The 2021 amendments to the Subdivision Act have had the unintended consequence of making it almost impossible to get approval for altering plans of subdivision. This difficulty stems primarily from a threshold requirement that over 50% of lot owners must refuse consent. While the Rossidis case reaffirms VCAT’s authority to alter plans under section 34D, it underscores that VCAT's discretion is typically exercised only for the benefit of the entire plan, not individual interests.

Key Takeaways

When advising your clients on amending plans, consider:

• Is the application for the benefit of the plan as a whole? Successful applications have included correcting a mistake in the plan and the creation of owners corporations to ensure a fairer distribution of expenses
• A ballot should set out the mechanics of any intended amendment, as well as any real outcomes for the other lots to ensure full transparency. This includes any increase in their fees due to a reduction in the number of lots.

Overview

The plan involved a 12-lot commercial subdivision in Collingwood. The applicants, Con and Freda Rossidis, owned lot 5 and sought to remove it from the Owners Corporation (OC) to demolish an existing two-story factory and construct a six-story office block.

Amending a plan requires unanimous consent under section 32 of the Subdivision Act 1998.  The applicants secured support of 9 out of 12 lots but failed to achieve unanimous consent, necessitating an application to VCAT.

VCAT's authority to amend a plan is governed by section 34D of the Subdivision Act. In 2021, an amendment to section 34D(3) restricted VCAT's power, allowing alterations only if more than 50% of lot owners refused consent. Since this amendment, no successful applications have been reported, with most dismissed for failing to meet the threshold. Member Rowland observed that ‘To my mind, the amendments to section 34D(3) have missed the mark and caused the unintended consequence of preventing worthy applications being made to the Tribunal.

To bypass the threshold issue in section 34D(3), the applicants sought to appoint an administrator under section 173 of the Owners Corporations Act 2006 (OC Act), who would have the power to alter the plan under section 176(b) of the OC Act.

VCAT declined to appoint an administrator request, noting:

• The Owners Corporation was not dysfunctional for simply not meeting the threshold under section 34D(1)(b) of the Subdivision Act, noting the application had not been framed under this section.
• There was no evidence of inequality or mistake in the plan requiring rectification.
• The proposed amendment benefited only the applicants, not the subdivision as a whole.

In coming to the above decision, Member Rowland commented that ‘The Tribunal does not lightly order amendment to a plan of subdivision. Any change to a plan of subdivision affects lot owners' proprietary interests. Lot owners have a vested interest in the plan and the Tribunal will not disturb that interest unless a clear case is established.’

Comment on Legislative Amendment

Given Member Rowland's comments, there is a question of whether further legislative amendments might be necessary to address the unintended consequences of the 2021 changes to section 34D(3). The requirement for over 50% of lot owners to refuse consent before VCAT can consider an amendment may need revisiting to ensure that worthy applications are not unjustly dismissed.

Further information / assistance regarding the issues raised in this article is available from the author, Fabienne Loncar, Partner, or your usual contact at Moray & Agnew.