The relationship between Owners Corporations and lot owners can be tested by unexpected events, including the imposition of additional fees and levies. Luckily, the Owners Corporation Act 2006 (Vic) outlines the way an Owners Corporation (‘OC’) can impose fees, levies, and additional costs for rectification work that does not involve an equally distributed benefit for all lot owners. This article explains how the Act allocates these fees and offers guidance to lot owners who may want to dispute these fees.
Types of Fees and How They are Levied:
General Annual Fees:
In accordance with the Act, an OC may impose annual fees insofar as to cover repair and maintenance costs, general administration, and insurance fees. These are set on the basis of lot liability, meaning that the person who owns, is in possession of, or receives rent and profit from the lot is liable to pay the fees and contributions owed to the OC in relation to that specific lot.
Additional Annual Fees:
Additional fees may be levied on a particular lot owner whereby their use of the lot has caused the OC to incur costs which would otherwise not be covered by the General Annual Fees. These can arise from extraordinary circumstances and can be related to work that only benefits one, or a few, lot owners as opposed to everyone.
Unlike General Annual Fees, these are set in accordance with the benefits principle whereby the amount levied is proportional to the benefit obtained by the lot owner’s use of that lot. Essentially, those who derive a greater benefit from the work undertaken must pay more.
Below is a breakdown of the difference between how these fees are allotted.
| Category | Principle | Section (Owners Corporation Act) |
| General Annual Fees | Lot Liability | S 23(1)-(2) |
| Additional Annual Fees | Benefits Principle | S 23(3A)-(3B) |
Fee Recovery Process:
To initiate the fee recovery process, the Owners Corporation can take the following steps:
- Issue a Fee Notice to the lot owner.
- Issue a Final Notice if the first notice has not been paid within 28 days. This Final Notice must state that all overdue fees, charges, and interest are due and payable immediately. The Final Notice must also state the OC intends to take action under Part 11 of the Act (Application to VCAT) if the outstanding amount is not paid within 28 days of the final notice.
- Initiate recovery proceedings in VCAT or the Magistrates’ Court.
Responses to Receiving an Additional Levy:
If you are a lot owner and have received and additional levy, please consider the following steps to respond appropriately.
- Determine the basis for that levy and whether you bear the sole responsibility for the cost or whether it is to be shared between multiple lot owners.
- Determine which principle the fee has been based upon. If the levy pertains to lot liability, ensure that it does not relate to discharging an Owners Corporation liability, since a lot owner cannot be compelled to contribute funds beyond those strictly in respect of their lot.
- Determine the type of Notice you received.
If you receive a Final Notice, call us for a consultation immediately. This may impact on your right to vote as a lot owner and may incur additional costs for you if your OC decides to lodge the matter with VCAT.
Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.
