- What is a Strata Title?
Each unit in a block or multi-unit complex is individually owned. In addition, all of the owners in the building or complex have shared ownership of the common property.
- What is an Owners Corporation or Body Corporate?
An Owners Corporation, which was previously known as a Body Corporate, is an entity that collectively manages the common property of a residential, commercial, retail, industrial or mixed-use property development and is a separate legal entity made up of all owners.
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 common property?
Common property is the property to which title or other evidence of ownership is held by individual members of the Owners Corporation. Common property is stated on the plan of subdivision and may include gardens, passages, walls, roofs, stairwells, pathways, driveways, lifts, foyers, pools and fences. The Owners Corporation is responsible and has to look after the common property – the Owners Corporations Act 2006 states that the Owners Corporation must, among other things, manage, administer, repair, insure and maintain the common property.
- What is a Plan of Sub Division?
Victorian subdivision has operated under several different forms of legislation over the years, with the most recent being the Subdivision Act of 1988. This act superseded the earlier forms of subdivision under the Strata Titles, Local Government and Cluster Titles Acts. Since 1988, Building subdivision plans have followed a particular style of presentation, typically broken into 3 sections. A “Face” sheet, floor “Plan” sheets and cross sectional “Diagram” sheets. An additional section containing Owners Corporation detail is extracted from the plan at registration and represented in Owners Corporation searches. The face sheet contains many items of text, describing attributes of the land being divided, notations about boundaries, additional purposes of the plan, easement details, Council, Land Registry and Licensed Surveyor’s signatures. With the advent of electronic plan lodgement since 2007, hand written signatures are being replaced by a “digital signature” which looks just like printed text on the plan borders. Despite their appearance, these are in fact underpinned by a highly secure digital authentication process.
Of particular interest to Owners Corporation members, are the notations about boundary definitions for lots and common property. These will vary from plan to plan, depending upon developers’ instructions when the plan was prepared. Typical definitions for defining boundaries by structures include internal face of walls, external face of walls, medians of wall, upper or lower surfaces of finished or unfinished surfaces. For further understanding of these definitions, refer to the Subdivision (Registrars Requirements) Regulations of 2011. These definitions are particularly important to understand the limits of lot ownership. It also becomes relevant when maintenance or changes to structures are proposed. For example, if your ownership stops at an interior surface, you may need permission of your neighbour or the Owners Corporation (or both) to do works or alter an external surface. If in doubt, consult your OC manager for further advice.
Other key information on the face sheet includes easement rights and notations to explain if a lot is comprised of more than one part. A residence, car space and storage cage could be 3 separate lots, or a single lot in 3 parts. It’s important to understand the difference.
Plan Sheets contain a “birds eye” view looking down on the subdivided building(s). For multilevel buildings there may be one “typical” plan for identical floors, or a separate plan for each floor. These plans are drawn to scale but typically only show structures which define the boundaries. Architectural features such as room partitions, service shafts, ducts, stairs, foyers, lifts, dividing walls are not generally identified in the plan. This plan is purely focussed on ownership extents.
Diagram sheets show a “side view” of the building(s) either as a “typical” elevation or a cross section slicing through part of the building. These are not drawn to scale, but show the relationship between upper and lower boundaries, with lines that represent the structural elements of the building that define those boundaries. These diagrams can be particularly useful for understanding matters like: Do you own your balcony or just the air space above it? The Owners Corporation may take responsibility for some structures, depending upon boundary locations. For further advice consult your OC manager. Due to the complexities of some developments, interpretation of a subdivision plan may require professional advice. Also, if you intend to alter a lot boundary you will need to engage a Licensed Surveyor to certify the plans and guide you through the certification process.
- What are the responsibilities of an Owners Corporation?
An Owners Corporation must:
- Repair and maintain the common property, fixtures and services
- Take out and maintain required insurance
- Raise fees from the lot owners to pay for maintenance, improvements and insurance
- Prepare financial statements and keep financial records
- Provide Owners Corporations certificates when requested
- Keep an Owners Corporation register
- Establish a grievance procedure
- 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 Model Rules for the control, management, use and enjoyment of common property and lots. The Model Rules cover the day-to-day issues such as parking, pets and noise and are outlined in the Owners Corporations Act 2006.
An Owners Corporation may also adopt their own additional rules to deal with particular matters relevant to their common property. The adoption of these additional rules require a Special Resolution of members with three quarters of members in agreement. If 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
- 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 lot entitlements and lot liabilities of lot owners are set out in the plan of subdivision.
