week 3 - Owners corporation

Question 1

what is an owners coporation

Answer 1

o Is created by statute when there are multiple owners of the property
o Has specific functions and duties
o Core duty is management of the common property and the shared services

 An Owners Corporation is automatically created when a Plan of Subdivision containing Common Property is registered at Land Victoria.
 Common Property may include, for example: Gardens, Passages, Walls, Pathways, Driveways, Lifts, Foyers and Fences. It can also include sewer pipes and other utilities services

Question 2

how is an owners corporation created

Answer 2

o For multi-owned developments, Developers are responsible for:
o Formulating the rules (bylaws) of the scheme
o Engaging managers (Owners Corporation Manager, Caretaker)
o Preparing the first budget and determining the Owners contributions
o Obtaining insurance
o Making all decisions until the first AGM (annual general meeting)
o Holding the first AGM

Question 3

define plan of subdivsion

Answer 3

Depicts the break-up of a piece of land. It is registered at Land Victoria and an owners corporation is automatically created if the plan creates common property.

Question 4

define a lot

Answer 4

Land and buildings on a plan of subdivision that can be separately owned and sold. May include accessory lots such as car spaces, storage bays, and storerooms

Question 5

define common property

Answer 5

Includes any parts of the land and buildings that are not individually owned lots. May
include gardens, corridors, walls, pathways, driveways, stairs, lifts, foyers and fences. It is collectively owned by the lot owners as tenants-in-common

Question 6

define strata title

Answer 6

Each unit in a block or multi-unit complex is individually owned.
In addition, all the owners in the building or complex have shared ownership of the common property, which is managed by an owners corporation.

Question 7

define prescribed owners coporations

Answer 7

Owners corporations that have more than 100 lots or collect more than $200,000 in annual fees in any financial year

Question 8

how are decisions made

Answer 8

1. Annual general meetings (a vote by all lot owners)
2. By committee (with restricted delegated powers)
3. By manager (further restricted delegated powers)

Question 9

explain plan of subdivision

Answer 9

o The plan of subdivision is the key to understanding an Owners Corporation.
o It shows the parcels of land that can be sold separately.
o These are called ‘lots’. Lot owners are the members of the Owners Corporation for the property.
o More than one Owners Corporation can be created in a subdivision of land
or buildings.

 The Plan of Subdivision is the Owners Corporation Key Document - It sets out Where, What, Who and How?
 Each Plan is different and needs to be fully understood to be able to correctly apply the Act, the Regulations and the Rules.
 A good Plan of Subdivision will show you what is actually built on each lot. It should show you the outline of each house or unit and it should also advise where the private property stops and the common property starts
 Identifies the upper and lower boundaries of each lot
 Identifies any easements affecting the land
 This aids in defining the responsibility and liability for maintenance (e.g. gardening)

Question 10

plan of subdivision identifies

Answer 10

The Plan identifies the following –
 The land affected by the owners corporation – lots & common property
 If the OC is “Unlimited” or “Limited”
 The Address for service of notices
 If there are any amendments to the Standard or Model Rules.
 The “Liabilities & Entitlements” for each Lot.
 The Plan of Subdivision sets out what is called “Lot Entitlement” and “Lot Liability” of each lot.
 It also shows the total lot entitlement and lot liability for all the lots on the Plan of Subdivision – creates major differences in what people pay e.g. based on size

Question 11

explain lot entitlement

Answer 11

reflects the lot owners share of ownership in the Owners Corporation’s assets (which primarily comprise the common property). Lot entitlement also determines voting rights at Annual General Meetings and other meetings which may be called.

Question 12

EXPLAIN lot liability

Answer 12

is the proportion of the Owners Corporation expenses that are to be carried by any particular lot. It is effectively the limit of a lot owners liability for the liabilities of the Owners Corporation.

Question 13

explain special fees and levies

Answer 13

or charges to cover extraordinary or unexpected expenditure;
for example, to urgently repair the building e.g. painting.
o If the amount of the proposed special fees is more than double the
amount of the OC annual fees, it must be approved by a special resolution.
o A special resolution requires support from 75 per cent of all lot owners or lot entitlements.

