The Owners Corporations Act 2006 (Vic) (“Act”) regulates the management, functions and powers of owners corporations (OCs) in Victoria. It also provides for mechanisms of dispute resolution in relation to the OCs and its members. Developers, as initial owners, need to comply with their obligations under the Act. This article will explain in general terms the obligations which developers have, what are the new obligations under the Amendment to the current Act (“Amendment”), and the restrictions that apply to developers.
In the case that a developer controls the majority of the owners corporations (OCs), the developer must act honestly, in good faith, and in the best interests of the OCs (s 68). For example, if the developer commandeers common property for its own benefit and excludes other lot owners’ use of it will be contrary to acting in good faith.
The developer must also act with due care and diligence, fairness, and take all reasonable steps to enforce domestic building contracts that affect the OCs (s 68). In the event of the developer’s failure to do so, the OCs may pass a special resolution to authorise legal proceedings against the developer under the implied warranties of those building contracts. In the alternative, lot owners, as individuals, can apply to the Victorian Civil and Administrative Tribunal (VCAT) to “enforce” obligations of the developer.
New Disclosure Obligations under the Amendment to the Act
There are some key changes that imposes increased obligations on developers as initial owners of the OCs under the amendment to the Act.
At the first meeting of the OCs, the developer must provide the following documents (s 34 Amendment; s 67 Act):
- the building maintenance manual,
- the asset register,
- copies of any warranties, or details of any warranties if copies are not available, and
- copies of any specifications, certificates, permits, reports, notices or orders in relation to the plan of subdivision.
The developer must also disclose, at the first meeting of the OCs, the following information (s 35 Amendment; new s 67A Act):
- any relationship with the OC manager,
- any immediate or future financial transactions that will or will foreseeably arise out of the relationship, and
- any possible or specific benefits which the developer will receive from it.
Other New Obligations
An OC with more than 50 lots (tier one or tier two OC) is required to prepare and approve a maintenance plan for the property for which it is responsible (s 19 Amendment; s 36 Act). The maintenance plan must be provided at the first meeting of the OC (s 67), and adequate fees to the funding of the maintenance plan must be paid into a maintenance fund in the name of the OC (s 42).
Plan of subdivision
In the course of preparing a plan of subdivision, a developer is now required to specify how lot liability and lot entitlement be allocated, and to engage a licensed surveyor to set out the initial allocation of lot liability and lot entitlement in the plan (unless the owners corporation is a two-lot subdivision, or services only owners corporation) (s 87 Amendment; new s 27 EA Subdivision Act 1988 (Vic)).
If the plan of subdivision has separate buildings, and one or more buildings is or are multi-level development and has its own OC which is or are multi-level development, the OC must obtain reinstatement and replacement insurance and public liability (s 30 Amendment; s 61(3) Act) and separate valuations of its buildings (s 33 Amendment; s 65 Act).
The developer cannot:
- appoint themselves as an OC manager unless the OCs relate to retirement village land,
- appoint an associate (s 68(5)), such as a spouse or employee who is ‘close’ to them, as an OC manager,
- vote on resolutions of the OC that relate to defect of the building on the plan of subdivision,
- propose an unreasonable or unsustainable annual budget of the OC,
- designate what would normally be common properties or services as a private lot, and
- receive any payment from the OC manager in relation to contract of appointment of the OC manager.
Further, the appointment of the OC manager prior to the first meeting of the OC expires at that first meeting (s 67B(1)), and the OC manager must not be appointed for a period of more than three years (s 119(1D)).
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DISCLAIMER The contents of this newsletter are of a general nature and cannot be relied upon as legal advice. However, if you need legal advice please do not hesitate to contact any one of our lawyers.