New laws set to reshape debt recovery for owners’ corporations

For lot owners and committee members in Melbourne apartment buildings, the Consumer Legislation Amendment Bill 2026 proposes some of the most significant changes to owners’ corporation debt recovery in recent years.

If passed, these reforms will affect owners’ corporations (OC) by (i) changing how it can enforce payments from lot owners, (ii) introducing a new framework so that lot owners in financial difficulty can seek temporary relief from debt recovery, and (iii) ensuring that debt recovery steps are paused while a payment plan is in place.

The more wide-ranging change is the introduction of a formal payment plan framework. After receiving a fee notice or final notice, a lot owner may request a payment plan from their OC in writing. The OC then has 28 days to accept or refuse that request. If it fails to respond within that window, the payment plan is taken to have been accepted on the terms the lot owner proposed.

No fee can be charged for offering a plan. Information disclosed in support of a request must be kept confidential and must not appear in meeting minutes in a way that identifies the applicant. These provisions will apply to all OCs except those in the smallest category under the Act – tier five schemes.

The strongest protections are reserved for owner-occupiers. An OC can only refuse a payment plan request from someone living in the lot as their principal place of residence on specific, limited grounds, such as whether the payment plan would threaten the OC’s financial position, or if the owner-occupier has failed to honour a previous plan within the past two years, or if the term of the payment plan requested exceeds twelve months.

While a payment plan request is being assessed, or a compliant plan is running, recovery action stops. The OC cannot issue a final notice, charge penalty interest, or apply to VCAT to recover the debt. A lot owner who is complying with an agreed plan is also treated as not being in arrears for voting and committee eligibility purposes.

These reforms are well-intentioned, but OCs operate on fixed, collective budgets funded entirely by the lot owners. A prolonged pause in recovery action can create genuine cash flow pressures, particularly in smaller schemes with fewer contributors.

Much will depend on regulations yet to be finalised – including the evidence a lot owner must provide to support a hardship request and the financial thresholds at which an OC may lawfully decline.

The intent behind these proposed changes is clear. Whether they strike the right balance will become apparent as the detail emerges.

Finally, on a personal note, it’s been 13 years that I’ve been writing Owners’ Corporation Law for Docklands News.

I’m proud to have contributed to this masthead’s wonderful legacy, and I look forward to continuing under The Melburnian •