Owners Corporations – A Change is Coming

by | Apr 29, 2021 | Conveyancing & Property

The Owners Corporations and Other Acts Amendment Act 2021 (‘the Act’) was passed by the Victorian Parliament last month and introduces changes to the Owners Corporation Act 2006, Retirement Villages Act 1987 and certain provisions of the Subdivision Act 1998.

These changes will take effect from 1 December 2021.  Some of the more notable key changes include:

Tier System

  • The classification of Owners Corporations into five tiers, which carry different obligations on Owners Corporations. Unsurprisingly, the higher density developments are subject to more stringent obligations.  The tiers range from 2 occupiable lots (or a services-only Owners Corporation) through to more than 100 occupiable lots.
  • The lowest tier (Tier 5) is exempt from compliance from a number of provisions of the Act.
  • Tiers 1 and 2 (more than 50 lots) must prepare and approve a Maintenance Plan

Legal claims and action

  • An ordinary resolution (rather than a special resolution) is now sufficient to authorise an OC to commence legal action in respect of disputes up to $100,000.

Water

  • Water disputes are common, and areas of dispute typically relate to the origin of water, and whether a lot owner or the Owners Corporation should be held liable for damage caused to another property by the escape of water. The Act now provides that, should water fall onto the common property, it is deemed to be a part of the common property, which will likely have the effect that the Owners Corporation (and therefore its insurance) will be responsible for a much broader category of water claims under the Water Act 1989.

Insurance costs

  • Owners Corporations can levy fees on lot owners under certain circumstances including:
    • Reimbursement of insurance excess amounts and increased premiums as a result of a ‘culpable or wilful act or gross negligence’;
    • To recover the excess where the claim relates to an individual lot; and
    • For damage to common property which is either not covered by insurance or is less than the excess amount under the policy.

Developers

  • Developers who continue to hold the majority of lots after a plan of subdivision is registered must comply with obligations (eg obligation to act in the interests of the OC) for 10 years (an extension to the existing 5 year obligation period)

Removal of goods

  • Owners Corporations can dispose of goods abandoned on the common property

Interim resolutions

  • Managers will be able to pass interim resolutions on some matters even when there are no lot owners present at the meeting. This means that these resolutions will be deemed a resolution of the Owners Corporation unless sufficient members file votes against the resolution within 29 days of the meeting.  A manager cannot pass an interim resolution that affects their appointment as manager or the annual budget of the Owners Corporation.
  • Where a special resolution does not obtain the requisite number of votes to pass, but no votes are recorded against it, the resolution will be deemed an interim resolution and will take effect as a resolution of the Owners Corporation unless sufficient members record a vote against it within 29 days of the meeting.
  • If interim resolutions are passed, members who do not agree must register their vote within 29 days of the meeting or the interim resolution will take effect.

Managers

  • Some of the obligations of managers have been enhanced including:
  • Managers must take reasonable steps to ensure that goods and services are procured at competitive prices and on competitive terms
  • Where a manager is entitled to receive a commission or benefit under a contract for goods or services, the chairperson of the Owners Corporation must be notified in writing and disclosure of any such relationship is to be disclosed to the Owners Corporation;
  • If a manager is holding funds on behalf of the Owners Corporation, copies of bank statements and financial information is to be provided upon request by the Owners Corporation
  • Further restrictions are imposed in which a person with a criminal record may be registered as the manager

Committees

  • Previously, an Owners Corporation affecting 13+ lots was required to elect a committee however this has been reduced to 10 lots
  • The maximum number of members on a committee must not exceed 7 unless the Owners Corporation resolves to increase this to 12 by ordinary resolution

Rules

  • Owners Corporations will be able to make rules regarding works to alter or renovate the appearance of a lot to:
  • Preserve the quiet enjoyment of all other lots and the common property during the works;
  • Protect the structural integrity of any building from the proposed works; and
  • Ensure the market value of any other lot is not decreased by the proposed works
  • Rules can be made regulating tobacco smoke in multi-level apartment buildings
  • Guests must comply with the rules and both occupier and guest are jointly and severally liable for any breach of the rules.

Nevett Ford’s conveyancing and property development lawyers can assist with any queries you may have in regard to Owners Corporations and can be contacted on +613 9614 7111 or email at melbourne@nevettford.com.au.