Question 14

setting lot liability and lot entitlement

Answer 14

 The SCA recommends that in determining the value, four tests are satisfied:

1. Set as Equal unless it can be demonstrated that it is just and equitable for there to be inequality. Eg. if all the same type of residential apartment, otherwise choose 2,3, or 4 below.
2. Set based on Area unless it can be demonstrated that type of use has bearing. eg., All residential where the type of lot is much larger than the others or is commercial.
3. Set based on Occupancy where the number of occupants has greater bearing that area.eg. sustainable measures, common utilities.
4. Set based on use (area x factor). Eg. Develop a factor applied to area for restaurants, office, retail, heritage, sustainability etc

Question 15

why is an OC certificate required

Answer 15

o The purpose of the Owners Corporation Certificate is to enhance the transparency of Owners Corporations – to disclose matters such as rules, fees, levies, liabilities and activities affecting an Owners Corporation.
o It must include information such as the current quarterly or annual fees, the date fees have been paid to, any special levies or fees which have been raised and when they are payable, details of insurance coverage, as well as a host of other information.

Question 16

explain the risk

Answer 16

 The sale / purchase can fall over
 Under Sub-s32(5) of the Sale of Land Act 1962 (Vic) - not having an Owners Corporation Certificate is one of the very few legal reasons which entitle a prospective purchaser to walk away from a settlement right up to the very last minute.
 Where a vendor—
(a) supplies false information to the purchaser in the statements or certificates required to be given by this section; or
(b) fails to supply all the information required to be supplied in the statements or certificates required to be given by this section—
the purchaser may rescind any contract for the sale of the land which has been entered into on the basis of that information at any time before he accepts title and becomes

Question 17

explain OC insurance

Answer 17

 The only insurance that owners require is to cover contents and legal liability inside their unit – this is called LANDLORD’S INSURANCE.
 Owners must not insure their own unit (otherwise it will be double insured).
There are inherent dangers in having multiple insurance policies

Question 18

explain model rules

Answer 18

 A default set of rules applies if the Owners Corporation does not
make its own rules.
 These default rules are called Model Rules, and they are outlined in the Owners Corporation Regulations (2007).
 All lot owners and tenants must be given a copy of the Rules before they move in
S139 Model rules
(1) The regulations may prescribe model rules in relation to any matter in respect of which rules can be made.
(2) If the owners corporation does not make any rules or revokes all of its rules, then the model rules apply to it.
(3) If the model rules provide for a matter and the rules of the owners corporation do not provide for that matter, the model rules relating to that matter are deemed to be included in the rules of the owners corporation

Question 19

what do rules typically cover

Answer 19

Typically the Rules cover most day-to-day issues like parking, noise and pets, but they also relate to a much wider range of things such as:
o	Health, Safety and Security
o	Committees and Sub Committees
o	Management and Administration
o	Use of Common Property
o	Garbage Disposal
o	Use of and Works to Lots
o	Behaviour of people
o	Dispute Resolution

Question 20

duties of an OC manager

Answer 20

o Collect fees from lot owners
o Hold all money on behalf of an owners corporation on trust
o Keep financial records and prepare financial statements
o Lodge an annual statement with the BLA
o Report to the owners corporation at each AGM (annual general meeting)
o Maintain insurance
o Repair and maintain the common property, fixtures and services
o Handle grievances

Question 21

financial reporting task

Answer 21

• Responsible for preparing financial statements for the owners
• corporation that:
• Include all income, expenditure, assets and liabilities
• Separate maintenance fund records and accounts
• Explain all financial transactions and can be properly audited

Question 22

maintenance tasks

Answer 22

• Maintenance plan must cover major capital items for
• repair and replacement over the next 10 years and include:
• The present condition of those items
• When the items or components will need to be repaired or replaced
• The estimated cost of the repair and replacement of those items or components
• The expected life of those items or components once repaired or replaced

Question 23

dispute resolutions procedures

Answer 23

This process has three steps:
• Internal dispute resolution
• Conciliation through Consumer Affairs Victoria
• Applications to VCAT (Victorian Civil and
Administrative Tribunal)

Question 24

type of resloutions

Answer 24

(2) Unanimous Resolution
(3) Special Resolution
(4) Ordinary Resolution
Solution to Apathy
(3) Interim Resolution
(1) Special
(2) Ordinary

read slides - gracie boffa

Question 25

Describe, in detail, how the Owners Corporations Act 2006 defines the term “Common Property”.

