Owners’ Corporation – Appointing a Manager

Appointing a manager

An owners’ corporation may appoint a manager to carry out any powers or functions it is able to delegate (matters that require an ordinary resolution and that do not require a general meeting). The owners’ corporation usually delegates powers to a manager in a contract or instrument of delegation. This enables the manager to make decisions on behalf of the owners’ corporation. The appointment must be in writing or through a written contract.

Some owners’ corporations may be self-managed on a voluntary basis by a committee or a lot owner who has been delegated powers.

Duties of managers

All professional managers must:

  • register with the Business Licensing Authority
  • be appointed by an instrument or by contract of appointment
  • act honestly and in good faith
  • have professional indemnity insurance
  • hold all owners’ corporation money in trust
  • account separately for money held for each owners’ corporation they manage
  • report to the owners’ corporation at each Annual General Meeting
  • report to the committee as required
  • lodge an annual statement with the Business Licensing Authority.

Registration and professional indemnity insurance

All paid owners’ corporation managers must register with the Business Licensing Authority and have professional indemnity insurance. Registration applies to management businesses, rather than each individual manager who may be an employee of the business.

People aged under 18, bankrupts, or those who do not have professional indemnity insurance cannot register as a manager.

You can check a manager’s registration on the Business Licensing Authority’s public register of owners’ corporation managers. This register includes details of any orders made against a manager.

Removing a manager

A manager may be ‘removed’ by not renewing their contract of appointment.

Removing a manager before the expiry of their contract raises complex legal and contractual issues.

To remove a manager, an owners’ corporation should:

  • arrange a general meeting or postal ballot of lot owners. Alternatively, any authorised delegate can remove the manager without advising lot owners
  • follow the process for the removal or termination of the manager outlined in the contract of appointment.

The owners’ corporation may also apply to the Victorian Civil and Administrative Tribunal for an order terminating the manager’s contract.

Once a manager’s appointment is terminated, the manager has 28 days to return all funds and records to the owners’ corporation.

 

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

Financial Decisions That Will Make You Think Twice

 

Both men and women who have recently retreated or have been forcibly ejected from a relationship are generally not in the best state of mind to make sound financial decisions.

 

It might be useful to set out a sort of checklist, incorporating the fundamental principles that at least ought to be considered in these circumstances.  They are certainly not intended to be exclusive. Trying to protect people from their emotions and desires would be a lifetime’s work.

 

 

  1. Upon leaving a relationship for whatever reason, accept that you may be emotionally vulnerable for some time, and lock up your assets in a vault or  even in a term deposit and ensure you also deposit your titles, share certificates and any other assets of material or emotional significance.
  2. Consider appointing someone else as Power of Attorney.
  3. If you have Herculean strength, then simply resolve to take no action for a least a year which may in any way have a material effect on your assets or income. If you have exited from a traumatic relationship and you have been left with very little, then consider reading on for the time when you hopefully have rebuilt your wealth.
  4. As a general principle, endeavour to separate your personal assets from your business assets or the assets which are likely to attract more risk. This is not always an easy task as banks tend to seek protection in bricks and mortar and other tangible assets wherever they can.

If you are seeking a mortgage or bank accommodation work out a reasonable amount of security, offer that and no more.  If surplus assets are available be assured that the bank will want to take security over any and all of them.

At this stage you may be slightly confused but have another Gin and Tonic, and let me assure you that these are all well accepted commercial business practices. Do not try to implement any without seeking professional legal advice because in the space of this article I can only provide an outline. Remember that frequently people who make small fortunes start with long ones.

Many relationship breakdowns result directly or indirectly from financial problems. You owe it to yourself or at least your partner, to do whatever you can to remove or reduce the many and varied paths to unsettled relationships. Alternatively, I suppose you can recognise that this could be the catalyst that you are looking for to terminate the relationship that is going nowhere.

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

Part 2 – WHAT FUNCTIONS AND POWERS DOES AN OWNERS’ CORPORATIONS HAVE?

