Brooks questioned the charges but was told by a manager that “systems automation” applied the fees and that removing them might encourage other owners to be “opportunistic”.
Such fees have not held up under legal scrutiny. Earlier this year, a VCAT member blasted an owners corporation manager for loading thousands of dollars in “unlawful” and “misleading” fees onto a lot owner’s account.
In that decision, VCAT found the manager had hit the owner with charges that had “no tenable basis in fact or law”, including for debt collection, invalid levies and legal work to chase late fees that were claimed twice.
The tribunal struck out thousands of dollars in fees, ruling that owners corporations “have no inherent legal right to include these items in a fee or final fee notice at all”.
Generally, the only legal financial recourse available to owners corporations for arrears is the 10 per cent penalty interest. Any other cost – including the fee for a final notice – cannot be demanded as a debt unless ordered by VCAT, and strata managers cannot place these on an owner’s fee notice.
Despite these rulings, documents obtained by The Age show management companies continue to pass motions to enforce these charges.
Minutes from an August meeting at Brooks’ residential complex show resolutions to impose late fees of up to $150. While the manager bills the owners corporation for these fees, the corporation cannot automatically pass that debt onto the individual owner.
Instead, the corporation must get an order from VCAT to legally recover the cost. It cannot simply “pass through” the fee – a practice ruled unlawful by VCAT in 2022.
However, managers contracted to prepare fee notices are ignoring this ruling, and automatically add the charges to owners’ bills via software.
Lawyer Fabienne Loncar told an industry podcast that corporations were still trying to pass on costs they were “not entitled to” by simply tacking them onto bills without a tribunal order.
The charging of “administrative” and “debt recovery” fees has become a lucrative revenue stream for the $471 billion Victorian strata sector.Credit: Eddie Jim
BCSG, which manages the owners corporation at Brooks’ building, did not respond to a request for comment.
Other companies are engaging in similar practices.
A policy from OCVM Group, obtained by The Age, warns owners that if their fees are more than 14 days overdue, they will “receive a reminder notice which is charged at $46”. If the bill remains unpaid after 45 days, the policy states the owner “will receive a final notice which is charged at $110.”
OCVM defended its processes, claiming owners corporations could recover the fees themselves from owners. But it did not respond to questions about those “pass on” mechanisms being unlawful.
Breaking ranks
While some firms defend the practice, others have backed down.
Another firm, Verticali, admitted it had issued fee statements in 2023 – seen by The Age – which listed “debt recovery costs” of up to $75. A spokesman blamed the charges on a “default system setting” in a new software program and said the firm quickly dumped the charges.
“As soon as the issue was identified, Verticali immediately turned this setting off and reversed the charges against any affected lots,” the spokesman said. “Verticali accepts and complies with VCAT’s interpretation.”
The Age has also heard from smaller managers who reject the industry standard.
The ‘deterrent’ debate
In a statement, the industry’s peak body, Strata Community Association (Vic), acknowledged that owners corporations “do not currently have lawful power to directly recover administrative or debt-recovery charges … unless ordered by a tribunal”.
However, it rejected the description of the fees as “predatory”, arguing that compliant owners were “frequently left subsidising the costs generated by persistent non-payers”.
“Significant extra administration is required to manage defaulting lot owners and it is inequitable that the owners corporation, often comprising a majority of responsible lot owners who pay on time, should subsidise defaulting lots owners, and indemnify them for administrative costs incurred as a linear result of their recalcitrance,” the peak body said.
The body also questioned the legitimacy of the tribunal’s rulings, describing VCAT as “not an authoritative court of record” and described the tribunal’s decisions as “rough justice”.
Strata Owners Alliance founder Adam Promnitz.Credit: Justin McManus
Adam Promnitz, the founder of Strata Owners Alliance, said the peak body’s defence of the unlawful charges showed “an extraordinary level of entitlement and arrogance”.
“It’s clear the sector is badly out of touch and in urgent need of stronger regulation,” he said.
Promnitz said there was no legitimate cost in chasing arrears as the process is automated through software, and he disputed the claim that extra fees were needed as a deterrent, noting that he self-manages his own 42 townhouse complex and keeps arrears near zero using only the existing legal tools: penalty interest and court orders.
“We support the continued recovery of penalty interest … [but] no council, telco or utilities company is allowed to charge fees like this,” he said. “The simple fact is this was predatory and managers profited every time they add these illegal fees to an invoice.”
Enforcement ‘unchecked’
Opposition consumer affairs spokesman Tim McCurdy said the government had allowed the watchdog to drift “off course” by focusing heavily on real estate agents while ignoring strata managers.
Opposition consumer affairs spokesman Tim McCurdy.
“Fee-gouging is never acceptable … Consumer Affairs should be policing the whole property market, but the Allan Labor government has narrowed its focus and left serious issues unchecked,” McCurdy said.
While the state’s consumer watchdog explicitly warns against rogue fees, Consumer Affairs Victoria said it had no powers to enforce the Owners Corporation Act.
A state government spokesperson confirmed that owners corporations “can’t charge administrative fees” and that all levies “must be lawful”. The spokesperson said an independent expert panel had specifically been tasked to examine whether “existing measures in the act to address non-compliance … are sufficiently robust”.
“We made significant reforms in 2021 to better reflect the needs of the one in four Victorians who live in apartments,” the spokesperson said.
Promnitz said the upcoming review must stop “a dodgy practice that should have been stopped years ago”.
“The government should be making the managers pay back every cent to owners who have been slugged with these fees,” Promnitz said.
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