An overhaul of regulations for Owners Corporations

18 April 2022 | Owners Corporation

Towards the end of last year, the Owners Corporations and Other Acts Amendment Act 2021 came into effect. Delivering significant reforms to the ways owners corporations (OC’s) operate in Victoria, this amendment is set to make life easier for Victorian lot owners. It is essential for owners corporation managers, property developers and people who own a property covered by an OC to be informed on these changes.

Changes to the Common Seal

Previously, an OC could only execute documents with the approval of all members through the common seal. Under the reforms, an OC can execute documents in their own name/on behalf of members, allowing for two owners of separate lots to now execute a document on behalf of the OC. Existing OCs must agree by ordinary resolution to destroy the common seal & to allow the OC to execute documents in accordance with the amendment.

New 5-Tier System

The amendment introduced a new 5-tier system for classifying owners corporations. Tiers are allocated depending on the number of lots covered by the OC, and different levels of administration will be required depending on the OC’s tier.

The tiers are defined as follows:

  • Tier 1 – OC has 100 or more occupiable lots & is not a services only OC
  • Tier 2 – OC has 51-100 occupiable lots & is not a services only OC
  • Tier 3 – OC has 10-50 occupiable lots & is not a services only OC
  • Tier 4 – OC has 3-9 occupiable lots & is not a services only OC
  • Tier 5 – OC has a 2-lot subdivision or is a Services Only OC

Tiers one and two will need to prepare and approve a maintenance plan.

Previously, this obligation only applied to OCs with over 100 lots or annual levies above $200k. Tier-one owners corporations have 12 months from December 1, 2021, to implement their maintenance plan, whilst tier two OCs will have 24 months.

Additional Powers to the Owners Corporation

There are several additional powers outlined in the amendment.

Disposal of Abandoned Goods

OCs can legally dispose of abandoned goods on the common property. Written notice of the intention to remove the goods must be provided to lot owners and must include:

  • The plan number and address of the OC
  • A description of the goods
  • An address where the goods may be collected
  • A statement detailing when the goods will be disposed of (unless collected)
  • A statement that the OC will retain funds from the sale of the disposed of goods to cover its costs (if applicable)

New Rules

Owners corporations have new powers to make rules relating to the following topics:

Smoke drift:

Rules that regulate or prohibit the drifting of tobacco smoke from a lot to the common property or any other lot may be implemented by the OC.

Fire safety advice

The OC can implement rules regarding advice given to occupiers about fire safety and emergency preparedness. For example, the OC may require lot owners to provide their tenants with fire safety and emergency procedures.

Payment of fees

The OC can implement rules allowing lot owners to pay fees in instalments

Sustainability items

The OC can make rules about proposed renovations/alterations to the external appearance of a lot for the following reasons:

– to protect the quiet enjoyment of all other lots and the common property

– to protect the structural integrity of any building on the plan of a subdivision

– to prevent a decrease in the market value of any other lot.

These rules cannot unreasonably prohibit the installation of a sustainability item, such as hot water systems and solar panels.

Additional Responsibilities of the Owners Corporation

New responsibilities apply to each owners corporation tier regarding records and financial statements. Tiers 1, 2 and 3 must prepare annual statements following Australian Accounting Standards & present statements at the OC general meeting.

Tier 4 must also prepare annual statements for annual fees that are levied.

Additional Levies

Owners corporations now can levy additional fees to individual lot owners. In situations where the owners corporation has incurred an extra expense that could be directly attributed to the lot owner, fees may be requested to cover:

  • An excess amount or increased premium resulting from an insurance claim, if such claim is caused by the lot owner, their lessee or a guest of either party
  • Damage to the common property where the damage is caused by a lot owner or the lot owner’s tenant if the damage is not covered by insurance or the cost of damage is less than the excess amount.

New Powers for VCAT

From December 1 2021, the  Victorian Civil and Administrative Tribunal have new powers that allow them to order a lot owner to pay the OC’s reasonable costs in recovering unpaid amounts from the lot owner, not including legal fees.

VCAT can also order an occupier to allow entry to the building or lot to a person authorised by an OC. This gives OC’s the incentive to choose VCAT over the Magistrate’s Court for legal claims.

Committees and Managers

The amendment imposes greater restrictions on OC managers and clarifies terms regarding the manager’s contracts, duties, and appointments. These amendments aim to prevent long-term management contracts that offer potential prejudices to owners. As such, an OC manager cannot be appointed for more than three years or five years for retirement village OC.

Size of Committees

An OC committee must have at least three and as many as seven members. If the OC wishes to have more than seven members, they can pass an ordinary resolution to allow between seven and twelve members. The chairperson of the OC must give written notice of the ballot to all members.

Owners Corporation Management Contracts

There is clarification on OC manager contract terms. Under the amendment, an OC manager contract cannot include terms that:

  • Require the OC to pass a special, unanimous or any other resolution requiring more than a simple majority of votes before revoking the manager’s appointment.
  • Require the OC to convene a general meeting or take any other prescribed step before revoking the manager’s appointment.
  • Allow the manager to renew the appointment contract at their discretion.
  • Require a tier-one or two OC to give three months or more notice of its intention to revoke the appointment.
  • Require a tier 3, 4 or 5 OC to give one month or more notice of its intention to revoke the appointment.
  • Provide automatic renewal of the contract if the OC fails to give notice of its intention not to renew per its terms.
  • Restrict the OC’s ability to appoint a person as manager.

If any of these terms are included in a contract after December 1, 2021, they will be void.

Owners Corporation Management Duties

There are additional duties attributed to the OC manager. These include:

  • Ensuring that goods and services procured on behalf of the OC are procured under competitive terms.
  • An OC manager must not pressure any OC member to influence the outcome of a vote.
  • The OC manager must give written notice to the OC chair to disclose any personal benefit they may gain from a contract for goods or services supplied to the OC.

OC managers must also provide financial statements relevant to funds they hold in trust for the OC upon request. Money held in trust by an OC manager includes any interest earned.

Manager’s Report

The manager’s report must now contain more information than before. As well as previous details required, the report must include:

  • Details of receipts and transactions involving money held on trust for the OC.
  • Any commissions, payments or benefits the OC manager received in relation to contracts for goods or services procured on behalf of the OC.

For more information about the Owners Corporations and Other Acts Amendment Act 2021, visit the Consumer Affairs Victoria website or download the act here.

Contact Meadows Property Group to make an owners corporation management enquiry.