Owners Corporations

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The number of subdivision developments continues to grow and consequently the number of lots per development continue to increase.

We act for complex buildings such as Owners Corporations, gated communities, retirement villages, golf courses in relation to a range of strata law matters.

We can assist on implementing subdivision documentation for developers or advise on Owners Corporation governance, management and administration, financial and asset management and insurance.

We collaborate with our litigation and dispute resolution team in the event of a dispute arising, to ensure you have the support you need.

What is an Owners Corporation?

An Owners Corporation (formerly body corporate) is incorporated by registration of a plan or subdivision or a plan of strata or cluster subdivision.  If land or part of a building is set aside for common property in a plan of subdivision then an Owners Corporation must be created.  An Owners Corporation can also be created to manage shared services within the land affected.

An Owners Corporation manages the common property of a residential, commercial, retail, industrial or mixed-use property development.  Common property is defined in the plan of subdivision and may include parts of the land, buildings and airspace that are not defined as lots, road or reserves. Common property is collectively owned by all lot owners as ‘tenants-in-common’ rather than a particular person.

Common property can include shared driveways, common gardens, stairs, paths, elevators, lobbies, pools, gyms, and other facilities available to be used by owners and occupiers.

What is the purpose of an Owners Corporation?

Owners Corporations are responsible for managing the common property. Owners Corporations are regulated by the Owners Corporations Act 2006 (Vic) and have the following responsibilities:

  • manage and administer the common property;
  • repair and maintain the common property, fixtures and services;
  • take out and maintain required insurance;
  • raise fees from the lot owners to meet financial obligations;
  • prepare financial statements and keep financial records;
  • provide Owners Corporations certificates when requested;
  • keep an Owners Corporation register;
  • establish a grievance procedure;
  • carry out any function and duties under the Owners Corporations Act 2006 (Vic), the Owners Corporations Regulations 2018, the Owners Corporation rules and any other law or regulation;
  • ensure compliance with the Act, the Regulations and the rules.

What is the difference between an Owners Corporation and a body corporate?

An Owners Corporation and body corporate have the same meaning.  On 31 December 2007 all body corporates’ became Owners Corporations when the Owners Corporations Act 2006 (Vic) came into force.

Do I have to be a member of an Owners Corporation?

If you own a property that is affected by an Owners Corporation then you automatically become a member of that Owners Corporation.  You cannot opt out of being a member of an Owners Corporation if the property is affected by one.  As a member, you have legal and financial responsibilities to the Owners Corporation.

What are lot entitlements and lot liabilities?

If you own a property that is affected by an Owners Corporation then you automatically become a member of that Owners Corporation.  The plan of subdivision will set out responsibilities among the property owners by defining the lot entitlement and lot liability of each lot on the plan.

Lot entitlement is a lot owner’s share of ownership of the common property, and in some cases can determine voting rights.

Lot liability represents the proportion of Owners Corporation administrative and general expenses that each lot owner is obliged to pay.

Each lot entitlement and liability is determined by the developer in conjunction with the licensed surveyor before lodgement of the plan of subdivision at Land Use Victoria.  The basis of the entitlement and liability must be described at the time of lodging.

What is the difference between a prescribed and non-prescribed Owners Corporation?

A prescribed Owners Corporation is an Owners Corporation that either:

  1. consists of more than 100 lots; or
  2. levies ordinary fees in excess of $200,000.00 in a financial year.

Owners Corporations which are prescribed have additional financial reporting obligations. One of the additional obligations is the required to have the financial records of the Owners Corporation audited every financial year.

Why does my property have more than one Owners Corporation?

Some developments have multiple Owners Corporations to help lot owners share rights, responsibilities and costs.  Properties with multiple Owners Corporations will usually have and unlimited Owners Corporation which owners the common property and one or more limited Owners Corporations which will apply to only some lots.

As a lot owner, you will be a member of one unlimited owners corporation and MAY belong to one or several limited owners corporations.

What is the difference between an unlimited Owners Corporation and a limited Owners Corporation?

The most common type of Owners Corporation is an unlimited Owners Corporation.  An unlimited Owners Corporation generally manages all land within the Owners Corporation, including services, maintenance and any common property which is not affected by a limited Owners Corporation.  This type of Owners Corporation has no limits to how the functions and powers apply as determined by the Owners Corporation Act 2006 (Vic).

A limited Owners Corporation can be referred to as ‘limited’ or ‘limited to common property’.  This type of Owners Corporation is limited to common property that is affected by the limited Owners Corporation only.  For example, in an apartment building, you may be a member of the Owners Corporation that is responsible for the parking spaces but may not be a member of the Owners Corporations responsible for the lifts.

Can I volunteer as manager of my Owners Corporation to save money?

Yes. There are two types of manager’s who can manage an Owners Corporation.  They are:

  1. a volunteer manager (not required to be registered or insured); or
  2. a paid professional (required to be registered and have professional indemnity insurance).

It is important to note that both volunteer and paid registered managers have the same legal obligations.

A person or company who is paid for managing an Owners Corporation must be registered with Business Licensing Authority.

What is an inactive Owners Corporation?

Pursuant to section 32F of the Sale of Land Act 1962 (Vic), an Owners Corporation is inactive if it has not in the previous 15 months:

  1. had an annual general meeting; and
  2. fixed any fees; and
  3. held any insurance.

Only Owners Corporations with two lot subdivisions are exempt from the insurance obligations of the Owners Corporations Act 2006 (Vic).  All other Owners Corporations (three or more lots) are required to comply with the insurance requirements.   These include reinstatement and replacement insurance and public liability insurance.

It is important to note that insurance is not required if there is no common property and the Owners Corporation has resolved by unanimous resolution that each lot owner will arrange their own lot insurance.

It is also important to note that pursuant to section 11 of the Sale of Land Act 1962 (Vic) a person cannot sell a lot affected by an Owners Corporation unless the vendor or the Owners Corporation has a current insurance policy in accordance with the Owners Corporations Act 2006 (Vic).  If you sell a lot without insurance, the purchaser may avoid the sale at any time before the contract is completed.

What happens if I do not pay my Owners Corporation fees?

If you do not pay your Owners Corporation fees an Owners Corporation can charge you penalty interest on the amount owing if this is authorised by resolution.  The Owners Corporation can also take action to retrieve the debts in the Magistrate’s Court of Victorian or at the Victoria Civil and Administrative Tribunal (VCAT).

If you do not pay fees you lose the right to vote on ordinary resolutions.  You can still attend Owners Corporation meetings but can only vote on special or unanimous resolutions.

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