Owners’ Corporation: Things That You Need To Understand

Introduction

Owners corporations (also called strata corporations, corporations, body corporates and strata companies, depending on the state or territory) is the committee legally formed to manage the common area of a property and the shared services of all the members of a lot. A common property is defined in the plan of the subdivision for every lot and can include and may include parts of the land, buildings and airspace that are not defined as lots, roads or reserves. These may consist of gardens, passages, walls, stairwells, pathways, driveways, lifts, foyers and fences.

Before you get into the system, you need to register yourself. So you need to know everything that is coming towards you, so you make an informed decision.

Owners’ corporation: Things you need to know

Whenever you buy a property which is managed by an owners’ corporation, you automatically become a member of the same, and hold legal and financial responsibilities to the same. However, only the owners are the members of the same, not the tenants.

The Owners Corporations Act 2006 in Victoria came into effect  in 2008 which introduced a new framework for the management of multi-occupancy subdivisions and introduced the term ‘Owners Corporation’. When any property – residential, retail, commercial, industrial or mixed use – has been subdivided into two or more lots, an owners’ corporation needs to mandatorily be formed, according to this new law.

Levels of work in an owners’ corporation

Like everything else in this world, owners’ corporations also have layers of hierarchies. Every owners’ corporation operates at four levels:

• The members:

All the lot members come under this title. The members have rights to be involved in all the decision making regarding a lot. They can assert powers, but only for matters that do not require a unanimous or special resolution. They can also overturn an earlier decision made by the owners’ corporation, but they will have to be present in the meetings in order to do so. However, in case they want to reduce responsibilities on them, they can create sub-committees to advise the corporation, although this sub-committee does not have the power of making decisions.

• The committee:

The committee consists of elected lot owners or lot owners’ proxies. Proxies are the people lot owners send to annual general meetings instead of going themselves. It can make decisions of all matters except for the ones everyone decided to be discussed in a general meeting.

• Chairperson and secretary:

The owners’ corporation has to elect a chairperson to lead the committee as well as the corporation, if it wants to be legal. The chairperson leads meetings towards a conclusive decision. An owners corporation must also have a secretary who is responsible for various tasks including managing correspondences and organising these meetings.

• A delegate of the owners’ corporation or of the committee:

This can be anyone from the chairperson, the secretary, a committee member, a lot owner, or an employee of the owners corporation. At some special occasions, the committee may delegate to a lot owner, a manager, or sub delegate to a member of the committee.

A delegate can only make decisions within the limits set by the owners’ corporation, but they cannot overthrow a decision made by the owners’ corporation or the committee.

Responsibilities

The owners’ corporation has a legal responsibility for a number of things:

• Managing and administering the common property.
• Repairing and maintaining the common property, fixtures and services.
• Preparing required insurance for the whole property for the full replacement value.
• Raising fees from the lot owners to meet financial obligations.
• Preparing proper records for everything starting from financial statements, copies of all correspondence received and sent decisions made in every meeting, and minutes of the meetings. The financial records must include receipts consecutively numbered, a statement of deposits and withdrawals for the account of the owner’s corporation, a cash book, and a levy register. All these records should also be preserved for at least a period of 7 years.
• Preparing a strata roll to include the owner’s name and contact details for service of notices, the owner’s agent and the agent’s Australian contact details for service of notices, the strata plan number and the address of the building, the name of the original owner and an Australian address for notices, the name of the managing agent (if there is one) and an Australian address for notices, the total unit entitlements for the scheme and each lot, insurance details, the by-laws for the strata scheme, and the details of any tenants (name and address/email) for service of notices.
• Employment of a strata managing agent and/or a building manager; if required by the corporation.
• Providing owners corporations certificates as per request.
• Keeping an owners corporation register.
• Dealing with grievances, resolving disputes, and enforcing the owners’ corporation rules.
• Keeping up-to-date with all laws and amendments to such laws; including planning, building, fire and safety inspections and work, health and safety laws.

Funding

Every lot owner is charged with a fee to pay for maintenance and repairs. The amount of this contribution is calculated according to the ‘lot entitlement’ accompanying the strata plan. These fees collected are divided into funds – an administrative fund for day-to-day expenses and a capital works fund for major works, maintenance or repairs.

Rules

Every owners’ corporation has to follow certain rules and regulations for a smooth control, management and use of common property and lots. The rules cover day-to-day issues such as safety,  parking and noise. The corporation can decide to abide by the model rules outlined in Owners Corporations Regulations 2007, they can make a complete set of their own rules, or they can simply add some rules of their own to the model list. Either way, the rules are to be registered with the plan of subdivision. If an owners’ corporation decides to create its own rules however, they must register those with Land Use Victoria, otherwise those are not enforceable and only the model rules will apply.

In order to make up new rules and add them to the already existing list of the owners’ corporation rules, they have to pass a special resolution.

Decision making

Decision making by an owners’ corporation goes through three categories or levels.

1. Ordinary resolution: This is used to make decisions in minor cases in the community like fixing certain timings etc, and requires a 50% of votes from members.
2. Special resolution: A special Resolution requires 75% of eligible votes to pass. A Special Resolution is generally needed for deciding on matters such as setting annual fees, extraordinary expenditure, additional fees, leasing or licensing of common property etc. As mentioned earlier, to change or add rules to the already set rules of the owners’ corporation, this is an absolute necessity.
3. Unanimous resolutions: These are where 100% of eligible voters are required are used in scenarios like selling or buying the common property,  a renovation of the boundaries, altering lot entitlement or liability etc.

Conclusion

The entire process can get quite confusing and tedious, especially if you are in a new building and the owners’ corporation is just created. Either way, you would need to register your property and you need to be careful as to whom you are getting into a contract with. It needs to be an organisation which is good at managing the corporation, and dedicated towards building strong and beautiful communities. That is exactly what you find at Strata Plan, which takes care of your every single need with utmost care and responsibility.