Following Royal Assent to the Owners Corporations and Other Acts Amendment Act 2021 (Vic) in February 2021, amendments to the Owners Corporations Act 2006 (Vic) (OC Act) will take effect on 1 December 2021.
These amendments include creating a new five tier system of owners corporations, expanding the obligations of developers with respect to establishing owners corporations and limiting the term of appointment of managers and contract conditions. Some of these amendments are set out below.
Five tiers of owners corporation
A new five tier categorisation of owners corporations will apply based on the number of occupiable lots within an owners corporation. Different obligations will apply according to the category of owners corporation. The 5 tiers comprise:
- Tier 1 – more than 100 occupiable lots and is not a services only OC.
- Tier 2 – 51–100 occupiable lots and is not a services only OC.
- Tier 3 – 10–50 occupiable lots and is not a services only OC.
- Tier 4 – 3–9 occupiable lots and is not a services only OC.
- Tier 5 – 2-lot subdivision, or a services only OC (exempt from certain provisions under the OC Act).
Tier 1 and Tier 2 owners corporations will have the most significant obligations, including a requirement to have a maintenance plan, to have their financial statements audited and to prepare their financial statements in accordance with the Australian Standards.
Developer obligations
A developer’s obligation to act honestly, in good faith, with due care and diligently in the interests of an owners corporation apply for 10 years (previously 5 years) following the registration of the plan of subdivision. A developer must not:
- propose an owners corporation annual budget that is unreasonable or unsustainable;
- vote on owners corporation resolutions relating to defects in or on a building on the plan of subdivision;
- designate as a private lot what normally would be common property or services; or
- receive any payment from an owners corporation manager in relation to that manager’s contract of appointment.
At the first meeting of an owners corporation, a developer must disclose any relationship with the owners corporation manager, any immediate or future financial transactions that will foreseeably arise out of the relationship with the owners corporation manager and any benefits that may flow to the developer as a result of that relationship.
The developer must also now provide to the first meeting of the owners corporation a maintenance plan, the building maintenance manual, an asset register, copies (or details) of any warranties, and copies of any specifications, reports, certificates, permits, notices or orders in relation to the plan of subdivision.
Manager appointment and duties
A developer must not appoint themselves or their associate as owners corporation manager.
The contract of appointment of an owners corporation manager must not:
- exceed 3 years; and
- include certain terms which are prohibited.These are terms which deter the owners corporation from revoking or terminating the appointment.For example, a right of renewal only exercisable by the manager, a requirement that the appointment only be revoked by a special or unanimous resolution, an automatic renewal, a restriction upon the owners corporation’s ability to refuse consent to an assignment of the contract of appointment (other than a requirement to not unreasonably withhold consent).
A manager has new obligations including a duty to take reasonable steps to ensure any goods or services are procured at a competitive price and terms, not to exert pressure on members so as to influence voting or election outcomes, to disclose certain commissions or benefits and as to holding moneys held by the manager on behalf of the owners corporation.
There are many other amendments which deal with day to day operational matters, including the financial power of the owners corporation to levy fees, annual reporting to the owners corporation, obligations of committee members and lot owners.
How we can help
If you require any further information on the changes, please contact Rosemary Southgate, or David Francis, of our Property & Development team.
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