What is an Owners Corporation?
An owners’ corporation (previously called a body corporate) is a legal entity that manages the common property of a residential, commercial, retail, industrial or mixed-use property development. It is automatically created when a plan of subdivision containing common property is registered with Land Use Victoria.
What is common property?
Common property includes any parts of the land, buildings and airspace that are not lots on the plan of subdivision. It may include gardens, passages, walls, pathways, driveways, stairs, lifts, foyers, fences, swimming pools, recreational areas etc. The common property is collectively owned by the lot Owners’ as ‘tenants-in-common’. Floor coverings and fixtures within a lot are usually the property of the lot owner.
What is a lot owner?
A lot owner is the owner of a lot affected by an Owners’ corporation.
What are a lot owner’s rights?
A lot owner is entitled to the following rights under the Owners’ Corporation Act 2006:
- The right to decorate the interior walls, floors and ceilings of their lot.
- The right to participate and vote in annual and special general meetings and ballots as a member of the Owners’ Corporation.
- The right to be elected to and sit on their relevant Owners’ Corporation committee.
The right to have their complaints heard by the Owners’ corporation or by VCAT
What are a lot owner’s obligations?
A lot owner has the following obligations under the Owners’ Corporation Act 2006
- The obligation to properly maintain any service that serves their lot exclusively and any part of their lot that affects the outward appearance of the lot or the use or enjoyment of other lots or the common property.
- The obligation to give notice to the Owners’ corporation of any application by the lot owner for a building permit or planning permit or the certification of a plan of subdivision affecting the lot
- The obligation to pay any outstanding fees owing to the Owners’ corporation in respect of that lot.
The obligation to comply with the laws set out by the Owners’ Corporation Act 2006, the regulations, and the rules of each Owners’ corporation.
What types of fees can an Owners’ Corporation set?
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.
How can lot owners’ participate in the decision-making process of an Owners’ Corporation?
Participating in general meetings and voting on resolutions
The main way that lot Owners’ can participate in the decision-making process of an Owners’ corporation is by attending the annual and special general meetings and voting on resolutions.
Lot Owners’ can attend and vote in person, or they can authorise a person to act as a proxy and vote on their behalf.
Lot Owners’ who have fees owing to the Owners’ corporation are not entitled to vote in person or by proxy until the said fees, charges, contributions and amounts are paid.
Election to the Committee
A more direct way for lot Owners’ to become involved in the decision-making process of an Owners’ corporation is by being elected to the committee.
Committees are normally elected each year at the annual general meeting, and any eligible lot owner may be able to stand.
A committee usually consists of between 3 to 12 members, with the most important members being the chairperson and secretary, who are elected by a majority vote of all committee members.
How are disputes with the Owners’ Corporation 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, which involves the following steps:
- internal grievance procedures
- dispute resolution through the Dispute Settlement Centre of Victoria (DSCV)
- applications to VCAT.
Internal Grievance procedures
An Owners’ corporation may develop its own internal 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 have its own rules, then the default grievance procedure in the model rules outlined in the Owners’ Corporations Regulations 2018 (Schedule 2) applies.
Dispute resolution 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 the Owners’ Corporation Act 2006 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.