Owners’ Corporation 

Functions

An Owners’ Corporation generally has the following functions:

  • 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’ Corporation certificates when requested
  • keep an Owners’ Corporation register
  • establish a grievance procedure

Property Maintenance

Maintenance plans

An Owners’ Corporation maintenance plan must cover:

  • major capital items requiring repair or replacement over the next 10 years
  • the present condition of those items
  • when the items or components will need to be repaired or replaced
  • the estimated cost of their repair and replacement
  • the expected life of those items or components once repaired or replaced.

Only prescribed Owners’ Corporations must have a maintenance plan and maintenance fund. We recommend that as part of responsible asset management, all Owners’ Corporations have a maintenance plan.

If an Owners’ Corporation has a maintenance plan, then it must have a maintenance fund to cover the cost of works in the plan.

The Owners’ Corporation is required to report on implementation of its maintenance plan, if it has one, at each Annual General Meeting.

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

PART 1 – HOW DOES AN OC EXERCISE THEIR FUNCTIONS AND POWERS?

 

Annual General Meetings

An owners’ corporation must hold a meeting of all lot owners if it receives or pays out money during the financial year. This is called the Annual General Meeting.

The Annual General Meeting is the main opportunity for lot owners to discuss issues concerning their property and elect the committee and office bearers for the next year.

Written notice of an Annual General Meeting must be provided to lot owners at least 14 days before the meeting.

The time between the Annual General Meetings must not exceed 15 months.

Agenda

The lot owners, committee members and manager must organise an agenda that identifies items for discussion. The agenda will typically cover the following topics:

  • election of a committee (mandatory if there are 13 or more lots)
  • election of chairperson and secretary
  • appointment of registered manager
  • instruments of delegation for the manager, committee, chairperson and secretary if required
  • registration of the owners’ corporation for taxation purposes.
  • notification to Land Use Victoria of changes to the owners’ corporation contact details
  • provision and details of insurance
  • additional insurance; for example, to protect office bearers
  • setting up a bank account
  • method of keeping books and records
  • building audit for the purposes of the Building Regulations 2018, including cooling tower registration if required
  • risk assessment for occupational health and safety purposes
  • budget for the next 12 months. The budget is usually for a financial year
  • consideration of financial statements
  • the details of fees
  • rules, including the owners’ corporation’s process for resolving disputes
  • consideration of reports.

Resolutions

Different types of resolutions require different percentages of votes to pass. These include:

  • ordinary resolutions, which require the agreement of more than 50 per cent of lot owners
  • special resolutions, which require the agreement of at least 75 per cent of lot owners
  • unanimous resolutions, which require agreement from all lot owners.

Delegations

Delegation of powers enable a chairperson, secretary, manager or committee to make decisions on behalf of the owners’ corporation and carry out day-to-day tasks without having to call a general meeting.

Some powers cannot be delegated, including all matters requiring a unanimous resolution, a special resolution or an ordinary resolution at a general meeting.

Minutes of Meetings

The owners’ corporation must arrange for minutes of all meetings to be kept and available for inspection.

Proxies

If a lot owner cannot attend a meeting, another person can be appointed as a ‘proxy’ to represent and vote on behalf of the lot owner. It is illegal for someone to demand or require another person to give a proxy.

Powers of Attorney

A person acting under a power of attorney for a lot owner may vote on the lot owner’s behalf at a general meeting or ballot. An attorney can only act for more than one lot if they are a member of the lot owner’s family. It is illegal for someone to demand or require another person to give a power of attorney.

Special General Meetings

All meetings other than Annual General Meetings are called special general meetings. These can be convened by the owners corporation manager, chairperson or secretary, or a lot owner nominated by lot owners who have at least 25 per cent of the total lot entitlements.

 

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

 

Coronavirus and Australian Property. The potential impact on Australian Economy.

A respiratory virus that broke out in Wuhan (China) has now officially become a global spread which cases outside of China, the coronavirus or what is now know as COVID-19 is all over the news globally.

Besides the obvious health risks, the coronavirus fears to impact an economic slow down and serious impact on our property market. The Australian government imposed a two-week ban, tourists traveling from mainland China to Australia. The coronavirus having significant impact to the Australian economy due to being heavily dependent on the spending of Chinese tourists and students, as well as Chinese export revenue.

