If 2020 was a year of immense challenge for Owners Corporations across Victoria, 2021 could be a big year of change.
As we all know, 2020 and the coronavirus pandemic presented a range of challenges for owners, occupiers, contractors and managers of Owners Corporations and their lots.
From managing communities in the midst of a state-wide lockdown, to holding and running Annual General Meetings, the challenges presented by COVID19 for strata real estate services providers and the customers we serve were as varied as they were difficult.
However, these challenges also presented great chances for the best, most organised and most adaptable professional strata services to shine.
In 2021, that will be the case again as we welcome the The Owners Corporation Act Amendments which in February became law.
In this blog we are going to look at the laws and how they effect the various stakeholders of an Owners Corporation.
The Owners Corporation Act amendments: What are they?
In February, the Victorian Parliament passed the Owners Corporations and Other Acts Amendment Act 2021.
The amendments that were passed effect the Owners Corporation Act (VIC) 2006, which is the overarching piece of legislation that governs how Owners Corporations operate.
The laws which were based will take effect on December 1, 2021, giving Owners Corporations and their strata property management professionals the better part of 10 months to prepare for their formal implementation.
But what are the amendments and what do they mean?
There new Act has made the following 11 Amendments to the Owners Corporation Act 2006.
The changes include:
- The creation of five levels of Owners Corporations, with the degree of regulation depending on the number of occupied lots.
- The removal of the requirement for Owners Corporations to have a common seal
- Owners Corporations will be allowed to levy fees to cover the premiums for reinstatement and replacement of insurance or for an excess amount required for an insurance claim
- To allow for Owners Corporations to remove abandoned goods that have been left on common property
- To provide for what may be disclosed at the first meeting of an Owners Corporation
- To make changes to the duties of members of committees and sub-committees of an Owners Corporation
- To place further restrictions for when a person with a criminal record can be registered as the manager of an Owners Corporation
- Empowering VCAT to make orders that authorise low owners to commence, prosecute, defend or discontinue proceedings on behalf of Owners Corporations as well as requiring lot owners to pay the reasonable costs of Owners Corporations.
- To create new duties for the Owners Corporation manager which relate to contracts for goods and services as well as money held on behalf of the Owners Corporation in trust and the obligation to disclose beneficial relationships with suppliers of goods and services
The amendments also change the Subdivision Act 1988 to specify how lot liability and lot entitlement must be allocated, and to require the initial owner to engage a surveyor to set out the initial allocation of lot liability and lot entitlement.
Now, that’s a lot of changes to navigate, so what do these actually mean for lot owners and their Owners Corporations?
The Owners Corporation Act amendments explained
There are a range of important changes in these laws, and in this section we will clearly explain the major changes.
Owners Corporation Tiers
Perhaps the biggest change made by these laws is the creation of five tiers of Owners Corporations.
The tiers are set out based on the number of lots in the strata plan and are structured as follows:
|Tier||Number of Lots|
|5||2-lot subdivision or services only Owners Corporation (regardless of the number of lots). An example of a services-only owners coproation is an Owners Corporation that only deals with a car stacker or a lift|
Depending on which tier they are in, Owners Corporations will have various responsibilities.
This will benefit different Owners Corporations depending on which tier they are in.
For example, a tier 5 Owners Corporation will no longer need to comply with a range of provisions in the Act to ensure a more streamlined operation.
Tier 1 and 2 Owners Corporations, on the other hand, will be more strictly governed.
A Tier 1 Owners Corporation, for example, will have to:
- Prepare and approve a maintenance plan
- Audit their financial statements
A simple majority at a general meeting will now allow legal proceedings to go ahead for cases up to $100,000.
This is different to the current laws which require a special resolution, which explains why Victoria has far fewer strata cases that end up in court or the Tribunal.
Developers who maintain the majority of lots after the plan of subdivision is registered must now fulfil their initial obligations for a period of ten years, rather than five. Initial owners (and their associates) are not permitted to serve as the Owners Corporation’s manager or vote on defects resolutions.
At the first annual general meeting, developers will be constrained in their ability to employ managers and enter into contracts. Contracts are only permitted to be signed for a period of three years.
The amendments have changed the permitted size of a committee from 12 to seven.
However, the Owners Corporation can still increase the committee size from seven back to 12 by way of an ordinary resolution.
Effect on professional strata services, including Owners Corporation managers
Strata managers will face a lot of new requirements and restrictions as a result of these changes.
As a professional strata property management provider, Our Body Corp will have to abide by the following changes:
- Take fair action to ensure that all products or services procured on behalf of the Owners Corporation are procured at competitive rates and terms; and
- Not exert pressure on any owner’s corporation member in order to sway the results of a vote or election held by the Owners Corporation; and
- Before entering into a contract for the supply of products or services to an Owners Corporation in which a manager is entitled to a fee, payment, or other benefit, the manager must offer written notice to the Owners Corporation’s chairperson disclosing the commission, payment, or other benefit, as provided by section 122B.
- Keeping money in separate bank accounts (unless otherwise agreed) and sending copies of bank account financial statements to an owners company upon request.
- Revealing advantageous arrangements with or from manufacturers, such as fees, payments, or other benefits
At Our Body Corp, we have already been following the vast majority of these new laws as part of our internal practices.
We have always believed that Owners Corporations are there for the lot owners and the people who live in the building, not for the benefit of managers.
That’s why gives you more control over the management of your strata building.
Our Body Corp gives you transparency in to where your owners funds are being spent.
There are also changes to Owners Corporation management contracts.
The following prescribed terms must not be used in manager appointment contracts:
- Requiring an owners company to call a general meeting or pass a special resolution to remove the manager;
- Allowing the manager to choose whether or not to renew the appointment contract;
- The automatic renewal of contracts
- Requiring tier one and tier two Owners Corporations to provide more than three months’ notice before termination, and all other tiers to provide one month’s notice.
This means if your Owners Corporation is not managed by Our Body Corp and you are looking to make the change, it will now be easier than ever to make the change.
Got any questions about these changes or how they will affect your Owners Corporation? Call us today!