Changes to the Owners Corporations and Other Acts Amendment Act 2021 will come into effect on 1 December 2021. 

The amendments aim to improve on existing legislation and make life as a lot owner easier by introducing clearer guidelines for Owners Corporations.

Reclassification of Owners Corporations into Tiers

One major amendment is the reclassification of Owners Corporations into tiers. 

Tier one: More than 100 occupiable lots (and is not a services only Owners Corporation).
Tier two: 51- 100 occupiable lots (and is not a services only Owners Corporation).
Tier three: 10-50 occupiable lots (and is not a services only Owners Corporation).
Tier four: 3 – 9 occupiable lots (and is not a services only Owners Corporation).
Tier five: An Owners Corporation for a 2 lot subdivision or a services only Owners Corporation.

Rhett Oliver, Partner at Colin Biggers & Paisley Lawyers, stated “The tiered system is intended to establish different requirements in respect of committees, financial reporting and maintenance plans depending on the size and nature of the Owners Corporation. Larger Owners Corporations will be subject to more rigorous requirements, whereas smaller Owners Corporations will be subject to less stringent requirements. New requirements for first meetings and for the appointment of Owners Corporation Managers are also intended to provide greater protections to Owners Corporations, purchasers and lot owners.” 

Changes for Committees
The amendments to the act have changed the permitted size of a committee from 12 to 7. The Owners Corporation can increase the committee size from 7 back to 12 by way of ordinary resolution. 

New requirements for first meetings  

At the first meeting, the following additional documents will now be required to be provided: 

• Maintenance plan; 
• Building maintenance manual; 
• An asset register; 
• Copies of any warranties; 
• Copies of specifications, reports, certificate, permits, notices, or orders in relation to the plan of subdivision.  

Changes for Developers  

The Bill amends the Subdivision Act 1988 (Vic) (Subdivision Act) to provide new requirements for a licensed surveyor to set out initial allocation of lot liability and lot entitlements when preparing a plan of subdivision under Part 5 of the Subdivision Act, and also to include a statement detailing how the lot entitlement and lot liability are allocated having regard to the following principles:  

Lot liability in the plan must be allocated equally between the lots unless: 

•  there is a substantial difference in size between the lots;  
• different lots have a bearing on the consumption or use of common utilities or the cost of maintaining the common property; or  
• the number of occupiers in relation to each lot has a greater bearing on the consumption or use of the common utilities or the cost of maintaining the common property than the size of the lot; and  

Lot entitlement must be allocated on the basis of the market value of the lot, and the proportion that value bears to the total market value of the lots.

“These new requirements will need to be front of mind for developer’s selling land ‘off the plan’ to make sure the draft plan of subdivision they are disclosing to purchasers is compliant. Developers will now be required to disclose any relationship with a manager of the Owners Corporation and benefits that may flow to the developer arising from that relationship. Further, where the developer appoints a manager who is not the developer (i.e., initial owner) or a lot owner, the contract of appointment of that manager expires at the first meeting of the Owners Corporation.” – Rhett Oliver.

The following additional restrictions are now imposed on the developer of an Owners Corporation: 

• the developer and their associates may no longer be appointed as manager of the Owners Corporation they have developed; 
• the developer must not propose an annual budget for the Owners Corporation that 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 Owners Corporation in relation to the manager’s contract of appointment. 

Changes for Owners Corporation Managers  

The term for a contract of appointment for an Owners Corporation Manager (Contracts of Appointment) must not exceed 3 years.  

New requirements specify a list of terms that must not be included in Contracts of Appointment, including the following (Prohibited Term): 

• any requirement for the Owners Corporation to obtain a special or unanimous resolution or convene a general meeting of the Owners Corporation to revoke the Contracts of Appointment; 
• a term that allows the manager to renew the Contracts of Appointment at the manager’s option; 
• a term requiring a tier one or tier two Owners Corporation to give three months’ or more notice of its intention to revoke the manager’s Contracts of Appointment; 
• a term that restricts the ability of an Owners Corporation to refuse consent to an assignment of the Contracts of Appointment to a person appointed as manager other than a requirement that consent must not be unreasonably withheld. 

Please click here for more information from Colin Biggers & Paisley on the changes to the Owners Corporations and Other Acts Amendment Bill 2021.

For more information specific to your scheme, please contact SSKB Victorian General Manager, Hedley Gaudin, or Colin Biggers and Paisley Lawyers Partner, Rhett Oliver.

Hedley Gaudin
SSKB Victorian General Manager
(03) 8641 6505
hgaudin@sskb.com.au

Rhett Oliver
Partner at Colin, Biggers and Paisley Lawyers.
(03) 8624 2034
rhett.oliver@cbp.com.au