Let’s break this down a bit, Chinese visitors are Australia’s largest international tourism market, If Chinese tourism decrease the Australian economy will take a hit. By Australia being heavily dependent on China, both virus outbreak and travel bans Australia could suffer a combined $2.3 billion dollars in revenue due to less Chinese tourist and students visiting our shores. Once the Australian economy takes a hit the property market becomes affected, meaning property in Australia becoming less affordable for buyers’ dues to lower wages and increase of unemployment, fewer Chinese students and investors coming to Australia impacting in less demand of property investment and property rental.

However, with no crystal ball to predict the future let’s understand the potential virus impact on the market is too early to forecast at this coming stage. It’s important we regularly monitor Australian property news to be informed in the outcomes, impacts and trends.

HOW ARE DISPUTES WITH OWNERS’ CORPORATIONS RESOLVED?

 

 

Complaints to the owners’ corporation must be in writing, in an approved form. The owners’ corporation may decide to take no action, but must provide the person making the complaint with written reasons for this decision.

The Owners’ Corporations Act 2006 sets out a process to help owners’ corporations deal with grievances. This process may involve three steps:

  1. internal dispute resolution
  2. dispute resolution through the Dispute Settlement Centre of Victoria (DSCV)
  3. applications to VCAT.

The owners’ corporation must have an internal grievance procedure to handle complaints about breaches of the rules and other disputes.

 

Grievance procedure

The owners’ corporation may develop its own rules for handling grievances – these must be recorded at Land Use Victoria and must not conflict with any other Acts, regulations, or natural justice.

If an owners’ corporation does not make its own rules, the procedure in the model rules outlined in the Owners’ Corporations Regulations 2018 (Schedule 2) applies.

 

Resolving Owners’ Corporation Disputes through the Dispute Settlement Centre of Victoria (DSCV)

If the problem or complaint cannot be resolved through the owners’ corporation’s internal dispute resolution process, then lot owners can seek advice on dispute resolution assistance from DSCV.

It is not compulsory to seek DSCV’s assistance before applying to VCAT. However, DSCV may be able to resolve the issue more quickly and at a lower cost.

DSCV can only try to resolve a dispute if all parties agree to take part in this process.

 

Applications to VCAT

VCAT may hear and determine a dispute or other matter arising under this Act or the regulations or the rules of an owners’ corporation that affects an owners’ corporation ( an owners’ corporation dispute ) including a dispute or matter relating to—

(a)     the operation of an owners’ corporation; or

(b)     an alleged breach by a lot owner or an occupier of a lot of an obligation imposed on that person by this Act or the regulations or the rules of the owners’ corporation; or

(c)     the exercise of a function by a manager in respect of the owners’ corporation.

 

Any of the following persons may apply to VCAT to resolve an owners’ corporation dispute—

(a)     a manager or former manager;

(b)     a lot owner or former lot owner;

(c)     the owners’ corporation;

(d)     an occupier or former occupier of a lot;

(e)     a mortgagee of a lot;

(f)     an insurer under a policy taken out by the owners’ corporation;

(g)     the Director.

VCAT can impose penalties for breaches of rules and make a wide range of other orders.

 

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

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

TRUSTEES DUTY TO ACT PERSONALLY

 

Trustees of family or unit trusts have many important duties which have enshrined by case law or Commonwealth or State legislation. One of the most important duties is the duty for a trustee to act personally.

There are many aspects to the duty to act personally, but they all relate to the general rule that trustees must personally exercise their decision-making power and responsibilities, in accordance with the trust deed, without influence or restrictions.

There are however exceptions under the common law and statute that allow trustees discretion in how they exercise their powers.

This article examines some of the aspects of the trustee’s duty to act personally, some of the exceptions or exemptions to each aspect under the common law or statute.

 

The Duty of non-delegation

The most basic aspect of a trustee’s duty to act personally is the general duty for a trustee not to delegate their decision-making powers to others, unless otherwise permitted by the trust deed.