Why is it important we understand the meaning of this definition?

Answer 25

‘Common property” means land shown as common property on a plan of subdivision or a plan of strata or cluster subdivision

o Common Property includes any parts of the land, buildings and airspace that are not lots on the plan of subdivision.

It may include gardens, passages, walls, pathways, driveways, stairs, lifts, foyers and fences.

o The common property is collectively owned by the lot owners as ‘tenants-in-common’.

o Floor coverings and fixtures within a lot are usually the property of the lot owner.

Question 26

What is an Annual General Meeting? When and why are they held?

Answer 26

1) The time between the Annual General Meetings for an Owners Corporation must not exceed 15 months
2) These must be sent to all lot owners at least 14 days before the meeting. (New Australia Post delivery times means we must add a further week’s notice  21 days minimum.)

Why?

1) Assets & Liabilities of the owners corporation at the end of the past financial year income and expenditure of the owners corporation during the past financial year
2) Maintenance works and the maintenance plan
3) A report from the committee
4) A report from the owners corporation manager
5) Discuss any complaints and emerging issues

Question 27

Explain the difference between levy fees (annual fee) and extraordinary fees (special fee).
Why is it important that levy fees are calculated and revised each year?

Answer 27

Levy Fee covers for General administration, lift maintenance and general maintenance, insurance and other ongoing costs.
Lot owners are charged their share of annual fees according to their lot liability.

Extraordinary Special fees cover Extraordinary or unexpected expenditure such as to urgently repair the building, lift replacement or to cover the cost of legal action against the OC.

Fees must be set and revised each year – At least in line with inflation - to cover rising costs of maintenance and insurance and recurrent costs.
Must have an annual budget so need to cover actual & anticipated costs.
Hold funds in a maintenance funds.

Question 28

With reference to the regulations, what is a “Prescribed Corporation”?
Also, if a maintenance plan is to be prepared, what must it contain

Answer 28

From Definitions in the Act:
Owners corporation means a body corporate which is incorporated by registration of a plan of subdivision or a plan of strata or cluster subdivision;
Prescribed owners corporation means an owners corporation of a class prescribed by the regulations;
Regulation 5 Prescribed owners corporations
For the purposes of the definition of prescribed owners corporation in section 3 of the Act, the following classes are prescribed—
(a) an owners corporation that levies annual fees in excess of $200 000 in a financial year;
(b) an owners corporation that consists of more than 100 lots.

Question 29

What must a maintenance plan contain? (cont.)

Answer 29

In this section— Major capital item includes—

(a) a lift; or
(b) an air conditioning plant; or
(c) a heating plant; or
(d) an item of a prescribed class

Question 30

Schedule 2 of the Owners Corporations Regulations 2007 prescribes the “Model Rules”.
With reference to Sec 139 of the Act and the regulations explain when these rules apply and summarise what they contain.
Why do you think it is important have such rules?

Answer 30

• These rules are necessary for quiet enjoyment by occupants and to provide a basis of behaviour that everyone understands.
• They can be modified, that is, OCs can make their own rules and register them, but in the absence of that the Model Rules apply to all Body Corporations.

Include:
(p10-14)
1 Health, safety and security
1.1 Health, safety and security of lot owners, occupiers of lots and others
1.2 Storage of flammable liquids and other dangerous substances and materials
1.3 Waste disposal
2 Management and administration
2.1 Metering of services and apportionment of costs of services
3 Use of common property
3.1 Use of common property
3.2 Vehicles and parking on common property
3.3 Damage to common property
4 Lots
4.1 Change of use of lots
5 Behaviour of persons
5.1 Behaviour of owners, occupiers and invitees on common property
5.2 Noise and other nuisance

Question 31

What is an Owners Corporation Certificate? (hint read the Act & Regulations)

Answer 31

o A document that must be provided to new lot owners and prospective purchasers.
Must be included in the Section 32 that accompanies the Vendors statements for selling a property.
Sec 151 of the 2006 Act has details of content or Owners Corp Regulation 2007 (10) and (11) states what must be included in the certificate