Changes to the Owners Corporation Act in Victoria are set to take effect at the end of 2021. Take a look at some of the details.

As we all know, the property industry is ever-changing, with constant updates to rules and regulations. 

One of the most recent changes is an update to The Owners Corporations and Other Acts Amendment Act 2021 (Vic) (Amendment Act).

There are a number of new rules which will come into effect in December, 2021. These are aimed at improving the quality of owners corporation managers and enhance protection for Owners Corporations. 

It is important for property managers, Owners Corporation managers and property owners within multi-lot complexes to be aware of the updates to the Act.

Take a look at some of the changes: 

New Owners Corporation classifications

In order to regulate Owners Corporations (OCs) in a more rational and responsible way, there will soon be five ‘tiers’ of OCs which are based on lot numbers. 

The top tier (Tier One) will have more than 100 lots, then the breakdown is as follows:

Tier Two OCs: 51-100 lots

Tier Three OCs: 10 to 50 lots

Tier Four OCs: 3 to 10 lots 

Tier Five OCs: two lots

These changes break down the one-size-fits-all regulations and place tougher requirements on larger Owners Corporations. As shared by Mondaq: 

“As an example, tier one, tier two and tier three owners corporations must prepare annual financial statements in accordance with Australian Accounting Standards for presentation at the annual general meeting of the owners corporation.

Tier one owners corporations must, at the end of each financial year, have their financial statements audited by a registered or authorised auditor.”

In addition to the new tiers, a common seal will no longer be needed on documents. According to Lexology.com, “it will no longer be a requirement for an OC to possess a common seal, and the use of the common seal will no longer be a requirement for the execution of documents for and on behalf of an OC.” This will hopefully serve to streamline decision-making. 

Owners Corporation authority

Owners Corporations will be given additional powers under the amended act. 

These include: 

• The ability to levy additional annual fees on a lot owner if the OC has incurred additional costs because of the owner’s actions. An example is an insurance claim resulting from a party being held in an AirBnb property. If the claim results in higher premiums, the cost of these premiums may be passed on to the lot owner. Another example could be the need for additional security because a property is open to short term rentals.

• OCs being permitted to dispose of goods abandoned on the common property.

• Clarify relationships and reduce disputes in OCs by:

• enabling them to make rules protecting the interests of other residents during private-lot renovations

• excluding rules which unreasonably prohibit the installation of sustainability items, and

• developing a Model Rule on the process for changes to the external appearance of private lots.

Changes to management contracts

In the past, OC management contracts have often extended for many years. Under the new changes, there are limits to how long a management contract can last for. 

For example, any contract entered into by the developer which relates to the OC and benefits the developer must not have a term for longer than three years. Exceptions may apply for hotels and holiday facilities. 

In addition to this:

- the developer and their associates may no longer be appointed as manager of the OC they have developed

- the developer must not propose an annual budget for the OC which is unreasonable or unsustainable

- the developer must not designate as a private lot what normally would be common property or services

- the developer must not receive any payment from the manager of the OC in relation to the manager's contract of appointment.

OC Manager duties

The Amendment Act introduces extra duties for OC Managers, which include:  

• Ensuring goods or services are procured at competitive prices

• Not pressuring members of the OC to influence votes

• Providing written notice of contacts which give commissions of benefits to the OC manager to the Chair of the OC, and disclosing the commissions or benefits. 

Restrictions for lot owners

Under the amendment, lot owners will no longer be able to repair, alter or maintain common property, or repair/alter a service without permission from the OC. 

Voting rights

If a lot owner is behind with their payments to the OC, they are not entitled to vote on a resolution until the amount is paid in full, unless the matter requires special or unanimous decisions. 

There are further changes which you will need to be aware of if you are an OC stakeholder. 

With the regulations coming into force in December, there is time to update other stakeholders and ensure any necessary changes are implemented. You’ll find more information at the Consumer Victoria website: https://www.consumer.vic.gov.au/resources-and-tools/legislation/public-consultations-and-reviews/owners-corporations-and-other-acts-amendment-bill-exposure-draft-consultation.

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