Upgrades, Renovations and Alterations to the Common Property

 

An owners’ corporation can only make significant alterations to the use or appearance of its common property if the changes are listed in the maintenance plan, or approved by special resolution at a general meeting.

A special resolution is also required if the common property is to be upgraded, renovated or improved and the:

    > estimated total cost is more than double annual total fees, or

    > works require a planning or building permit.

Urgent works to ensure safety or prevent significant loss or damage do not require a special resolution. This applies only to the work necessary to address the safety, loss or damage.

 

 

Financial Management

An owners’ corporation is responsible for actions taken on its behalf by delegates, such as a professional manager or committee member. It can pass on costs incurred by these actions to members by raising fees. There is no limit to members’ financial and legal liability for actions of the owners’ corporation or its delegates.

An owners’ corporation should seek professional help to manage its financial responsibilities.

An owners’ corporation has the power to:

  1. set fees to cover general administration, maintenance and insurance
  2. levy special fees for extraordinary expenditure
  3. establish a maintenance fund to cover the cost of works in the maintenance plan
  4. borrow money
  5. invest money
  6. recover money owed
  7. charge penalty interest
  8. operate a bank account.

Financial Records

An owners’ corporation must keep financial records that:

  • record all its income, expenditure, assets and liabilities
  • enable it to make true and fair reports of its financial situation
  • record and explain all financial transactions for income tax and GST purposes, as required by the Australian Taxation Office (ATO).

Financial records must be kept in a safe and secure place. They can be kept in hard copy or in an electronic form. A free e-record system is available on Australian Taxation Office website.

Owners’ Corporation Fees

An owners’ corporation can set both annual and special fees.

Annual fees cover general administration, maintenance, insurance and other ongoing costs. Lot owners are charged their share of annual fees according to their lot liability.

Special fees cover extraordinary or unexpected expenditure such as to urgently repair the building or to cover the cost of legal action against the owners’ corporation.

Lot owners are charged special fees according to their lot liability, unless works are being undertaken that will only benefit one, or some (but not all) lots.

In such a case, special fees are charged using the ‘benefit principle’ which means that those who benefit more, pay more.

The way the benefit principle is applied does not need to be exact, if it is not practical to apply it in this way – the assessment only needs to be considered reasonable.

In some circumstances, applying the benefit principle may still result in lot owners paying according to their lot liability. Examples include:

  • when the work is being funded partly from annual fees and partly from special fees and the benefits of the work to certain lots is offset by their having paid higher annual fees (because of their higher lot liabilities), or
  • when works being done on certain lots will indirectly benefit the other lots; for example, by raising the value of the entire building or by reducing the possibility of legal actions against the owners’ corporation.

If the amount of proposed special fees is more than double the amount of the owners’ corporation’s annual fees, it must be approved by a special resolution. A special resolution requires support from 75 per cent of all lot owners or lot entitlements.

Insurance and Records

Insurance

All owners’ corporations must take out reinstatement and replacement insurance for all buildings on the common property and for incidental costs of the replacement or repair of damaged common property. This insurance must also cover services shared with a person other than the owners corporation or any of its members, such as pipes and cables for gas, electricity, water or data.

Owners’ corporations must also take out public liability insurance of not less than $10 million for common property.

Two-lot subdivisions are exempt from these requirements but should take out these forms of insurance if there are buildings on common property.

Owners’ Corporation Register

All owners’ corporations, except two-lot subdivisions, must establish and keep an owners corporation register which is a summary of its activities, undertakings and membership.

The register must be available for inspection free of charge. A manager can charge the owners’ corporation for supervising inspections of the records and register.

The owners’ corporation, if requested, must provide copies of the register and may charge a reasonable fee for doing so.

 

For further information or enquiry on the above, please contact us