security position is the part owners most often misunderstand. Lannock’s published position is that its lending is unsecured: no mortgage, no charge, no lien, no caveat registered against the common property or against any individual lot. There are no personal guarantees, and lenders do not assess individual owners’ finances.
What the lender relies on instead is the owners corporation’s statutory power to levy contributions and its statutory power to recover them. The levy stream is the security. This is why credit assessment focuses on the scheme — the number of lots, values, the budget, and above all the existing arrears history. A scheme already carrying material arrears will be priced for it, or declined.
Typical terms
Facilities in this market commonly sit between $250,000 and $3 million, though there is no fixed ceiling. Terms of five to seven years are typical, with the market offering anywhere from one to fifteen years, and an interest-only period at the front end is common. Rates are variable and materially above mortgage rates, because the debt is unsecured.
Two features matter for a remediation programme. The ability to draw progressively rather than in a single advance, so interest accrues only on funds actually used. And the ability to match the term to the useful life of the works.
There is also a practical point that unlocks the tender award. A confirmed facility, approved with funds available to draw down, satisfies the requirement that money be in place before works commence. It is a legitimate substitute for cash sitting in the capital works fund.
The uncomfortable truth about borrowing
A loan does not remove anyone’s obligation. It changes its shape.
The loan is repaid by a levy. An owner who cannot pay fifteen thousand dollars at once may well manage six hundred a quarter, but an owner in genuine hardship remains a defaulter, now on a smaller number over a longer period. Meanwhile the owners corporation has acquired a fixed commercial repayment schedule, and arrears begin to threaten the scheme’s ability to meet it rather than merely delaying works.
Borrowing also cannot be part-funded. Levies are struck against all lots on entitlement. A scheme cannot let one group pay out upfront while another pays over time within a single levy structure.
Against the liability on the balance sheet, weigh the alternative: a building with an unfunded defect report and no plan is the harder sale by some distance.
When owners still fall behind
The recovery framework changed materially on 27 October 2025 under the Strata Schemes Legislation Amendment Act 2025. Committees still operating on the old assumptions risk having their recovery costs disallowed.
10%
Simple interest per annum on unpaid contributions under section 85. No interest applies if payment is made within one month of the due date.
28 days
To respond in writing to a payment plan request, with written reasons required for any refusal. No fee may be charged.
30 days
Minimum notice before recovery proceedings commence, extended from the previous 21 days.
12 months
Maximum length of a payment plan, renewable by agreement. No recovery action while a plan is being complied with.
Every levy notice must now carry the Financial Hardship Information Statement prepared by NSW Fair Trading, with contact details for the National Debt Helpline. Payment plan requests are made on a prescribed form, must be considered individually, and blanket resolutions refusing all plans are prohibited.
Refusal remains available on limited grounds — notably where granting the plan would leave the capital works fund inadequate for repairs, or the administrative fund inadequate to meet expenses and compliance obligations. For a scheme funding urgent remediation that ground is real, but it must be reasoned, documented and given in writing. It is not a licence to refuse everyone.
Section 86 then allows recovery of the unpaid contribution, the interest, and the owners corporation’s reasonable expenses of recovery, either as a debt in a court of competent jurisdiction or by application to NCAT. That word carries the weight. Costs are recoverable only so far as they were reasonably incurred, which is precisely why the notice sequence matters.
Can you force the sale of a lot?
Every committee eventually asks. The answer needs care.
The owners corporation holds no charge over the lot. Unpaid levies do not create a security interest in the unit, and there is no mortgage-style right to sell. Even after judgment, the owners corporation ranks as an unsecured creditor, behind the mortgagee and behind the costs of any bankruptcy.
A judgment debt can nonetheless reach the land eventually. The enforcement options run through garnishee orders over wages or accounts, examination of the debtor, and a writ for the levy of property authorising the Sheriff to seize and auction property. The writ runs twelve months. It does not authorise the Sheriff to sell land where the outstanding judgment is under $20,000, and for land the Sheriff must give at least thirty days’ notice. Reaching real property is a separate and more involved application, generally taken to a higher court. Bankruptcy is usually pursued for pressure rather than recovery, given the unsecured ranking.
So forced sale exists as an endpoint. It is slow, expensive, contested and rare. It is not a levy collection strategy.
The far more common resolution is voluntary sale. Arrears follow the lot in practical terms — outstanding contributions at the date of sale attract liability, they appear on the section 184 certificate, and they are almost always deducted from the price at settlement. An owner facing a levy they cannot fund, in a building whose value depends on the works being completed, frequently sells. That outcome is quicker and less destructive than enforcement, and a committee that engages early is far more likely to reach it.
A working sequence for committees
- Fix the obligation first. Establish what must be done, what is safety-critical, and what carries a statutory deadline. That defines the non-negotiable spend.
- Get the number right before going to owners. A levy struck on an incomplete tender is a levy you will strike twice.
- Model the funding options side by side, showing owners the per-lot cost of each on entitlement.
- Obtain indicative loan terms before the general meeting, so owners vote on a real alternative rather than a concept.
- Structure instalments to the works programme, not the calendar.
- Have the payment plan process ready before the first instalment falls due — the prescribed form, the 28-day discipline, and a documented basis for any refusal.
- Run the recovery sequence properly. Notices in order, thirty days, reasonable costs, no action against a compliant plan.
- Communicate in plain terms. Owners accept difficult numbers far better when they understand the obligation driving them and can see every alternative was tested.
The law does not offer a scheme the option of doing nothing because its owners cannot pay. It offers levies, borrowing and time, alongside a recovery framework now deliberately weighted toward keeping owners in their homes and on a plan rather than in court.
The schemes that navigate this well separate the two questions and answer them in order: what must be done, and only then, how do we fund it.
Considering a sale during a remediation programme?
Buildings under works are not unsellable — they are differently sold. The disclosure position, the timing against the levy schedule, and how the programme is presented to buyers all move the result.
Alan Weiss
