Understanding Victoria’s updated owners corporation legislation

Understanding Victoria’s updated owners corporation legislation

This amendment to owners corporation legislation is intended to provide owners with more clarity and security around owners corporation operations

Long-awaited updates to the Owners Corporations Act 2006 are finally here. Effective from 1 December 2021, the Owners Corporations and Other Acts Amendment Act 2021 addresses key concerns many owners face, particularly relating to developer and owners corporation manager compliance, administrative matters and finances. The intention is to simplify operations for owners corporations and also formalise some owners corporation manager obligations.

To help you navigate this legislation, we’ve created an easy-to-understand summary that explains the updates and amendments that could affect you and your owners corporation property.

1. Owners corporation obligations

• Five tiers have been created for owners corporations: tier 1 (more than 100 lots), tier 2 (51-100 lots), tier 3 (10-50 lots), tier 4 (3-9 lots) and tier 5 (2 lots or services only)
• Owners corporations will have different obligations depending on which tier they fall under
• Larger owners corporations will have more requirements around committee management, financial statements, maintenance plans and funds
• Tier 1 owners corporations must have their financial statements audited each year
• Tier 2 owners corporations must have their financial statements reviewed by a certified public accountant
• Tier 3, 4 and 5 owners corporations will not be required to have a maintenance plan but can have one prepared if they wish
• Tier 5 owners corporations will be exempt from a range of compliance measures, including the need to have a chairperson or secretary

2. Finances

• If an owners corporation experiences additional costs because of one lot, owners corporation fees can be charged on the benefit principle (those who add to costs more than others, pay for a larger share of the total fees than others) rather than lot liability
• In some circumstances, an insurance excess can be passed on to individual lot owners instead of the whole owners corporation

3. Legal and administrative matters

• An owners corporation is no longer required to have a common seal
• If an owners corporation no longer wishes to use an existing common seal, they must pass an ordinary resolution and arrange to destroy the common seal. Documents can then be signed by two authorised lot owners
• Only an ordinary resolution is necessary for owners corporations to action legal proceedings for claims up to $100,000
• If a general meeting has a quorum and a special resolution has no votes against it, but it cannot be passed because it does not have the required number of votes, it can be taken to an interim resolution
• Committees cannot have more than seven members unless an ordinary resolution is passed to increase the committee to a maximum of 12 members
• VCAT can order a lot owner to cover or reimburse the cost of recovering unpaid fees
• VCAT can authorise a lot owner to represent the owners corporation in legal proceedings
• Owners corporations can make rules about works that may alter the property’s external appearance to protect the structural integrity, market value or quiet enjoyment of the property
• Rules created by the owners corporation cannot be oppressive, prejudicial or discriminatory

4. Developers and owners corporation managers

• Restrictions have been placed on how developers can engage owners corporation managers and how contracts can be entered into during the first annual general meeting
• Owners corporation management contracts can only be a maximum of three years
• If a developer owns the majority of lots after the plan of subdivision is registered, they must comply with their initial obligations for 10 years rather than five
• Initial owners (usually the developer) cannot be appointed as the owners corporation manager, vote on resolutions about defects, or receive any payments relating to the appointment of the owners corporation manager
• If no lot owners are present at a meeting, owners corporation managers can pass interim resolutions if they are necessary for the owners corporation to function. For example, they can pass an interim resolution to obtain insurance, if the insurance is close to expiring
• Owners corporation managers must ensure that any goods or services they source on behalf of the owners corporation are competitive in price and terms
• Owners corporation managers are responsible for disclosing any commission, payment or benefit they receive from a contract or supplier relationship. Written notice must be given to the chairperson if there is a contract involved
• Owners corporation managers cannot pressure an owner to influence an election or meeting decision
• An owners corporation manager cannot hold an owners corporation’s money in a separate bank account without explicit permission. If the owners corporation requests access to financial statements, they must be provided
• Further restrictions have been put in place for a person with a criminal record to be appointed as an owners corporation manager
• An owners corporation managers contract cannot specify that a general meeting must be convened or a special resolution must be passed to revoke the management contract
• Automatic renewal of contracts is not allowed
• An owners corporation manager cannot renew a contract of appointment without the owners corporation’s permission
• The notice period for terminating an owners corporation manager’s contract cannot exceed three months for tier 1 and 2 owners corporations, and one month for other tiers

5. Community living

• It has been confirmed that if water leaks from the common property, the water is considered part of the common property. This means owners and residents can take action against the owners corporation about water flowing from common property (e.g if a common property water leak results in a flooded lot)
• A process has been established for owners corporations that want to remove or dispose of goods on common property
• Those occupying an owners corporation property’s lots are responsible for their guests’ behaviour

Disclaimer: This factsheet provides general information in summary form on various legislative and regulatory compliance matters. The contents of this factsheet do not constitute legal advice or other advice on any specific matter and should not be relied upon for that purpose. Any user of this factsheet requiring or seeking legal advice is responsible for obtaining such advice from their own engaged lawyers and any user should do so before taking (or not taking) any action in reliance on any information contained in this factsheet.

PICA Group plays an active role in influencing governments to generate good policies at both a state and federal level. Our legislation pages are a free and easy way for all property stakeholders to stay up to date with community living legislative changes for New South Wales, Queensland, and Victoria. In certain circumstances where drafting a new by-law or building rule could be more effective in creating harmony, our team at Kemps Petersons Legal can assist with a by-laws review, click here.  If you would like to learn more about the services we offer, click here for a free assessment.