The Owners Corporation Law in Victoria is proposed to be changed in an effort to bring more uniformity in the rules and regulations across the states in Australia.

Previously, in December 2018, the new Owners Corporations Regulations 2018 replaced the existing Owners Corporation Regulations 2007.

Proposed Changes

The new Bill proposing amendments to the Owners Corporations Act 2006 has been developed following detailed consultations with industry and community. Rather than introducing a new Act, the Bill proposes comprehensive amendments to the Owners Corporations Act 2006, the Retirement Villages Act 1986 and Part 5 of the Subdivision Act 1988. These laws primarily govern the establishment, operation, functions and powers of Owners Corporations in Victoria. The amendments reflect some of the recent changes made in New South Wales.

The proposed amendments can be broadly categorised to make the following changes:

  • enabling owners corporations to make rules controlling smoke drift between lots;
  • prohibiting certain unfair terms in owners corporation management contracts and providing the Victorian Civil and Administrative Tribunal (VCAT) with the power to rule whether other terms are unfair;
  • restricting ‘proxy voting’ and prohibiting contractual limitations on lot owners’ voting rights;
  • strengthening the disqualification provisions of the current registration scheme for professional owners corporation managers, and
  • expanding the obligations of developers to the owners corporations they create, and extending their operation from the existing five years to 10 years.

The amendments primarily aim to streamline regulation of owners corporations and enhance protections for property owners. More than 1.6 million Victorians own or live in properties managed by owners corporations, including apartments and townhouses. The majority of the issues discussed in the bill are a response to the issues and problems raised by stakeholders during the Victorian Government’s Consumer Property Law Review.

Impact on stakeholders

The new amendments propose to divide strata schemes into four tiers. Different tiers will have slightly different regulations governing them considering the different sizes of the scheme.

These would be:

  • Tier one (51 “occupiable” lots or more);
  • Tier two (10 to 50 lots);
  • Tier three (three to nine lots); and
  • Tier four (two lots).

A tier one scheme is mandatorily required to have a maintenance plan for future repairs and replacement of common property. The requirement is not so stringent for tier two, three and four schemes and they may choose to have a maintenance plan. However, in case any scheme opts to have such a plan, they have to mandatorily put money into the sinking fund to cover expected costs.

Election of a responsible committee is a must for tier one and two schemes, but it is optional for tier three and four schemes.

The required number of members to constitute committees are reduced to a maximum of seven members from the earlier count of twelve, but the owners at a general meeting may decide to have more members.

The new amendments also propose to introduce Queensland and NSW-style restrictions on proxy voting and owners can hold a maximum of one proxy per 20 lots.

The requirement for obtaining legal advice has been made easier and a simple majority at a general meeting can agree to take legal action at tribunal or magistrate’s court level. Earlier it required a special resolution to be approved by a 75 per cent vote at a general meeting.

Strata Managers

As per the proposal, nobody with criminal records may be appointed as Strata managers. A probable appointee is mandated to reveal any prior relationships with the developers in new schemes, and any benefits they may accrue from service providers.

Strata managers’ contracts in new schemes can only run for the first year and for a maximum of three years thereafter in all schemes.

Tier one schemes with more than 100 lots must mandatorily appoint a strata manager, unless they decide by a 75 per cent vote not to do so. But such a decision which can later be overturned by a simple majority.

Restrictions on Vacation Rental Properties

The proposed changes intend to tighten the legal grip on owners who have put up/listed their properties as a part of holiday letting arrangements or as vacation rental homes. Owners will also be held individually liable for extra charges including repairs which result from the way they use of their apartments.

This will potentially increase the costs for owners who list their properties on websites as vacation rental homes

Watch this space

An Exposure Draft of the Bill has been released for public consultation for the relevant stakeholders to put across their comments and suggestions.

A more detailed summary of the reform proposals can be found through Consumer Affairs Victoria