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This is an extremely complex area of law. We have tried to simplify it as much as possible. Please do not hesitate to contact us if you require any assistance regarding your Owners Corporation or Body Corporate as we have a team of lawyers specialised in Owners Corporation disputes.
Simply email: our Owners Corporation Team.
- What is a Owners Corporation?
- What is meant by common property?
- How do Owners Corporation operate?
- What does a Owners Corporation do?
- What legislation regulates a Owners Corporation in Victoria?
- What is the effect of the Owners Corporation Rules?
- Who makes decisions?
- What is my lot entitlement and lot liability?
- How are decisions made?
- I think my lot liability is too high. How can it be altered?
- What records does a Owners Corporation have to keep?
- What fees can the Owners Corporation charge?
- Who is responsible for repairs, maintenance and improvements of common property?
- Who is responsible for insurance on the property?
- Who can resolve disputes between members and the Owners Corporation?
- I do have an issue that I need some advice on, who should I contact?
An Owners Corporation (or Body Corporate as it was formerly called) is a body that collectively manages the subdivision of a building or land that is registered at Land Victoria. An Owners Corporation may be created in any subdivision - residential, retail, commercial, industrial or mixed use. An Owners Corporation must be created where a subdivision contains common property.
Common property is the property to which title or other evidence of ownership is held by individual members in the common area. It is owned by the members as tenants in common.
Common property includes for example, pathways, driveways, stairs, lifts and lift lobbies, common garden areas, passages and other facilities. When a plan of subdivision is first registered, the owners of the subdivided lots become the first members of the Owners Corporation. When a lot is sold, the new owner replaces the previous owner as a member.
The Owners Corporation members may manage their own affairs or appoint a member or a committee of members to do so. An Owners Corporation may also choose to appoint a manager to take care of the management of the Owners Corporation. A manager is usually paid to manage the Owners Corporation. A manager must have professional indemnity insurance of at least $2 million and be registered with the Business Licensing Authority. The Owners Corporation may remove a secretary or a manager from office at an annual or special general meeting.
The main functions of the Owners Corporation are to:
- repair and maintain the common property, fixtures and services
- maintain correct insurance, including compulsory public liability insurance and reinstatement and replacement insurance
- provide general management and administration of land and buildings
- Insure compliance with the Regulations and rules
- provide Owners Corporation certificates to owners or prospective purchasers (Section 151 certification)
The Owners Corporations Act 2006 ("the Act") and Owners Corporations Regulations 2007 ("the Regulations") regulate Owners Corporation in Victoria. An Owners Corporation is a statutory corporation or ‘creature of statute’ which is created on registration of the plan according to the provisions of the Act and the Regulations. Being a statutory corporation and not a corporation affected by the Corporations Act 2001 or the Associations Incorporations Act it has only the powers which are given to it under the Act, the Regulations or the Rules of the Owners Corporation made by special resolution.
Anything the Owners Corporation does beyond these specific powers is ultra vires - beyond power. In other words the Owners Corporation must only act on matters that it has authority to act on or deal with. Acting beyond this scope is acting without proper authorityy.
All Owners Corporation have Model Rules. The Model Rules are set out in Schedule 2 of the Regulations. The Rules set out the use of common property and lots. The Rules outline what a member must not, and must ensure that the occupier of a member’s lot does not do. For example, a member must not make or permit to be made any undue noise in or about the common property or any lot affected by the Owners Corporation.
All Owners Corporation may by special resolution (75% majority) make additional rules. These additional rules may then be amended or revoked by special resolution.
The members of the Owners Corporation make decisions. An Owners Corporation is required to conduct a meeting of its members within the first six months of registration. After this meeting, an Owners Corporation is only required to have a full annual general meeting if it receives or pays out money in the financial year.
Additional meetings can be called whenever a matter requires a decision by the members, such as rules, repairs or use of facilities. The secretary, manager or chairperson of the committee can call a meeting. A group of members can ask the secretary, manager or chairperson to call a meeting if they hold at least 25 per cent of all the lot entitlements.
The plan of subdivision sets out the lot entitlement and lot liability of each Owners Corporation member and is usually expressed as a percentage or fraction.
