04 Oct Changes to Owners Corporations Act 2006 – Tiers
Tiers
A tiered classification of owners corporations has been introduced which is based on the number of occupiable lots affected by it.
Classification of owners corporations into tiers has been introduced replacing the existing prescribed and other owners corporations. There are obligations imposed by classification in the appropriate tier.
The tiers are:
Tier 1: more than 100 occupiable lots
Tier 2: 51 and 100 occupiable lots
Tier 3: 10 and 50 occupiable lots
Tier 4: 3 and 9 occupiable lots
Tier 5: 2 occupiable lots or a services only owners corporation
An occupiable lot is a lot intended for habitation and excludes lots not usually occupied such as car parks, storage cages or lockers or other lot not normally occupied.
If an owners corporation consists of less than 10 occupier lots and more than 50 non-occupiable lots, the applicable tier is determined by the number of non-occupiable lots rather than the number of occupiable lots.
For an owners corporation consisting of all non-occupiable lots, such as a car park, the tier is based on the total number of lot lots.
A services only owners corporation is one which does not have any land or building designated as common property and:
- the initial owner of the subdivision arranged for the installation of common meters; or
- there are common unmetered supplies for one or more utilities.
There are obligation imposed on particular tiers regarding:
- preparation financial statements to comply with Australian Accounting Standards (AAS);
- audit of financial statements;
- review of financial statements;
- adoption of statutory maintenance plan
A summary is:
Tier 1 – More than 100 Occupiable Lots
Financial statements
Compliance with AAS: Required
Audit: Required
Review: Optional
Adoption of maintenance plan
Mandatory
Tier 2 – 51 and 100 Occupiable Lots
Financial statements
Compliance with AAS: Required
Audit: Optional
Review: Optional
Adoption of maintenance plan
Mandatory
Tier 3 – 10 and 50 Occupiable Lots
Financial statements
Compliance with AAS: Required
Audit: Optional
Review: Optional
Adoption of maintenance plan
Optional
Tier 4 – 3 and 9 Occupiable Lots
Financial statements
Compliance with AAS: Not required
Audit: Optional
Review: Optional
Adoption of maintenance plan
Optional
Tier 5 – 2 Occupiable Lots or a services only owners corporation
Financial statements
Compliance with AAS: Not required
Audit: Optional
Review: Optional
Adoption of maintenance plan
Optional
Changes to the Owners Corporations Act 2006 (From 1 December 2021):
The Owners Corporations Act 2006 is amended with the changes taking effect from 1 December 2021 (some of the changes include the following.Creating five tiers of owners corporations in place of the existing prescribed owners corporation):
- Tier 1 owners corporations are required to have an audit undertaken.
- Tier 2 owners corporation need to have review of their financial statements undertaken.
- Allowing an owners corporation to levy fees on a particular member for:
- damage to common property caused by a lot owner or a lessee if it is not covered by insurance or is less than the excess;
- an increase in insurance premiums caused by a wilful culpable or negligent act of lot owner, lessee or guest of the owner or lessee;
- for an insurance claim solely in respect of one lot the lot owner is responsible for the excess.
- Tiers 1 and 2 are required to implement a maintenance plan for common property.
- For meetings and ballots
- quorum is based on the number of lots;
- altering how an interim special resolution may be passed;
- for an urgent matter, allowing a ballot to close earlier than 14 days.
- Any rain water falling on common property is part of common property and the owners corporation is the occupier of the common property for the purposes of the Water Act 1986.
- Allowing a manager to pass interim resolutions at a general meeting if no members or proxies attend the meeting.
- Committees:
- requiring an owners corporation of 10 or more lots to appoint a committee;
- the default maximum committee size of (7) seven members but may be up to 12 members if approved by ordinary resolution;
- subcommittee members have the same duties as a committee members.
- The power to dispose of goods abandoned on common property and the process to be followed.
- Insurance:
- public liability cover to be a minimum of $20 million (currently $10 million);
- requiring a valuation of all buildings insured by the owners corporation at least every five years;
- specifying changes to insurance obligations if there are multiple separate buildings in the development.
- Allowing litigation to be commenced without a special resolution if the amount claimed is within the civil jurisdiction of the Magistrates’ Court.
- Allowing VCAT to make orders:
- to authorise a lot owner or owners to commence, prosecute, defend or discontinue a proceeding on behalf of owners corporations;
- requiring a lot owner to pay reasonable costs of the owners corporation in debt recovery proceedings.
- An owners corporation is no longer required to have a common seal.