Debt Recovery – Is there a better way?
The debt recovery process is never pleasant on either side of the fence.
But as paying strata levies or fees is a legal requirement for owners of a lot in a strata complex, as strata managers you will likely have to deal with this process at some stage.
There are many reasons lot owners may fall into arrears with their payments - they may be experiencing financial hardship, they may just forget or they may wilfully refuse to pay in the case of a dispute.
More often than not, the reason for their default is innocent enough and you are best served establishing contact with the lot owner and guiding them towards payment of the debt prior to lengthy and costly recovery proceedings.
When it gets to the point where you’ve issued several overdue invoices, final notices and made numerous follow-up telephone calls, you may just want to go straight to the Victorian Civil and Administrative Tribunal (VCAT).
But going to VCAT may not always be the best option, as it could be costly and you could be waiting a long time before any ruling is made, let alone the additional time in enforcement of the debt before you actually see any money.
So, are there other steps you can take first to get the debt sorted more quickly and more amicably?
Try to agree on a payment plan
With the rising cost of living affecting many people, a payment plan could be an option to help the debtor repay the debt. Outstanding debt can be paid in instalments, and is a good way to recover funds without incurring legal costs and time dealing with the legal process.
If you do go down this road it may be a good idea to engage a lawyer and have the agreement documented so that you are protected if the debtor fails to make payment. These agreements may also expedite recovery of the debt when it comes to enforcement.
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Write a letter of demand
Another thing you could do is write a letter of demand, usually sent on a lawyer’s letterhead, which states how much is owed and on what basis. It will also include a warning that legal action may be taken if the debt is not paid by a particular date. A letter of demand is often all that is required to compel someone to pay their debt.
Look into a Statutory Demand
If the debtor is a company, you could look into issuing a Statutory Demand to recover a debt In certain circumstances. After being served with a Statutory Demand, a debtor company has 21 days to either pay the amount demanded or apply to have the Statutory Demand set aside.
If all the other steps fail to resolve the issue, you may have to consider going the legal route.
Before you do so, now is the time to take all necessary measures to ensure the client has received their levy notices, are aware of the debt and do not have any outstanding matters that may result in a counter claim against the Owners Corporation.
VCAT has jurisdiction to hear debt recovery disputes if they relate to goods and services supplied to or by someone in Victoria. While the process is straightforward, it isn’t quick.
Once VCAT receives your application it sets a timetable for all supporting documentation to be submitted, after which they will decide whether the case will be listed for a hearing or a mediation. This process could take many months.
After all that, and once you have your hearing or mediation the ruling may not even go in your favour if there are any deficiencies in paperwork or proof of service.
Thus, before going down the legal route, it may be worthwhile to try other steps first.
As always, your first step should be to seek qualified legal advice on the options that best suit your Owners Corporation’s individual needs.