“You Can’t Put Legal Costs on a Ledger” – Actually, You Can
One of the most common queries I hear from strata managers, including at the recent SCA Law Forum, is: “I’m told recovery costs cannot be recorded on a ledger because they are not levies.”
This is half right – recovery costs are not levies. But that does not mean they cannot be recorded on something described as an owner ledger (as distinct from a levy ledger).
Importantly, a ledger is not a statutory document prescribed by the Strata Schemes Management Act (SSMA). It is simply the owners corporation’s record of what it says an owner owes at any given time. That can include contributions (levies), interest and other amounts recoverable from the owner (eg. reasonable recovery costs or licence fees).
A key point to remember is that an owner is not necessarily financial simply because they have paid their levies and interest. Under s 4 of the SSMA, an owner also has to pay other recoverable amounts before they are entitled to vote, and reasonable levy recovery expenses fall into that category.
So can recovery costs be shown on a lot ledger or an owner ledger?
Yes.
In our experience, courts have not had any difficulty with the inclusion of recovery costs on a lot ledger in levy recovery proceedings, and a ledger serves as a useful record for the court.
The main tip is not to call it a “levy ledger”, which would only record outstanding contributions and interest. The distinction becomes important when a lot is sold – purchasers of a lot become liable for any outstanding contributions and interest, under s 84(1) of the SSMA, so a levy ledger is useful to record that. That does not stop recovery costs being recorded on a section 184 certificate and, in practice, purchasers often require them to be cleared at settlement. However, strata managers should take care to distinguish recovery costs from levies and interest.
One final point – recovery costs do not have to be limited to court scale costs. Section 86(2A) of the SSMA allows an owners corporation to recover reasonable expenses incurred in recovering unpaid contributions as part of the debt itself, and not as a costs order. The question therefore is whether the costs are reasonable, not whether they happen to match a court scale.
The takeaway is simple:
Recovery costs are not levies, but that does not stop an owners corporation recording them on an owner ledger.
