Two Appeal Panel cases, from 2022 and 2023, suggest the answer is probably yes, but only if the by-law is written correctly.

Liu case

2 cases in 2022 involving the same owner (Liu) and adjoining large schemes at Sydney Olympic Park went before the Appeal Panel.  The initial issue in those cases was whether a short-term letting by-law is enforceable (it was). Remember, an owners corporation can pass a by-law banning short term letting by non-resident owners, but cannot prevent residents from letting out spare rooms.

The problems in this case were that the relevant by-law said:

1. The OC can decode fobs (security access cards) of owners and occupiers in breach. As confirmed by the Jo Cooper and Horizon pet case, owners have an inherent proprietary right to use their lot and common property, so the permission to decode fob keys in the event of a breach makes the by-law harsh, unconscionable or oppressive.

2. The OC can recover its costs flowing from the breach as a levy debt. Levies are struck under ss81 & 83 of the SSMA and payable based on unit entitlements, and there was no power to characterise the expenses to be recovered as a levy or to recover them as a levy debt. A by-law allowing an owners corporation to recover expenses incurred as a levy debt is beyond power, because levies are struck only as set out in the SSMA. Surprisingly, these findings were not relied on by the owner in the subsequent Gokani-Robins

Gokani-Robins case

In this case, special by-law 17 enabled the OC to recover from an owner the costs of enforcement of a breach of a by-law (including rectification work) or the Act as a debt due and include reference in levy notices. The OC sued the owner in the Local Court for $20,000 of enforcement costs and the owner had those proceedings stayed so it could challenge the validity of the by-law in the Tribunal.

The key finding by the Appeal Panel here was:

3. The by-law was harsh and unconscionable because it gave the OC the power to place the cost on the levy ledger without the need for the cost or any works to be reasonable, or to have any checks (eg by a court).

1. Neither case outlaws cost recovery by-laws. Instead, they set out what cost recovery by-laws cannot do. There is a quoted comment at paragraph [70] of the Liu decision which can be read as Appeal Panel support for cost recovery by-laws being valid, but only if done the right way. That quote is: …the issue is not whether the owners corporation can recover a debt from a lot owner, it is the characterisation of that debt “as if it was a levy debt” which is without power.
2. An owners corporation has 2 choices with owner ledgers. The ledgers can be (A) solely for levies and interest and called a “levy ledger”, or else (B) they can be a ledger showing all amounts owed by an owner, and include these other expenses. If it is (B), it should not be called a levy ledger or contribution ledger, but clearly described as all amounts owing by an owner to the owners corporation. It is important to note here:
   • A ledger solely for levies and interest (Option A) records what needs to be paid on any sale of a lot, given section 84(1) of the SSMA says incoming owners are only liable for levies and interest on levies, not recovery costs or other costs; and
   • Ledger Option B helps with the definition of unfinancial owner in section 4 of the SSMA, which is important for voting purposes.
3. If part of a by-law is harsh, unconscionable or oppressive, the rest cannot remain, because that modified form of by-law has not been passed by the OC. This means all parts of a by-law have to be correct and enforceable.

If you would like a cost recovery by-law or to check yours is enforceable, please contact us by clicking here.