There are two main exceptions to this general duty provided by the Trustee Act 1958 (Vic). They are as follows:

  1. Section 30(1) of the Trustee Act 1958 – Power to delegate trusts during absence abroad

This provision allows a trustee who has never resided in Victoria, or is absent from Victoria, or is about to depart from Victoria, the power to delegate to any person by power of attorney (including a trustee company), the execution or exercise while he is out of Victoria, of all or any trusts, powers and discretions vested in him as trustee, either alone or jointly with any other person or persons

  1. Section 30(1) of the Trustee Act 1958 – Power to appoint agents

This provision allows a trustee to employ and pay an agent, whether a legal practitioner, banker, financial services licensee, regulated principal, or other person, to transact any business or to do any act required to be transacted or done in the execution of the trust, or the administration of the testator’s or intestate’s estate, including the receipt and payment of money.

However, a trustee must select only suitable persons as agents, and must supervise the proper performance of any agent or co-trustee (See Dalrymple v Melville (1932) 32 SR (NSW) 596).

The duty to not act under dictation

This duty requires a trustee not to exercise their powers under the dictation of another party, such as a beneficiary, an accountant or legal advisor, or a lender.

A classic case example of this duty being applied is the case Re Brockbank [1948] 1 All ER 287, where the beneficiaries of a trust applied to the Court to force the remaining trustee to appoint someone they nominated as the new trustee. The Court held that it would not interfere in the exercise of a discretion properly exercised by a trustee, and that “the power of nominating a new trustee is a discretionary power, and in my opinion is no longer exercisable, and indeed, can no longer exist if it has become one of which the exercise can be dictated by others”.

The duty not to fetter discretion

This duty requires a trustee to not to fetter the exercise of their discretions by binding themselves in advance to a course of actions. This means that trustees cannot make pre-determined decisions about how they will exercise their decision-making powers.

Leading cases such as Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liquidation) [2001] FCA 1628 and Dagenmont Pty Ltd v Lugton [2007] QSC 272 are authorities on the principle that a trustee who makes a resolution, or enters into a legally binding agreement that forces them to act in a particular way, then any decision made by the trustee pursuant to such a resolution or agreement, would likely constitute a breach of the trustee’s duty to act in an unfettered way. It would then be open to a party, normally a beneficiary of the trust, to challenge the trustee’s action.

Duty to Act Unanimously

If a trust is managed by more than one trustee, all the trustees have a duty to act unanimously unless the trust deed provides otherwise. This means that for trusts which are managed by a group of trustees, a majority of trustees cannot ordinarily rule against the minority, nor can the majority of trustees defer their decision-making powers to a single trustee. If a disagreement or deadlock occurs between the trustees, an application to the Court may often be the only way to break the deadlock.

There are however exceptions to this duty, as the settlor of a trustee deed may include a provision that specifies that, either generally or in specific circumstances, the decision of a majority of the trustees will prevail.

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

RIGHTS AND ENTITLEMENTS OF LOT OWNERS

by Michael Xu

Lot Maintenance and Renovations

Lot owners in an owners’ corporation are entitled to renovate or refurbish the interior of their home. A lot owner must notify the owners’ corporation if the renovations require a building or planning permit.

A lot owner must also keep the exterior of their lot in ‘good and serviceable repair’. Its appearance must not affect other lot owners’ use and enjoyment of the property. If an owner fails to keep the exterior in good and serviceable repair, an owners corporation can, in writing, order the owner to carry out repairs.

If the requested repairs are not carried out within 28 days, the owners corporation can perform the work without the lot owner’s approval and charge the owner for the cost.

Use of common property

A lot owner must not use or neglect the common property or permit it to be used or neglected in a manner that is likely to cause damage or deterioration to the common property. Restrictions:

  • Not damaging or altering the common property without the written approval of the owners’ corporation
  • Not parking a vehicle on the common property except in the case of an emergency
  • Not behaving in a manner likely to unreasonably interfere with the peaceful enjoyment of any other person entitled to use the common property
  • not unreasonably create any noise likely to interfere with the peaceful enjoyment of any other person entitled to use the common property

Payment of Fees

A lot owner is liable to pay any outstanding fees, charge, contribution or amount owing to the owners’ corporation in respect of that lot.

A lot owner is not liable to pay or contribute to the funds of the owners’ corporation a proportion of any amount required to discharge a liability of the owners’ corporation exceeding the lot owner’s lot liability.

 

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