Our summary: Owners Corporation Act
Posted on 17 December 2021
Did you know there’s been some amendments to the Owners Corporation Act 2006? Read through Melcorp Strata’s summary.
The implementation of a five Tier System
This system is based on the number of occupiable lots. Occupiable lots is defined as a lot that is ordinarily used for residential or business purposes. Your Owners Corporation Manager will advise you soon as to which Tier your Owners Corporation belongs to, noting that if your Owners Corporation has multiple common properties, then each common property will be classified into its own Tier.
The five tiers are as follows:
Tier one is Owners Corporations with more than 100 occupiable lots
Tier two is Owners Corporations that have 51 to 100 occupiable lots
Tier three is Owners Corporations that have 10 to 50 occupiable lots
Tier four is Owners Corporations that have 3 to 9 occupiable lots
Tier five is Owners Corporations that are a 2-lot subdivision or services only, regardless of the number of lots
An Owners Corporation with more than 10 lots must elect a Committee of Management at each Annual General Meeting. An Owners Corporation with less than 10 lots may elect a Committee of Management at each Annual General Meeting.
A Committee of Management must have at least 3 members and no more than seven members. However, the Owners Corporation may, by ordinary resolution resolve that the Committee of Management can have more than seven members, noting however, that a Committee of Management cannot have more than twelve members appointed.
The ability to amend the duties of Members of the Committee of Management and Sub-Committees of your Owners Corporation. i.e a Committee of Management may by instrument delegate any of its powers and functions to the Owners Corporation Manager or a lot owner.
A Committee Member can only appoint another Committee Member as its Proxy. In Owners Corporations that have 20 or less occupiable lots, a person can only hold 1 proxy.
In an Owners Corporation that has more than 20 occupiable lots, a proxy holder cannot hold more than 50% of the total lot owners’ votes.
Owners Corporation Managers
An Owners Corporation Manager cannot be appointed by an Owners Corporation as its
Manager for a period that exceeds three years.
An Instrument or Contract of Appointment must be in the approved form.
Written notice must be given to the Chairperson by the Manager if they are to receive a commission for the supply of any goods or services.
The amendments allow for new duties for Owners Corporation Managers relating to contracts for goods or services, money held on behalf of Owners Corporations on trust and the obligation to disclose beneficial relationships with suppliers of goods or services.
Financial Reporting and Auditing
An Owners Corporation that is a Tier One, Tier Two or a Tier Three must prepare annual financial statements for presentation at each Annual General Meeting that are in accordance with the Australian Accounting Standards.
A Tier Four Owners Corporation must prepare annual financial statements for any financial year in which it levies annual fees, i.e., there is no requirement that these financial statements need to be in accordance with the Australian Accounting Standards.
A Tier One Owners Corporation must after the end of each financial year, have its financial statements audited by a registered company auditor, or a firm of registered company auditors, or a person who is a CPA Australia member or a member of CPA Australia, or the Institute of Public Accountants or Chartered Accountants Australian and New Zealand.
A Tier Two Owners Corporation must after the end of each financial year, have its financial statements reviewed by an independent person who is a member of CPA Australia, or the Institute of Public Accountants or Chartered Accountants Australian and New Zealand.
Tier One Owners Corporations must audit their financial statements, whilst Tier Two Owners Corporation must have their financial statements reviewed by a CPA or a Public Accountant.
A Tier Three Owners Corporation at its Annual General Meeting may resolve that its financial statements are to be audited.
A Tier Four and Tier Five Owners Corporation may resolve at its Annual General Meeting to have their financial statements audited.
Tier One and Tier Two Owners Corporations must prepare and approve a Maintenance Plan.
A Tier three, Tier Four and Tier Five Owners Corporation may prepare and approve a Maintenance Plan.
A Tier One Owners Corporation has 12 months from 1 December 2021 to ensure it is in compliant with the amendments, whilst a Tier Two has 24 months to comply from 1 December 2021.
Once a Maintenance Plan is approved by an Owners Corporation, it must be adhered to in its entirety, i.e. adhere to the raising of levies and the Plan may only be amended if an Ordinary Resolution is passed. However, noting that the fees determined must be adequate to fund the approved Maintenance Plan.
There is no longer a requirement for Owners Corporations to have a Common Seal. Your Owners Corporation will have to resolve that the common seal(s) are no longer required and therefore can be destroyed. Your Owners Corporation Manager will work through this with you.
The amendments will allow Owners Corporations to levy fees to cover the premiums for reinstatement and replacement insurance or for any excess amounts applicable for an insurance claim that has been lodged by a member.
There is now a process and the ability for Owners Corporations to manage the removal and disposal of goods abandoned on Common Property.
Water and Water Leaks
If water falls on Common Property, it is deemed to be part of the Common Property. Therefore, this allows lot owners to take action against an Owners Corporation for flows of water from Common Property to their private lots. This will put onus on your Owners Corporation to ensure that any future water leaks that flow from Common Property are attended to and resolved in a timely fashion.
Your Owners Corporation can now proceed with legal claims up to the value of $100,000 via an ordinary resolution. We note that previously, a Special Resolution of your Owners Corporation was required to issue proceedings (other than for recovery of outstanding Owners Corporation fees or Breaches of the registered Owners Corporation Rules).
Annual fees can now be charged to lot owners on the benefit principle if:
- The Owners Corporation has incurred additional costs arising from the particular use of the lot by the lot owner; and
- An annual fee set on the basis of the lot liability of the lot owner would not adequately take account of those additional costs.
Interim Resolutions for Ordinary Resolutions
The amendment of the Act will allow Owners Corporation Managers to pass interim resolutions on some matters when no lot owners are present at a Meeting and/or when instruction is not given, to ensure that your Owners Corporation can function. An example of this would be insurance renewals.
Interim Resolutions for Special Resolutions
If a General Meeting of an Owners Corporation has a quorum and the Special Resolution is not passed with the required number of votes, the resolution will be taken as an interim resolution if there are no votes against the resolution. This will make it easier for larger Owners Corporations to make decisions when lot owners do not attend meetings or participate in postal ballots.
VCAT will now be able to order a lot owner to pay the Owners Corporation costs incurred in recovering unpaid amounts from the lot owner (other than costs in the proceeding).
Lot owners may now bring, defend, or discontinue an action on behalf of an Owners Corporation where a Special Resolution or Ordinary Resolution has not passed.
Occupiers & Guests
Occupiers are now responsible for a guests’ behaviour.
Should your Owners Corporation be part of a multiple Owners Corporations, your Owners Corporation can continue to have one nominated bank account on the proviso that an Ordinary Resolution is made, your Owners Corporation Manager will work through this with you.
The Melcorp Strata team is pleased to report that our entire staff has competed training in relation to the amendments to the Act and advise our Owners Corporations accordingly.
Should you have any questions regarding the new legislation, do not hesitate to contact us on 03 8638 1822.