Owners Corporation update: Owners Corporation and Other Acts Amendment Act 2021 to take effect from 1 December 2021 — here’s what you need to know

After many adjournments, the Owners Corporations and Other Acts Amendment Bill 2019 received royal assent by the Victorian Government on Tuesday 23 February, albeit with two further amendments relating to the commencement date, and hotel and resort management contracts.

The Owners Corporations and Other Acts Amendment Act 2019 (the Act) will come into effect on 1 December 2021, unless proclaimed earlier.

Background

As outlined in the Explanatory Memorandum published on 10 September 2019, the purpose of the amendments are to:

• further regulate owners corporations;
• provide better protection to owners corporations, including owners corporation in retirement villages;
• provide quality control in respect of owners corporation managers;
• provide further obligations on developers;
• provide better governance, financial and internal relations in respect of owners corporations; and
• improve the Act.

In addition to the Owners Corporations Act 2006, the Act will implement amendments to the Retirement Villages Act 1987 and Part 5 of the Subdivision Act 1988 which were part of a wider public review of the consumer property legislation.

Key amendments — what you need to know

Provided below is an outline of the key amendments from the Act that will affect owners corporations, initial owners and owners corporation managers.

Owners corporations

Key amendments that will affect the owners corporation include:

• the introduction of five (5) tiers of owners corporations in place of prescribed and non-prescribed owners corporations;
• the ability to issue proceedings in VCAT and the Magistrates’ Court if authorised by ordinary resolution instead of a special resolution;
• no requirement to have a common seal;
• the ability to levy annual fees on a lot other than in accordance with lot liability if (say) the owners corporation has incurred additional costs arising from the particular use of a lot and if the lot’s liability does not adequately take account of those additional costs;
• the ability to charge the increase to an insurance premium payable on an insurance claim if the claim is caused by the gross negligence, or the culpable or wilful act of a lot owner, occupier or guest;
• the ability to on-charge the cost of damage to common property where the damage is not covered by insurance or the cost is less than the insurance excess payable;
• the ability to dispose of abandoned goods left on common property;
• a prohibition on a term in the contract of sale of a lot that limits or controls the voting rights of the purchaser of the lot in relation to the owners corporation;
• a limit on how many proxies a person may have at one meeting; and
• committee members are prohibited from appointing a proxy to attend a committee meeting unless the proxy is also a committee member.

Initial owner

Key amendments that will affect the initial owner include:

• the applicant for the registration of plan of subdivision (the Applicant) is required to disclose at the Inaugural General Meeting (IGM) any relationship with the manager of the owners corporation, any immediate or future financial transactions that will (or will foreseeably) arise out of the relationship with the manager of the owners corporation and any specific benefits which may flow to the Applicant as a result of that relationship;
• the termination of an owners corporation manager’s appointment at the IGM if the manager was appointed by the Applicant prior to the IGM; and
• a maximum term of three (3) years for any other contracts that benefit the Applicant, unless the contract relates to hotel and resort management.

The initial owner will also be prohibited from:

• appointing itself or an associate to be the owners corporation manager and to vote in any resolution in respect of the building;
• receiving a payment (or commission) from the manager in relation to the manager’s appointment; and
• designating common property or a common service as private property.

Owners corporation manager

Key amendments affecting the owners corporation manager include:

• giving the manager the power to pass some interim resolutions where no lots or proxies are present at the annual general meeting (AGM) unless that power is restricted by ordinary resolution;
• a prohibition of terms in the manager’s contract of appointment:
  • requiring that termination of manager must be approved by unanimous resolution, special resolution or any resolution other than majority vote and that the resolution to terminate must be made at a general meeting;
  • allowing the manager to renew the contract of appointment at the manager’s option;
  • requiring a tier-one or tier-two owners corporation to be give three months (or more) notice of its intention to revoke the contract of appoint; and
  • restricting the ability of an owners corporation to refuse consent to an assignment of the contract of appointment other than a requirement that consent must not be unreasonably withheld;

  The amendments also impose additional duties upon the owners corporation manager which include:

  • taking reasonable steps to ensure goods or services procured by the manager are procured at competitive prices and on competitive terms;
  • not exerting pressure on any member of an owners corporation in order to influence the outcome of a vote;
  • giving prior disclosure to the owners corporation of any payment or benefit to be received by a manager before a contract is entered into for the supply of goods or services to an owners corporation;
  • the holding of money on behalf of the owners corporation, including the provision of copies of financial statements and bank accounts upon request by the owners corporation;
  • disclosing to the owners corporation of any beneficial relationship the manager has with a supplier of goods or services;
  • disclosing to the owners corporation of any commission payment or other benefit the manager is entitled to receive in relation to a contract for the supply of goods or services to an owners corporation (e.g. insurance commissions); and
  • increased reporting obligations at each AGM.

  The above list is only a snapshot of the many amendments to the Owners Corporations Act 2006.

  More information

  If you would like detailed advice about how these changes will affect the responsibilities of the owners corporation manager and the owners corporation itself, please contact Anton Block, Principal Lawyer and Head of Owners Corporation, on (03) 8600 8833 or ablock@kcllaw.com.au.

  This Owners Corporation update was authored by Anton Block, Principal Lawyer.

  Note: This update is a guide only and is not intended to constitute legal advice.