In 2022, strata company Bonded Strata on behalf of the owners’ corporation moved to collect the debt by forcing the couple into bankruptcy in the Federal Circuit and Family Court of Australia.
Bonded Strata told The Sun-Herald it had instructions from its client not to comment because of the pending legal proceedings.
The couple have lived in the Earlwood apartment for 50 years. Credit:Steven Siewert
Khalil said the couple won a six-week reprieve from bankruptcy proceedings at the end of June. But if they can’t exchange contracts with a buyer within that time, there will be bankruptcy and a fire sale.
“If bankruptcy proceeds, they will become homeless,” Khalil says. “The trustees will go in and they will just sell it for peanuts. They just have to sell it for more than the debt and the solicitor’s fees, which is growing daily and is at about $44,000 now. Plus there would be tens of thousands of the trustee’s charges. That’s not a good outcome.”
The Tzavellases bought their unit in Earlwood in the inner west for $22,200 in 1972.
On paper, the median price for a unit in Earlwood is $777,000, but the couple is trying to sell in a falling market, and the property already passed in at auction in June with no registered bidders.
Financial Counselling Australia director of policy and campaigns, Lauren Levin, said an analysis of bankruptcies in the 2018-2019 financial year found 12 per cent of all bankruptcy applications were by owners’ corporations.
“I’m sure most people don’t realise how common body corporate-initiated bankruptcies are and would be shocked that such a sledgehammer approach to debt collection is being used, when there are other much better options,” Levin said.
Jane Foley, a senior lawyer at Financial Rights Legal Centre, said it was probably even higher. She had a colleague check one court list in Sydney last Thursday, and they found a third of listings were strata bodies bankrupting individuals.
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Meanwhile, the couple have health problems, with Nitsa the sole carer for Spiros, who has been incapacitated by three strokes, the most recent earlier this year.
Foley said owners’ corporations and strata companies had other ways to deal with debt in cases of financial hardship.
The first option is a payment plan that is affordable to the owner. The second option is borrowing to cover the owner’s share and putting a caveat over the property, so the debt would ultimately be recouped when the property is eventually sold.
Foley said the bankruptcy threshold was currently $10,000, but consumer advocates were pressing to increase this to $50,000.
Khalil said the law should change to protect elderly pensioners from strata-initiated bankruptcies.
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Levin said: “This story shows the cruel indifference of an owners’ corporation and the lack of hardship-informed regulations despite government reviews.
“How did they expect 80-year-old aged pensioners to raise $20,000? Are they expected to rob a bank or not eat for the year?”
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