week 3 - Owners corporation Flashcards
(31 cards)
what is an owners coporation
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
how is an owners corporation created
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
define plan of subdivsion
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.
define a lot
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
define common property
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
define strata title
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.
define prescribed owners coporations
Owners corporations that have more than 100 lots or collect more than $200,000 in annual fees in any financial year
how are decisions made
- Annual general meetings (a vote by all lot owners)
- By committee (with restricted delegated powers)
- By manager (further restricted delegated powers)
explain plan of subdivision
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)
plan of subdivision identifies
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
explain lot entitlement
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.
EXPLAIN lot liability
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.
explain special fees and levies
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.
setting lot liability and lot entitlement
The SCA recommends that in determining the value, four tests are satisfied:
- 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.
- 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.
- Set based on Occupancy where the number of occupants has greater bearing that area.eg. sustainable measures, common utilities.
- Set based on use (area x factor). Eg. Develop a factor applied to area for restaurants, office, retail, heritage, sustainability etc
why is an OC certificate required
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.
explain the risk
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
explain OC insurance
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
explain model rules
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
what do rules typically cover
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
duties of an OC manager
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
financial reporting task
- 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
maintenance tasks
- 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
dispute resolutions procedures
This process has three steps:
• Internal dispute resolution
• Conciliation through Consumer Affairs Victoria
• Applications to VCAT (Victorian Civil and
Administrative Tribunal)
type of resloutions
(2) Unanimous Resolution
(3) Special Resolution
(4) Ordinary Resolution
Solution to Apathy
(3) Interim Resolution
(1) Special
(2) Ordinary
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