FAQ
What is an Owners Corporation?
Is an Owners Corporation the same thing as a Body Corporate?
What is meant by common property?
What are the responsibilities of an Owners Corporation?
What are Owners Corporation Rules?
What is my lot entitlement and lot liability?
How are decisions made?
Does my Owners Corporation need a maintenance plan?
Who is responsible for insurance on the property?
Should we self-manage or appoint a professional Owners Corporation manager?
What is an Owners Corporation certificate?
Does my Owners Corporation need a Committee?
What is the role of a Committee Chairperson?
What is the role of a Committee Secretary?
What is an Owners Corporation?
An Owners Corporation (previously known as Body Corporate) is a body that collectively manages the common property of a residential, commercial, retail, industrial or mixed-use property development. An Owners Corporation is a separate legal entity from its members.
An Owners Corporation is automatically created when a plan of subdivision containing common property is registered at Land Victoria.
Is an Owners Corporation the same thing as a Body Corporate?
Yes, in Victoria Body Corporates were renamed to Owners Corporations in December 2007.
What is meant by common property?
Common property is the property to which title or other evidence of ownership is held by individual members in the common area. Common property is stated on the plan of subdivision and may include gardens, passages, walls, stairwells, pathways, driveways, lifts, foyers and fences. The Owners Corporation is responsible for the common property – the Owners Corporations Act 2006 states that the Owners Corporation must, among other things, manage, administer, repair and maintain the common property.
What are the responsibilities of an Owners Corporation?
An Owners Corporation must:
- 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 Corporations certificates when requested
- keep an Owners Corporation register
- establish a grievance procedure
It must also:
- carry out any functions and duties under the Owners Corporations Act 2006, the Owners Corporations Regulations 2007, the owners corporation rules and any other law or regulation
- ensure compliance with Owners Corporations Act 2006, the Owners Corporations Regulations and rules
What are Owners Corporation Rules?
All Owners Corporations have rules for the control, management, use or enjoyment of common property and lots. These are called Model Rules and cover day-to-day issues such as parking, pets and noise. The Model Rules are outlined in the Owners Corporations Act 2006.
An Owners Corporation may also adopt additional rules to deal with particular matters relevant to their common property. The adoption of additional rules requires that a special resolution of members be passed by the Owners Corporation. Once passed the rules are lodged with the Land Registry and recorded on the plan of subdivision, taking effect from the date of registration and are legally enforceable.
Rules made under the Owners Corporation Act 2006 and registered at Land Victoria apply to:
- the Owners Corporation
- lot owners
- tenants
- sub-lessees
- occupiers or tenants
Owners Corporations can apply to the Victorian Civil and Administrative Tribunal (VCAT) to enforce rules and the tribunal can impose penalties for breaches of rules.
What is my lot entitlement and lot liability?
The plan of subdivision sets out the parcels of land that can be sold separately. These are called ‘lots’. Lot owners are the members of the Owners Corporation for the subdivision. Lot entitlement and lot liability of each Owners Corporation member 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 liability is the proportion of Owners Corporation expenses, for example insurance, which the lot owner is obliged to pay.
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 at least 50% of the eligible votes
- A special resolution is a resolution passed by at least 75% of the eligible votes. A special resolution is required for some decisions including fees, penalty interest, works costing more than twice the annual fee, additional insurance, additional roles, leasing or licensing common property and use of the public 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 common property or buying land, altering boundaries or altering lot entitlement and lot liability.
Does my Owners Corporation need a maintenance plan?
Under the Owners Corporation Act 2006, your Owners Corporation must repair and maintain:
- the common property, for example a garden or nature strip
- chattels, fixtures, fittings and services related to the common property
- equipment and services that benefit some or all of the lots and common property
- property that is its responsibility
All Owners Corporations, Committees and delegates must exercise due care and diligence in carrying out functions and powers, including maintenance and repairs.
It is recommended that all Owners Corporations have a maintenance plan, but only some Owners Corporations are required to have one by law:
- prescribed Owners Corporations must have a maintenance plan and a maintenance fund
- non-prescribed Owners Corporations are not required to have a maintenance plan, but may choose to do so
- properties with multiple Owners Corporations usually have a maintenance plan. Your property manager will be able to advise you about maintenance responsibilities
Who is responsible for insurance on the property?
An Owners Corporation must have public liability insurance in connection with the common property and reinstatement and replacement insurance for all buildings on the common property. It is recommended that a valuation be obtained from a qualified valuer on a periodic basis to ensure that the full value of the buildings is insured thereby reducing the risk of members in the event of a substantial loss.
It is important to note that the Owners Corporation insurance does not cover the contents of owners’ units and members should ensure that they have appropriate contents cover in place, whether a resident or landlord of a tenanted property. Members should ensure that the policy in place for their property includes public liability cover.
