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 are the relevant laws and regulations that govern Owners' corporations?
The relevant laws and regulations that govern owners' corporations include the Owners' Corporation Act 2006, the Owners' Corporations Regulations 2018, the Subdivision Act 1988 and Subdivision (Procedure) Regulations 2011.
How does an Owners' Corporation operate?
An owners' corporation usually operates on the following levels:
- The wider owners corporation, consisting of all lot owners and/or their proxies
- The committee, consisting of elected lot owners or their proxies.
- A delegate of the owners corporation, for example, a manager, chairperson, secretary, lot owner or employee.
- A delegate of the committee. The committee may delegate to a lot owner, a manager or subdelegate to a member of the committee.
What functions and powers does an Owners' Corporation have?
An owners' corporation 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
To enable it to exercise its functions, an owners' corporation also has the power to:
- set fees to cover general administration, maintenance and insurance
- levy special fees for extraordinary expenditure
- establish a maintenance fund to cover the cost of works in the maintenance plan
- borrow money
- invest money
- recover money owed
- charge penalty interest
- operate a bank account
How does an Owners' Corporation exercise its powers and make decisions?
An owners' corporation can exercise its powers and make decisions through the following means.
General Meetings and Resolutions
An owners' corporation usually makes decisions regarding the exercising of its main powers and functions in the form of resolutions made at annual or special general meetings, or by ballots.
General meetings are the most common method by which resolutions of the owners' corporation are made. They are convened by the chairperson, secretary or manager on behalf of the committee and usually require a quorum (minimum amount) of at least 50% of all lot owners or their proxies. The person convening the general meeting will generally prepare an agenda of issues to be discussed, after which the lot owners or their proxies will vote on the resolutions.
Outside of general meetings, resolutions can also be made in the form of ballots distributed to lot owners by a committee member or a delegate. The lot owners can vote on resolutions this way by filling and returning the ballot to the committee member or delegate.
There are a few 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
Delegation of decision-making powers
An owners' corporation can also delegate a chairperson, secretary, manager or committee to exercise decision-making powers and carry out day-to-day tasks on its behalf 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.
How are Owners' Corporation managers appointed?
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.
What duties does an Owners' Corporation Manager have?
An owners corporation manager is appointed by the Owners' Corporation to carry out its functions in managing and administering the common property. These include maintenance and repairs, collecting fees, maintaining insurance and keeping financial records.
All owners' corporation 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.
What are the registration and professional indemnity insurance requirements for Owners' Corporation managers?
All 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.
Can an Owners' Corporation manager be removed?
An owners' corporation 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 (VCAT) 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.
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.