What is an owners corporation, and what do they do?
The major difference between owning a house and owning an apartment is the existence of an owners corporation.
An owners corporation is the entity, created by law when subdivided land is registered as having common property i.e. strata title property. Their function is to carry out tasks required under relevant laws including the maintenance of common property.
Responsibilities of an owners corporation include managing taking out and maintaining insurances, raising fees from owners to meet financial obligations, maintenance of the building’s Essential Safety Measures (ESMs), preparing financial statements, keeping records, and ensuring compliance with relevant legislation and regulations such as the Owners Corporation Act 2006 and Owners Corporation Act 2018.
Legal requirements of the owners corporation
The Owners Corporation Act 2006 and the Owners Corporation Regulations 2018 sets out the legal and financial responsibilities and powers of an owners corporations. These include:
- Managing and administering the common property
- Repairing and maintaining the common property, fixtures and services
- Taking out and maintaining the required insurance
- Raising fees from owners to meet financial obligations
- Preparing financial statements and keeping financial records
- Providing owners corporation certificates when requested
- Keeping an owners corporation register
- Establishing a grievance procedure
- Carrying out any functions and duties under the Owners Corporations Act 2006, the Owners Corporations Regulations 2007
- Adhering to all applicable laws, including planning, building, fire and safety inspections and work, health and safety laws.
Bust the myth
As an owner I don’t need to get involved in the owners corporation. It doesn’t impact me.
By owning a lot, you are a member of the owners corporation. Not only is it a responsibility, but it’s also an opportunity to have direct influence over how things are managed and how levies are spent. This may help save you and other owners money in the long run and help increase the value of your property over time should you choose to sell at a later stage.
What responsibilities do the owners corporation have?
Depending on the size of the property, owners corporations have different levels of responsibilities and duties.
Two-lot subdivisions are exempt from many of the legal requirements placed on larger owners corporations. Whereas properties which have more than 100 lots or collect more than $200,000 in annual fees in a financial year have additional obligations such as:
- Establishing a maintenance plan
- Having financial statements audited every year
- Every five years, obtaining a valuation of all buildings it is required to insure.
An owners corporation operates and can be structured at four levels:
- Consisting of all the lot owners.
- Create a committee, consisting of elected lot owners or their proxies
- Select a delegate of the owners corporation, for example, a manager, chairperson, secretary, lot owner, or employee.
- Select a delegate of the committee. The committee may delegate to a lot owner, a manager or sub-delegate to a member of the committee.
What is a lot owner?
If you buy into a strata title property, as a “lot owner” you become a member of the owners corporation. Just like owning a house, you cannot ‘opt-out’ of the legal, financial and maintenance responsibilities as part of the owners corporation, so it’s best to be aware of what your obligations are.
Organising owners corporation meetings
An owners corporation must hold a meeting of all owners if it receives or pays out money during the financial year. This is called the annual general meeting, or AGM for short.
The annual general meeting is the main opportunity for owners to discuss issues concerning their property and elect the committee and office bearers for the next year.
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.
Appointing an owners corporation manager
Many owners corporations use paid professional managers and providers such as Body Corporate Services (BCS), to assist with finances, insurance, administration, meetings, and maintenance. An owners corporation may appoint a manager to carry out any powers or functions it can delegate (matters that require an ordinary resolution and that do not require a general meeting).The owners corporation usually delegates powers to a manager in a service agreement, contract, or instrument of delegation. This enables the manager to make decisions on behalf of the owners corporation. The appointment must be in writing. All paid owners corporation managers must register with the Business Licensing Authority and have professional indemnity insurance.
Making rules for the owners corporation
All owners corporations should have tailored rules for the control, management, use or enjoyment of common property and lots. The rules cover day-to-day issues such as parking, pets, pools, and noise. If an owners corporation does not make its own rules, a set of model rules outlined in the Owners Corporations Regulations 2018 (Schedule 2) applies.
An owners corporation’s rules must be registered with Land Victoria. If they are not, they will be void and unenforceable and the model rules will apply. All owners and residents must be given a copy of the rules before they move in. Should things go wrong, the owners corporations can apply to the VCAT to enforce rules and the tribunal can impose penalties for breaches of rules.If you’d like to find out more, download our FREE Community Living guide on committee management & meeting management. Or ask a question at StrataFAQ.com.au.