- ‘Lot entitlement’ refers to your share of ownership of the common property and determines your voting rights. A lot for example, may have an entitlement of more than one vote
- ‘Lot liability’ represents the share of Owners Corporation expenses that each lot owner is required to pay
These entitlements and liabilities are determined by the developer at the time of subdivision and can only be changed by an unanimous resolution of all lot owners.
- 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 and is required for some decisions including fees, penalty interest, works costing more than twice the annual fee, additional insurance, 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.
Whilst it is recommended that all Owners Corporations have a maintenance plan, a Prescribed Owners Corporation is required to have one by law:
- A Prescribed Owners Corporation is one with more than 100 lots and must have a maintenance plan and a maintenance fund – these funds are also referred to as Sinking Funds
- Owners Corporations of less than 100 lots (also referred to as non-prescribed) are not required to have a maintenance plan but may choose to do so if they wish.
- Should we self-manage or appoint a professional Owners Corporation Manager?
Self-managed properties are typically smaller ones where the unit owners aim to save money by delegating management tasks amongst themselves. Although this may work many self-managed Owners Corporation find it hard to remain legally compliant, handle large maintenance projects, and resolve disputes.
Consideration should be given to:
- Who will prepare the annual budget, issue the levies and collect them?
- 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?
- 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?
- Who will obtain quotations for the various jobs that need to be done at the property such as small items like ensuring that public lighting is operating satisfactorily (in case someone trips over & sues the owners corporation)?
- Who arranges for contractors to correctly follow OH & S practices, have the necessary indemnity and public liability insurances in place?
- Who arranges for the Owners Corporation regulations and rules to be followed by all owners, particularly regarding parking, noise, animals and who will issue notices to rectify any breaches?
- Do you have adequate indemnity cover in place yourselves?
We strongly recommend that consideration is given to appoint a professional manager to ensure that you are fully compliant.
- 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?
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, but it is not mandatory.
- Committee Structure
A committee must have three to 12 members, who must be lot owners or hold proxies for lot owners. There must not be more than one committee member from any one lot. Once elected, the committee members hold office until a new committee is elected.
- Election of the Committee
The committee must elect a chairperson and a secretary by ordinary resolution (majority vote) at its first committee meeting after the Annual General Meeting. Failure to fill either of these positions may mean the committee and its decisions are not lawful. The committee’s chairperson and secretary also become the chairperson and secretary of the Owners Corporation.
- Committee Chairpersons Role
The chairperson’s main role is to host meetings allowing fair and open discussion, while keeping to the agenda, so decisions can be made.
- Committee Secretary’s Role
The secretary is responsible for tasks including managing correspondence and organising meetings.
- Removing Committee Members
Lot owners can remove a committee, or a committee member, by ordinary resolution at a general meeting. If there is a casual vacancy on a committee, the remaining members can invite another lot owner, or a person holding a proxy for a lot owner, to be a member of the committee. The vacancy does not have to be filled if three or more members remain on the committee.
- Committee Quorums
A quorum is the minimum number of members needed to transact business at a meeting. For a committee meeting, the quorum is at least half the committee members. When there is no quorum, the committee can only make interim resolutions.
- Calling Committee Meetings
A committee meeting may be called by the Owners Corporation, the committee, its chairperson or secretary, the manager of the Owners Corporation or a delegate of the Owners Corporation. Committees can make decisions by ballot or at meetings by a show of hands.
- Committee Minutes
The committee must keep accurate minutes of every meeting. Among other things, the minutes must include the date, time and place, names of those present and all resolutions.
- Two-lot Subdivisions
If your Owners Corporation is a two-lot subdivision, it does not have to take out public liability and reinstatement and replacement insurance for the common property but as owners of the common property you risk legal and financial liability. You should insure the buildings and have public liability insurance.
- Consumer Affairs Guide
Click on the following link for a useful guide – https://www.consumer.vic.gov.au/housing/owners-corporations
- Who is responsible for insurance on the property?
Insurance is important to protect your Owners Corporation and the personal assets of all lot owners. The law sets out the minimum insurance required but your Owners Corporation but may also want to consider extra cover.
The minimum insurance required for an Owners Corporation is:
- Reinstatement and replacement insurance of buildings on common property
- Public liability insurance for the common property. Insurance for common property protects owners in the case of unexpected damage and injuries.
- Reinstatement and replacement insurance
All Owners Corporations, except two-lot subdivisions, must take out reinstatement and replacement insurance for all buildings on the common property.
