What is an Owners Corporation?
An Owners Corporation (or Body Corporate as it was formerly called) is a collective group that collectively manages the subdivision of a building or land that is registered at Land Victoria. An Owners Corporation may be created in any subdivision – residential, retail, commercial, industrial or mixed use. An Owners Corporation must be created where a subdivision contains common property.
What is meant by common property?
Common property is the property to which title is held by individual members in the common area. It is owned by the members as tenants in common.
Common property includes for example, pathways, driveways, stairs, lifts and lift lobbies, common garden areas, passages and other facilities. When a plan of subdivision is first registered, the owners of the subdivided lots become the first members of the Owners Corporation. When a lot is sold, the new owner replaces the previous owner as a member.
How does an Owners Corporation operate?
The Owners Corporation members may manage their own affairs or appoint a member or a committee of members to do so. An Owners Corporation may also choose to appoint a manager to take care of the management of the Owners Corporation. A manager must have professional indemnity insurance of at least $2 million and be registered with the Business Licensing Authority. An Owners Corporation may change a secretary or a manager from office at an annual or special general meeting.
What does an Owners Corporation do?
The main functions (duties) of the Owners Corporation are to:
- repair and maintain the common property, fixtures and services
- maintain correct insurance, including compulsory public liability insurance and reinstatement and replacement insurance
- provide general management and administration of land and buildings
- ensure compliance with the Regulations and rules
- provide Owners Corporation certificates to owners or prospective purchasers (Section 151 certification)
What legislation regulates an Owners Corporation in Victoria?
The Owners Corporations Act 2006 (“the Act”) and Owners Corporations Regulations 2007 (“the Regulations”) regulate Owners Corporation in Victoria. An Owners Corporation is a statutory corporation or ‘creature of statute’ which is created on registration of the plan according to the provisions of the Act and the Regulations.
What is the effect of the Owners Corporation Rules?
All Owners Corporation have Model Rules. The Model Rules are set out in Schedule 2 of the Regulations. The Rules set out the use of common property and lots. The Rules outline what a member must not, and must ensure that the occupier of a member’s lot does not do. For example, a member must not make or permit to be made any undue noise in or about the common property or any lot affected by the Owners Corporation.
All Owners Corporation may by special resolution (75% majority) make additional rules. These additional rules may then be amended or revoked by special resolution. These additional rules only come into effect once registered with the Land Titles office.
Who makes decisions?
The members of the Owners Corporation make decisions. An Owners Corporation is required to conduct a meeting of its members within the first six months of registration.
After this meeting, an Owners Corporation is only required to have a full annual general meeting if it receives or pays out money in the financial year.
Additional meetings (SGMs) can be called whenever a matter requires a decision by the members, such as rules, repairs or use of facilities. The secretary, manager or chairperson of the committee can call a meeting. A group of members can ask the secretary, manager or chairperson to call a meeting if they hold at least 25 per cent of all the lot entitlements.
What is the role of the Owners Corporation Manager?
The Owners Corporation Manager carries out some or all of the functions or duties of the Owners Corporation in administering and maintaining the Owners Corporation. These tasks include secretariat and administration, arranging insurance, organising maintenance works, maintaining financial records and bank accounts, advising on rules and legal matters.
What is my lot entitlement and lot liability?
The plan of subdivision sets out the lot entitlement and lot liability of each Owners Corporation member and is usually expressed as a percentage or fraction.
Lot entitlement is the proportionate share of ownership of Owners Corporation assets, including the common property, for example, use of the drive-way. It also determines voting rights at a meeting of the Owners Corporation. Lot entitlement is based on the value of the individual lot as it compares to the total value of all the lots in the plan.
Lot liability is the proportion of Owners Corporation expenses, for example insurance, which the lot owner is obliged to pay. Lot liability is based on what is would be just and equitable for the owners to contribute the funds of the Owners Corporation.
How are decisions made?
Resolutions may be made by meeting or postal ballot. Decisions of the Owners Corporation may be made by ordinary, special or general resolution.
- An ordinary resolution is a resolution passed by the majority of owners who vote at a meeting, or by a Ballot whereby the majority of at least fifty percent of the members must vote in favour of the resolution.
- A special resolution is a resolution passed by at least 75% of the members voting in favour of the resolution. A special resolution is required for some decisions including works costing more than twice the annual fee, additional insurance, amendments to the rules, leasing or licensing common property, leasing or licensing of outside property, the use of the public land or the purchase of additional land . Special resolutions must be set out on the notice of the meeting which must be issued at least 14 days before the meeting.
A unanimous resolution is a resolution passed by all lot owners. A unanimous resolution is required for some decisions including selling all or part of common property or buying land, altering boundaries or altering lot entitlement and lot liability.
What records does an Owners Corporation have to keep?
An Owners Corporation is required to keep various records including the full name and address of each member, minutes of meetings, proper books of account and financial statements of all income and expenditure and assets and liabilities.
What is a levy?
A levy is a contribution that all owners must pay (usually quarterly) based on the annual budget of the Corporation, calculated as percentage of the lot liability compared to the total of all lot liability, which covers the administrative expenses of maintaining and managing the common property. Any Owners Corporation may have a maintenance plan, and may create a maintenance fund (previously called a sinking fund). A prescribed Owners Corporation must have a maintenance plan.
What fees can the Owners Corporation charge?
An Owners Corporation sets fees to cover general administration and maintenance, insurance and other ongoing costs. The Owners Corporation can decide the level of fees, how they are paid and times and dates for payment.
An Owners Corporation can also levy special fees or charges to cover extraordinary items of expenditure, for example, to pay for painting works. If the amount proposed is more than twice the amount of the annual fees it must be approved by a Special Resolution.
If a member does not pay the fees or levies, the member loses the right to vote on matters requiring an ordinary resolution. The member is still entitled to attend meetings of the Owners Corporation but may only vote on matters requiring a special resolution or unanimous resolution.
The Owners Corporation can also sue members to recover debts and may charge penalty interest on money owed by members. A decision to charge penalty interest must be approved at an annual or special general meeting and fix the amount of interest to be charged. The rate of interest must not be greater than the rate stated in the Penalty Interest Rate Act 1983.
Who is responsible for repairs, maintenance and improvements of common property?
The Owners Corporation has the legal responsibility to repair and maintain common property and common services. Each member is responsible to maintain their individual lots to a state of ‘good and serviceable repair’. If a notice to repair is served on your lot you must carry out the repairs within 28 days or the Owners Corporation is entitled to carry out the repairs and charge your account the cost of the works.
Who is responsible for insurance on the property?
An Owners Corporation must have public liability insurance for $10 million in connection with the common property and reinstatement and replacement insurance for all buildings on the common property. In multi-storey developments Owners Corporation must have such insurance for the whole building.
Who can resolve disputes between members and the Owners Corporation?
These are some of the options you can use to resolve disputes:
- sort it out yourself;
- advice the committee or the Owners Corporation Manager;
- lodge a complaint in the prescribed form and seek the complaint to be dealt with in accordance with the dispute resolution process; or
- obtain legal advice from our office – you may need to apply to VCAT for an order determining the dispute under Section 165 of the Act.
When can I use a proxy to have my say?
A proxy is where you authorise someone else to vote on your behalf when you are unable, or choose not to, attend a meeting. Use the prescribed Proxy Form, which will accompany the notice of meeting.
Are there any circumstances when I cannot ask someone to act as a proxy for me?
You will not be able to use a proxy if your name is not on the Owners Corporation (OC) register or if your levies are not paid in full.
If I have an issue that I need some advice on, who should I contact?