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Debt Recovery Alternative – Letter to Mortgagee


18 May 2021

Recently. I was handling a levy debt recovery process which had commenced in 2018 for an outstanding debt of $6,000. 

The Owners Corporation at the time held a VCAT order to enforce the debt but all the attempts to contact the owner were unsuccessful. Our lawyers lodged an application to the Magistrate Court to issue a warrant to seize personal assets of the lot owner and as a result the VCAT orders had become orders of the Magistrate’s Court to be enforced by the Sheriff’s Office.

The attendance of the Sheriff took longer than usual (60 days) due to Covid restrictions in 2020, however, the Sheriff’s attempts were also unsuccessful either and the debt grew to the amount of $18K by the end of 2020. 

The last advice received by the owners corporation was to take the next step and begin the process of escalating the matter to the Supreme Court to apply for the Warrant of Execution to sell the property. 

Knowing the complications of passing a Special Resolutions and the high cost of Supreme Court proceedings to issue the Warrant, I made a recommendation to the committee to instruct the lawyers to issue a Letter of Demand to the mortgagee (the Commonwealth Bank in this instance) to recover the debt before proceeding with the Warrant of Seizure and Sale.

The cost of sending a letter to the mortgagee is generally in the vicinity of $150-$300 (depending on the lawyer’s charges) so it is very cost effective relative to funding Supreme Court action.

Initially, the committee had mixed views as to whether to take this approach or not however, they eventually resolved to write to the mortgagee, and received a response from CBA within one week.

The mortgagee enquired as to whether communication had been made with the owner, evidence of which our lawyer provided immediately, as well as the most recent ledger of the lot owner’s account.

The outstanding balance was paid by the bank in full within 24 hours.

The process of writing to the mortgagee and recovering the debt took no longer than 2-3 weeks to complete and this process has been successful on multiple occasions. It is a cost effective alternative to proceeding with the seizure and sale of the lot.

Please note that the initial step of seeking a VCAT order to enforce the debt and submitting to Magistrates Court to issue a warrant to enforce the VCAT order should still be considered and explored by the Owners Corporation before issuing a letter to the Mortgagee.

If you would like to know more about how this process works, please contact me at rkaka@asmstrata.com.au

Rawand Kaka
Head of Strata