Should we self-manage or appoint a professional Owners Corporation manager?
The effective operation of an Owners Corporation is largely determined by the willingness of members to engage with, and assume responsibility for, the operations of the Owners Corporation.
Three key considerations which should be taken into account are the level of investment in the property, the number of lots and complexity of services required. These items can make the self-management of properties extremely problematic and pose significant risks for owners who may not be informed of the complexities associated with the management of their common properties.
Other issues to be considered when deciding to self-manage or appoint a professional manager are:
- Who will prepare the annual budget and then arrange to collect the fees?
- If an Owners Corporation certificate is required to be issued (required to be attached to the Section 32 statement of the contract of sale), who will prepare that document?
- Who will establish and maintain the Owners Corporation register (a register of important information)?
- If an owner does not pay his/her share of costs, who issues notices for failure to pay fees and charges and manages the debt recovery process?
- Who will obtain quotations for the various jobs that need to be done at the property, even such small items as ensuring that public lighting is operating satisfactorily (in case someone trips over & sues the owners corporation)? Or arrange for the preparation of a maintenance plan?
- Who arranges for contractors to correctly follow OH & S practices and procedure?
- Who arranges on a non-prejudicial basis for the Owners Corporation regulations and rules to be followed by all owners, particularly regarding parking, noise, animals? Who issues notices to rectify breaches?
- Does the person conducting the affairs of the Owners Corporation have indemnity cover?
The process and effective operation of Owners Corporations is facilitated and enhanced when a professional manager is appointed. It is not uncommon that a professional manager is appointed to solve intractable problems and relationship breakdowns in previously self-managed properties.
Professional Owners Corporation managers play a vital role in an increasingly complex environment by ensuring Owners Corporations are compliant with their legal responsibilities, efficiently and effectively protect and maintain the owners’ assets and plan for the future.
What is an Owners Corporation certificate?
Where land being sold is affected by an Owners Corporation, it is a requirement that certain details are disclosed such as current fees, insurance cover, maintenance works carried out, any proposed works, known fee increases and any potential or existing legal claims affecting the property. The Owners Corporation certificate is attached to the vendor’s statement (section 32).
Does my Owners Corporation need a Committee?
In Victoria, an Owners Corporation with 13 or more lots must elect a Committee at each annual general meeting. Owners Corporations with fewer than 13 lots may elect a Committee if they choose to, but it is not mandatory.
If your Owners Corporation does not have a Committee, the lot owners will either have to agree or vote for individual lot owners to carry out any decisions or engage a professional Owners Corporation manager.
What is the role of a Committee Chairperson?
An Owners Corporation Committee must elect a Chairperson. The Chairperson’s role is to run meetings in a way that encourages decisions. The Chairperson should allow fair and open discussion of matters and stick to the agenda, so that decisions can be made.
Duties
A Chairperson must:
- be the Chairperson of both the Committee and the Owners Corporation
- have an Instrument of delegation from the Owners Corporation or the Committee
- act on the directions of the Owners Corporation
- act on the directions of the Committee
- act honestly and in good faith, exercise due care and diligence and not make improper use of his or her position
- if there is a Committee, present its report at the annual general meeting
- be a financial member of the Owners Corporation
Powers
The Chairperson has the power to:
- convene the annual general meeting
- convene a special general meeting
- arrange a ballot
- make the casting vote at a general or Committee meeting when the count is equal
What is the role of a Committee Secretary?
An Owners Corporation must have a Secretary. The Secretary is responsible for tasks including managing correspondence and organising meetings. The Secretary can also be Chairperson.
Role
The Secretary:
- organises meetings and acts on the Owners Corporation or Committee’s instructions
- is responsible for sending notices, minutes and other correspondence within deadlines. Failure to do this could mean important decisions are open to challenge
- does not have any decision making powers unless delegated by the Owners Corporation or Committee. Delegated powers must be set out in an Instrument of delegation and recorded in the minutes
Duties
The Secretary must:
- be the Secretary of the Committee and the Owners Corporation
- have an instrument of delegation from the Owners Corporation or the Committee
- act on the directions of the Owners Corporation
- act on the directions of the Committee
- receive petitions against an interim special resolution
- receive ballot forms at general meetings or via post, telephone or electronic means in accordance with the owners corporation rules
- receive proxies from lot owners
- prepare the notice and the agenda for Committee meetings
- give three days’ notice of Committee meetings
- keep minutes of Committee meetings
- collect records and funds from a manager after the manager has been removed
- certify and record rules with Land Victoria
- act honestly and in good faith, exercise due care and diligence and not make improper use of his or her position
Powers
The Secretary has the power to:
- convene the annual general meeting
- convene a special general meeting
- arrange a ballot