Significant reforms to the way owners’ corporations operate in Victoria came into effect from December 1, 2021.
Under the new Owners Corporations and Other Acts Amendments Act 2021, there were several changes introduced, which are important for owners’ corporation managers, property developers, and people who own a property covered by an owners’ corporation.
The main changes are:
Appointment and removal of owners’ corporation manager
An owner’s corporation (OC) manager cannot be appointed for more than three years, or five years for a retirement village OC.
This aims to prevent long-term management contracts and potentially prejudices to owners.
An existing owners’ corporation will need to decide by an ordinary resolution whether to continue use of its common seal when executing documents, or if it is no longer necessary and can be destroyed.
This means that once agreed by resolution of the owners’ corporation, documents such as contracts can be executed by two authorised lot owners signing on behalf of the owners’ corporation.
Commencing legal proceedings
From December 1, 2021, the amendments will require the OC to pass a special resolution to commence legal proceedings (other than for levy recovery or breach of rules). This replaces the current arrangement whereby an ordinary resolution must be passed.
This change will make it easier for OCs to start legal proceedings, particularly when the OCs have a significant number of lot owners.
Introduction of tiers of owners’ corporation (depending on number of occupiable lots)
The newly introduced five (5) tiers are structured as below:
More than 100 occupiable lots (and not a services-only OC)
51 to 100 occupiable lots (and not a services-only OC)
10 to 50 occupiable lots (and not a services-only OC)
3 to 9 occupiable lots (and not a services-only OC)
2 lot subdivision or a services-only OC
In general, the owners’ corporation that falls into a higher tier (e.g. Tier 1) will be subjected to more stringent and rigorous regulations compared to a lower tier (e.g. Tier 5).
Impact of tiers in owners’ corporation regulation
An owners’ corporation (OC) that falls under Tier 1 to 3 must elect a committee at the annual general meeting. Tier 4 and 5 owners corporations may choose to elect a committee.
A committee of an OC must have between three and seven members, although it can resolve by ordinary resolution to have between seven and 12 members.
An owners’ corporation that falls under Tiers 1 to 3 must prepare financial statements in accordance with Australian Accounting Standards and be presented at its annual general meeting. Tier 4 must prepare annual financial statements for any year that it levies annual fees.
A Tier 1 owners’ corporation must have their financial statements audited by a registered auditor, or its accredited accountant.
Tier 2 must have their financial statements reviewed by an independent member of CPA, IPA or CA.
Tiers 3 to 5 may choose to have their financial statements audited by either method.
Maintenance plan and fund
Tier 1 and Tier 2 owners’ corporations must now prepare and approve a maintenance plan.
From December 1, 2021, Tier 1 will have 12 months to prepare and approve a maintenance plan, while Tier 2 will have 24 months.
Tiers 3 to 5 may choose to have a maintenance plan, but it is not compulsory.
Maintenance plans can be amended by the OC by an ordinary resolution.
Need help navigating owners’ corporation changes?
The amendments to the Owners Corporations Act are significant and OCs will need to be aware of all the changes, including which tier applies to them, to avoid penalties.
We recommend seeking legal assistance to ensure compliance. At LDB Group, we have a team of specialists who can guide you on matters relating to owners’ corporation, including the audit and review of your financial statements.
To find out how we can help you, give us a call on (03) 9875 2900 or send us details via our contact form.