An Owners Corporation, formally known as a body corporate, is a collective body that manages the common property within residential, commercial and mixed use property developments. An Owners Corporation is automatically established when a subdivided land or building containing common property is registered with Land Victoria.
What is an Owners Corporation?
How do I become part of an Owners Corporation?
If you own property within a subdivided building or development, you are automatically a member of an Owners Corporation. When you buy a subdivided property, you also purchase collective ownership of common property as set out in the plan of subdivision. Common property may include driveways, stairways, shared garden areas, car parks and a range of other facilities, whose maintenance and management falls under the responsibility of the Owners Corporation. You automatically become a member of the Owners Corporation when you purchase land within a subdivided property and as such share the legal and financial obligations of the areas of the Owners Corporation.
What is the role of an Owners Corporation manager?
The responsibilities attached to the owners corporation manager include:
- Scheduling and conducting meetings including the Annual General Meeting, and logging and distribution of minutes
- The collection and banking of members contributions and levies
- Obtaining quotes for, and arranging of property maintenance at the request of the Owners Corporation
- Registering and maintaining required insurance
- Recording financial accounts and preparing an annual financial statement on behalf of the Owners Corporation
- Advising on asset management
- Maintaining a budget to assist in assessing expenses and setting member contributions
- Management of the day to day obligations of the Owners Corporation; which may include coordinating the affairs of unit owners, correspondence and liaising with tenants, landlords, and ensuring maintained compliance with the legal and financial responsibilities of the Owners Corporation.
What is my lot entitlement and lot liability?
The lot entitlement and lot liability of each Owners Corporation member is set out in the plan of subdivision. A lot is a piece of land, building or airspace that can be separately owned or sold. Entitlements and liabilities are determined at the time of subdivision.
A lot owners entitlement refers to the share of ownership of the Owners Corporation assets, for example, common property, and determines voting rights within the committee as individual lots may have entitlement of more than one vote.
Lot liability represents the proportionate share of the Owners Corporation expenses that each individual lot owner is obligated to pay.
Lot liability and entitlement. What is the process for dispute resolution?
When an Owners Corporation is first established, the plan must be accompanied by a document “specifying the basis for the allocation of lot entitlement and lot liability”, as outlined in the Subdivision Act. 1988. For this to be altered a unanimous decision must be achieved within the Owners Corporation, which is often difficult. Alternatively, an application can be made to the Victorian Civil and Administrative Tribunal (VCAT) if owners wish to challenge this allocation.
What records does an Owners Corporation have to keep?
Under the Owners Corporations Act 2006, an Owners Corporation must collect and keep:
- The full name and address of each lot owner
- A consolidated copy of the owners corporation’s rules
- Minutes of meetings
- Copies of resolutions
- Records of the results of ballots
- Voting papers or ballots
- Accounting records
- Records of assets and liabilities
- Financial statements of income and expenditure
- Income tax returns and GST records (goods and service tax records, if any) of the owners corporation
- Insurance policies
- Any maintenance plan
- Any notices and orders served on the owners corporation by a court or tribunal
- Any notices served by the owners corporation
- Any contracts and agreements entered into by the owners corporation
- Any leases and licences entered into by the owners corporation.
What fees can an Owners Corporation charge?
The Owners Corporation is responsible for setting the level of fees required, and determining how and when payments are to be made by its members. These fees cover general administration, maintenance, insurance and any ongoing costs. Items of expenditure that are not included in the general annual budget i.e. unexpected repairs of common property, are subject to special fees and charges that are set by the Owners Corporation.
Members are entitled to dispute proposed levies if the total amount exceeds twice the annual fee.
Any member who fails to pay fees set by the Owners Corporation forfeits their right to vote on matters pertaining to general resolutions within the Owners Corporation’s administration and management. They reserve the right, however, to vote on matters that require special or unanimous resolution or are of an extraordinary nature. Members are permitted to attend all Owners Corporation meetings irrespective of their capacity to vote on matters.
An Owners Corporation may exercise its right to sue members who fail to pay Owners Corporation fees in order to recover debts, which may incur an interest penalty. Fixed penalty interest rate charges are predetermined at annual or general meetings, and must comply with the maximum rate of interest as stipulated in the Penalty Interest Rate Act 1983.
Who is responsible for repairs, maintenance and improvements of common property?
The legal obligation for these matters fall on the Owners Corporation. The Owners Corporation is responsible for the maintenance and repair of common property and services, which each member is obliged to maintain their own individual lot in a state of ‘good and serviceable repair’. Failure to carry out requested repairs on an individual lot will result in the relevant member surrendering this duty to the Owners Corporation, who will then carry out repairs on their behalf and levy that lot owner for the associated cost.
Significant changes to common property in any capacity require a special resolution with a 75 per cent approval from members other than maintenance for health and safety reasons (section 25 subsection 5 of the Owners Corporation Act 2006). Recent amendments to legislation regarding this area mean that legal advice should always be sought before undertaking maintenance or upgrade work of this nature.