Lot entitlement is the proportionate share of ownership of Owners Corporation assets, including the common property, for example, use of the drive-way. It also determines voting rights at a meeting of the Owners Corporation.
Lot liability is the proportion of Owners Corporation expenses, for example insurance, which the lot owner is obliged to pay.
Resolutions may be made by meeting or postal ballot. Decisions of the Owners Corporation may be made by ordinary, special or general resolution.
- An ordinary resolution is a resolution passed by at least 50% of the eligible votes.
- A special resolution is a resolution passed by at least 75% of the eligible votes. A special resolution is required for some decisions including fees, penalty interest, works costing more than twice the annual fee, additional insurance, additional roles, leasing or licensing common property and use of the public land. Special resolutions must be set out on the notice of the meeting which must be issued at least 14 days before the meeting.
A unanimous resolution is a resolution passed by all lot owners. A unanimous resolution is required for some decisions including selling common property or buying land, altering boundaries or altering lot entitlement and lot liability.
A unanimous resolution of the Owners Corporation is required to alter lot entitlement and lot liability. This can be difficult to obtain. If a unanimous resolution is not obtained, you can apply to the Victorian Civil and Administrative Tribunal ("VCAT") to alter the lot entitlement and lot liability. We can assist you with your application to the Court. Please contact us to assist you.
An Owners Corporation is required to keep various records including the full name and address of each member, minutes of meetings, proper books of account and financial statements of all income and expenditure and assets and liabilities.
A member can request the Owners Corporation to make the following records available for inspection at any reasonable time:
- the books of accounts
- the minutes of meetings of the Owners Corporation
- the other records that the Owners Corporation is required to keep under the Act.
The Owners Corporation is required to attach the financial statements to the notice of each annual general meeting. The Owners Corporation is not under any obligation to provide copies of these documents at any other time.
An Owners Corporation sets fees to cover general administration and maintenance, insurance and other ongoing costs. The Owners Corporation can decide the level of fees, how they are paid and times for payment.
An Owners Corporation can also levy special fees or charges to cover extraordinary items of expenditure, for example, to pay for painting works. If the amount proposed is more than twice the amount of the annual fees it must be approved by a special resolution (75% majority of all members).
If a member does not pay the fees or levies, the member loses the right to vote on matters requiring an ordinary resolution. The member is still entitled to attend meetings of the Owners Corporation but may only vote on matters requiring a special resolution or unanimous resolution.
The Owners Corporation can also sue members to recover debts and may charge penalty interest on money owed by members. A decision to charge penalty interest must be approved at an annual or special general meeting and fix the amount of interest to be charged. The rate of interest must not be greater than the rate stated in the Penalty Interest Rate Act 1983.
The Owners Corporation has the legal responsibility to repair the common property and common services. Each member is responsible to maintain their individual lots to a state of 'good and serviceable repair'. If a notice to repair is served on your lot you must carry out the repairs within 28 days or the Owners Corporation is entitled to carry out the repairs.
Significant changes in the appearance of common property or upgrades of it may only be done by the Owners Corporation passing a special resolution. Previous legislation regulating the operation of Owners Corporation did not enable an Owners Corporation to undertake these types of works so there is little authority on record to stipulate what is a significant change or not. Legal advice should always be sought first before undertaking any works that may alter the appearance of the common property or upgrade it.
An Owners Corporation must have public liability insurance for $10 million in connection with the common property and reinstatement and replacement insurance for all buildings on the common property. In multi-storey developments Owners Corporation must have such insurance for the whole building.
An Owners Corporation may take out additional insurance to cover the common property or units or liability resulting from the conduct of its office bearers. A special resolution of the members (75% majority) is required to approve this additional insurance.
These are some of the options you can use to resolve disputes:
- sort it out yourself by approaching the committee or the manager of the Owners Corporation;
- lodge a complaint in the prescribed form and seek the complaint to be dealt with in accordance with the dispute resolution process; or
- obtain legal advice from our office - you may need to apply to VCAT for an order determining the dispute under Section 165 of the Act.
Click here to be taken to the Owners Corporation page, where relevant profiles are listed.