WHAT TYPE OF OWNERS CORPORATION ARE YOU AND WHAT NEW OBLIGATIONS DO YOU HAVE?

The tiered system

The amendments provide for a tiered system as follows:

 
‘occupiable lot’ means a lot that is ordinarily used for residential or business purposes and does not include a car park or storage lot.
‘non-occupiable lot’ includes a car park, storage locker or a lot that is not ordinarily used for residential or business purposes.

Non-occupiable lots are taken to be occupiable lots for the purposes of determining the tiers where an owners corporation consists of:

• Less than 10 occupiable lots but more than 50 non-occupiable lots; or
• Solely of non-occupiable lots.

Example: An owners corporation comprising 5 residential lots, 2 commercial lots and 60 car spaces would be a tier 2 owners corporation. 

Financial statements and auditing obligations

The obligations regarding financial statements and auditing have been adapted to incorporate the tiered owners corporation system.

Only Tier 1 owners corporations may apply for an exemption as under the old Act.

Which owners corporations need maintenance plans?

Under the new amendments, Tiers 1 and 2 must prepare and approve a maintenance plan. Tiers 3, 4 and 5 do not require a maintenance plan. An owners corporation may, by ordinary resolution, amend an approved maintenance plan.
This provision does not come into effect until:

• 12 months after the commencement of the Act for Tier 1
• 24 months after the commencement of the Act for Tier 2

Formerly, only prescribed owners corporations needed to approve a maintenance plan, being owners corporations with annual levied fees in excess of $200,000 or consisting of more than 100 lots.

When does an Owners Corporation require a manager?

A tier 1 owners corporation must appoint a manager unless it resolves by special resolution otherwise. The decision not to appoint a manager can be overturned by an ordinary resolution.

Managers are optional for the other tiers.

When does an Owners Corporation require a committee?

Owners corporations affecting 10 lots or more (instead of 13) must elect a committee at an AGM.

A committee must not have more than 7 members unless it resolves by ordinary resolution otherwise, in which case it must not be more than 12.

Execution of documents and the common seal

Owners corporations no longer need a common seal to execute documents. An owners corporation may authorise a document to be executed by at least 2 lot owners of separate lots who:

1. Sign the document.
2. Print on the document their name, address and statement that they are a lot owner.

An owners corporation may also choose to retain their common seal and execute documents in the usual fashion.

Public liability insurance 

The minimum limit of liability for public liability insurance has been doubled from $10 million to $20 million.

Owners Corporation records inspection

There was some debate under the previous Act as to whether an owners corporation was required to provide copies of the OC records upon payment of a reasonable fee.

This has been clarified under the new amendments. Owners corporations must now provide a copy of the records upon request and the payment of a reasonable charge. 

MANAGERS AND DEVELOPERS

Management contracts

New strata manager contracts of appointment can no longer:

• Exceed 3 years.
• Require termination to be by special resolution or unanimous resolution.
• Require the owners corporation to convene a general meeting or take a prescribed step to terminate.
• Allow automatic renewal.
• Require tier 1 and 2 owners corporations to give 3 months’ notice to revoke the manager’s appointment.
• Restrict the ability of the owners corporation to refuse consent to assign the contract of appointment.

Notably, if an owners corporation fails to give notice of its intention to renew a contract of appointment, the contract is taken to have been renewed on the basis that it may be terminated by giving one month’s notice.

What are the new duties of a manager?

Managers must:

• Take steps to ensure that goods or services are procured at competitive prices and terms.
• Not exert pressure on any member to influence voting or elections.
• Disclose any benefit or commission received from a contract entered into on behalf of the owners corporation.

Manager's reports at AGM

Reports of the manager’s activities to be submitted at the AGM must include:

• Details of PI insurance.
• Details of trust account transactions.
• The amounts of any commissions, payments or other benefits received by the manager in relation to contracts for goods or services supplied to an owners corporation during the relevant year.

What are the new obligations on developers?

Developers must disclose at the IGM any relationship with the manager and any financial transactions that may arise out of that relationship.

If the developer enters into a contract relating to the owners corporation and from which it obtains a benefit, the contract must not exceed 3 years.

In addition to the documents the developer is already required to provide at the first meeting, the developer must provide:

• The building maintenance manual.
• An asset register.
• Copies of any warranties or, if copies are not able to be provided, details of any warranties.
• Copies of any specifications, reports, certificates, permits, notices or orders in relation to the plan of subdivision.