What does an Owner's Corporation do?
The roles of an Owner’s Corporation include, but are not limited to:
- Preparation and distribution of notices, agendas and minutes
- Corresponding and liaising with tenants and owners
- Maintaining the Owner’s Corporation roll
- Attaining quotes and arranging for repairs and building maintenance for common property
- Ensuring compliance with pertinent regulations and rules
- Maintaining all required registers
- Paying invoices
- Preparing and distributing relevant financial statements, budgets and contribution notices
- Organising orders, submissions and appeals
What does Common Property mean?
In real estate terms, common property refers to sections of a sub-division or shared property which is owned jointly by lot owners with an ‘undivided interest’ in the entire property. i.e. Shared land that is used by all residents of a sub division.
Examples of common property include driveways, stairs, elevators and elevator lobbies, common garden areas and landings. The management of these common areas fall to the members of the owner’s corporation, and decisions regarding pertinent development or policy are made by these collective members.
How do Owner's Corporations operate?
Owner’s Corporations make decisions based on voting. Voting takes place during meetings and special general meetings. The total number of votes are dependent on the number of lots within the property, not the number of people who own lots. This means that an individual who owns two lots will wield two votes, whereas two individuals who own one lot will only wield one vote.
Members of the Owner’s Corporation can nominate any number of representatives to handle the affairs of a property. These members may also appoint a manager to manage the Owner’s Corporation. A manager is typically paid, must have personal indemnity insurance and be registered with the Business Licensing Authority. A manager may be removed from office at an annual or special general meeting.
What is the regulatory legislation concerning an Owners Corporation in Victoria?
Owners Corporations in Victoria are governed by two primary legislatures, the Owners Corporation Act 2006, and the Owners Corporation Regulations 2007. The ‘Act’ sets out framework laws to provide for the management, powers and functions of Owners Corporation, while the ‘Regulations’ prescribes a set of model rules for Owners Corporations to follow in order to comply with relevant legislation.
For more information on the Act and Regulations refer to:
What is the effect of the Owners Corporation Rules?
The Owners Corporation Rules, found in Schedule 2 of the Owners Corporation Regulations, are a set of prescribed model or blanket rules for Owners Corporations which are automatically applicable if an Owners Corporation fails to make its own rules. Owners Corporations, under the Act, are awarded the power to assemble their own set of rules, provided that they comply with the requirements of the Owners Corporation Act 2006, and the Australian Consumer Law and Fair Trading Act 2012. These rules are also bound to comply with any other law, regulation or legal obligation under Victorian Law. These rules establish protocol for health, safety and security, use of common property, management and administration, and a range of other areas affected by Owners Corporations. If at least 75 per cent of votes were in favour of the new rules, a ‘special resolution’ is passed. If the Owners Corporation fails to create a rule outlined in the Regulations, the Regulations Model Rule applies.
How are decisions made within the Owners Corporation?
An Owners Corporation makes a decision or resolution when its members vote. Decisions of the Owners Corporation may be made by an ordinary, special or unanimous resolution, all of which require different percentages of the the total vote to be passed.
Resolutions may be put forward during a meeting involving the committee, delegates or appointed manager.
According to the Owners Corporations Act 2006, there is a hierarchy in the decision making:
The owners corporation (comprising all the lot owners) retains control of all decision making and matters requiring a unanimous or special resolution, or resolutions that can only be made at a general meeting. Only the owners corporation can overturn an earlier decision of the owners corporation.
The committee can make decisions requiring an ordinary resolution except those that must be decided at a general meeting. The committee cannot overturn decisions of the owners corporation.
If the owners corporation has delegated powers to a manager or a lot owner, then the delegate can make decisions. A delegate cannot overturn a decision of the owners corporation or the committee.
An owners corporation can appoint sub-committees to advise the owners corporation. Sub-committees cannot make decisions.
Who is responsible for the insurance of the property?
There is a minimum insurance policy that needs to be taken out by an Owners Corporation, which is outlined by the law, requiring:
Reinstatement and replacement insurance of buildings on common property
Public liability insurance for the common property. Insurance for common property protects owners in the case of unexpected damage and injuries
If an owners corporation represents a two-lot subdivision, it does not have to take out public liability and reinstatement and replacement insurance for the common property. However, insurance is considered to be a worthwhile investment to protect constituents of a property.
Who can resolve disputes between members and the Owners Corporation?
The best method for dispute resolution is open communication between members. Therefore, a preventative approach to the issue is advised, with the implementation of an internal dispute resolution process to handle problems most simply.
Disputes may not always be so easily resolved, in which case the Owners Corporation may request conciliation by Consumer Affairs Victoria (CAV) or make an application to Victorian Civil and Administrative Tribunal (VCAT), as stated by the Owners Corporations Act (2006) and Owners Corporation Regulations (2007).