A building is defined as:
- A structure and part of a building or structure
- Walls, out-buildings, service installations and other things attached to the main structure
- Any pipes or cables used to provide services to a party other than the Owners Corporation or its members (shared services)
- A boat or a pontoon permanently moored or fixed to land.
The insurance must cover:
- Replacement, repair and rebuilding of the damaged property
- Costs of demolishing and removing debris from the site
- Other costs such as employing an architect or surveyor
- Shared services
- Replacement of services and structures such as driveways and fences.
When renewing insurance, all Owners Corporations must ensure that the sum insured is more than the value of the buildings.
An Owners Corporation should obtain valuations of the buildings it is required to insure. A prescribed Owners Corporation must:
- Obtain a valuation every five years of all buildings that it is required to insure
- Present the valuer’s report at the next general meeting.
- Public liability insurance
Public liability insurance covers your Owners Corporation’s liability to pay compensation in the case of any:
- Injury, illness or death of a person
- Damage or loss of property.
Owners Corporations with common property, except two-lot subdivisions, must have public liability insurance of not less than $10 million for the common property.
Your Owners Corporation should get professional advice about its level of risk. Some Owners Corporations have lots with different uses (for example, residences and shops), which can mean significant differences in risk.
Lot owners in an Owners Corporation without common property can make a unanimous decision that each will arrange their own insurance.
- Insurance for multi-storey developments
An Owners Corporation must take out both reinstatement and replacement insurance and public liability insurance for all lots in a multi-storey development if any of the lots are:
- Above or below another lot
- Above or below common property.
This is not the case when:
- The lots are actually single storey, such as multi-storey plans that define the space above and below the lots as common property
- The multi-storey development was registered under the Strata Titles Act 1967 or Cluster Titles Act 1974 and does not have lots above or below one another.
- Insurance for mixed-use Owners Corporations
Developments with lots used for different purposes, such as shops and homes, are called ‘mixed use’. The cost of insurance may be higher for some lots than others in a mixed-use development.
Specific lots within an Owners Corporation can pay an extra premium for increased risk.
- What happens if the Owners Corporation cannot get insurance?
If your Owners Corporation cannot insure the common property on reasonable terms, the Owners Corporation may apply to the Victorian Civil and Administrative Tribunal for an exemption from the required insurance.
- Other insurance
Your Owners Corporation can, by ordinary resolution at a general meeting, decide to take out any extra insurance that it considers important to safeguard the interests of its lot owners.
This insurance might cover:
- Office bearers’ legal liability
- Voluntary workers insurance (a form of personal accident cover)
- Workers compensation
- Fidelity guarantee
- Machinery breakdown
- Catastrophe insurance
- Lot owners’ improvements to the building
- Legal defence expenses
- Government audit costs
- Appeal expenses
- Common property contents (for items such as carpet and paintings in foyers).
Additional insurance should always be on the agenda and considered at the annual general meeting.
- Insurance for individual lot owners
Individual lots owners can take out their own insurance cover in regard to destruction of or damage to their lot or their interest in the common property. This can be separate to or over and above the insurance provided by the Owners Corporation.
- Professional advice about insurance
Consumer Affairs Victoria recommends that your Owners Corporation only use insurers approved by the Australian Prudential Regulation Authority (APRA). This industry-funded authority regulates the Australian financial services industry and lists approved insurers on its website.
Approval means APRA considers that the insurer is able to meet its policy holder liabilities. Your Owners Corporation should always seek guidance about approved insurers, the range of insurance products and the amount of insurance to cover its risks.
Your Owners Corporation may save money and find it easier to make a claim if all lots and common property are covered by the same insurer.
We recommend that Owners Corporations obtain at least three quotes from different insurers.
- Owners corporation managers and insurance
When it comes to obtaining quotes for insurance, Owners Corporations should seek quotes from different insurers.
Owners Corporations managers may be authorised representatives of an insurer and hold an Australian Financial Services licence.
Consumer Affairs Victoria considers that it may be a breach of duty if a manager does not disclose to the lot owners that they:
- Act as an insurance agent offering to contract insurance for the Owners Corporation
- Receive commissions from a third party, such as an insurer, for selling that insurance.
These disclosure requirements exist to prevent a situation where a manager may be, or be seen to be, influenced to place insurance policies with an insurer offering better commission, rather than choosing the best policy for an Owners Corporation.
The interests of the Owners Corporation take precedence over other considerations