The requirements are limited to disclosing rather than preventing these types of arrangements by developers. 

CHANGES TO MEETINGS AND RESOLUTIONS 

No one present at meeting?

A resolution may be passed as an interim resolution even if no lot owner is present at the meeting.
A manager must not pass an interim resolution (if no members are present) that affects:

• Its contract of appointment.
• The annual budget if it is more than 10% of the previous year’s budget.

Interim special resolutions

Traditionally, an owners corporation could pass an interim special resolution with 50% of total votes in favour but no more than 25% of total votes against.
Now, interim special resolutions can also be passed at a general meeting where:

• There is a quorum.
• No one votes against the resolution.

New restrictions on proxies and powers of attorney

The new amendments provide:

• Lot owners cannot be proxies if they are in arrears.
• A person cannot vote (as proxy or under power of attorney) on behalf of

1. more than 1 lot owner if there are 20 or less occupiable lots; or
2. more than 5% of the lot owners if there are more than 20 occupiable lots.

The above restrictions do not apply to family members.

Commencing proceedings

The new amendments provide that owners corporations only need an ordinary resolution to commence a civil proceeding in the Magistrates Court or VCAT for matters up to $100,000.00.

A special resolution is still required to commence proceedings for matters exceeding $100,000.00.  

POWERS TO DEAL WITH LOT OWNERS' PROPERTY 

Owners Corporation access to lot property to maintain common property

The new amendments oblige an occupier to grant access to their lot for the owners corporation to carry out repairs and maintenance on common and lot property, subject to 7 days’ notice. This eliminates the need for an owners corporation to apply to VCAT to obtain an order as was the case in Owners Corporation No. 1 - PS434030V v Carroll [2016] VCAT 1863.

Disposal of goods

The amendments empower an owners corporation to relocate or dispose of goods which have been abandoned on common property subject to the Australian Consumer Law and Fair Trading Act, providing notice has been given.

The Owners Corporation must not dispose of the goods if there is an ongoing dispute with the owner.

LEVIES

Levies – benefit principle expanded

Formerly, annual fees had to be based on lot liability. The new amendments now provide that additional annual fees may be levied on a lot owner if:

• The owners corporation has incurred additional costs arising from the ‘particular use of the lot by the lot owner.
• An annual fee set on the basis of the lot liability of the lot owner would not adequately take account of those additional costs.

This includes general administration fees, which may include the costs of preparing and issuing a breach notice.

In addition, owners corporations may levy a lot owner to cover:

• Excesses and increased premiums against individual lot owners where the lot owner has caused the insurance claim by a ‘culpable or wilful act or gross negligence’.
• Insurance excess against a lot owner if the claim solely relates to that lot owner’s lot.
• Fees to cover any damage caused to common property by a lot owner that is not covered by insurance (or damage is less than excess).

In respect of extraordinary fees, the present wording of the benefit principle still applies i.e. fees for extraordinary items of expenditure relating to repairs, maintenance or other works that are undertaken wholly or substantially for the benefit of some or one, but not all, of the lots affected by the owners corporation must be levied on the basis that the owner of the lot that benefits more pays more.

In addition to the above benefit principle, the owners corporation may levy special fees and charges on a lot owner relating to repairs, maintenance and other works arising from ‘the particular use of a lot by the lot owner’. 

OWNERS CORPORATION RULES

Alteration of property

Owners corporations can now make rules regarding the alteration of common property and the appearance of a lot to:

• Protect the quiet enjoyment of all other lots and the common property during those works.
• Protect the structural integrity of any building on the plan of subdivision from those works.
• Ensure the market value of any other lot does not decrease as a result of those works.

However, it cannot prohibit the use of ‘sustainability items’ which includes anything that reduces a reliance on non-sustainable energy sources.

Who is bound by the rules?

The new amendments require occupiers to ensure their guests comply with the rules by making both the lot occupier and guest jointly and severally liable for any breach.

An occupier will not be liable for a guest’s breach if the occupier provided the guest with a copy of the rules. This exception does not apply to short stay operators.

Smoke drift

Owners Corporations can now make rules regulating or prohibiting the drifting of tobacco smoke from a lot in a multi-level apartment complex.