The Law Handbook 2024

594 Section 6: Houses, communities and the road lot entitlement and lot liability (previously, only the alteration of lot entitlement or lot liabillity was considered). The new criteria are: • Lot entitlement must be allocated on the basis of the market value of each lot and what proportion that value is of the total value of all the lots. • Lot liability must be allocated equally between the lots unless there is a substantial difference in size between the lots, or there are differences that have a bearing on the consumption or use of common utilities or the number of bedrooms in the lots. A licensed surveyor must be engaged to set the initial allocations. The new criteria should curb developers from implementing unfair schedules. The alteration of lot entitlement and lot liability requires a unanimous resolution that can be difficult to obtain. In the absence of a unanimous resolution, an application can be made to the Victorian Civil and Administrative Tribunal ( VCAT ) if owners wish to challenge an allocation. The requirements for an exemption from the obligation to have a unanimous resolution are set out in section 34D of the Subdivision Act. This section covers issues such as when it is impractical to obtain a member’s vote, or when more than 50 per cent of the voting rights support the ballot and the purpose is likely to bring economic or social benefits to the subdivision as a whole that are greater than any disadvantage to the members who did not consent. Note that the same exercise must be undertaken for each owners corporation where there are multiple owners corporations affecting a lot. The owners for the time being, and any buyer in possession of a lot, are liable to pay any outstanding fees, charges, contributions or amounts owing to the owners corporation in respect of that lot (s 28(1)). For this reason, it is important to ensure that any arrears are adjusted and paid at settlement or the new owner will become responsible. Under section 28(2) of the OC Act, a member of an owners corporation is not liable to pay or contri­ bute to funds of an owners corporation exceeding the member’s lot liability. The section prevents the making of any resolution or rule that imposes a fine or administration fee or charge to an individual lot owner. It does not apply in circumstances where repairs, maintenance or other works are undertaken wholly or substantially for the benefit of some, or one, but not all of the lots affected by the owners corporation (s 24(2A)) and that may include special levies for extraordinary items of expenditure. If an owners corporation incurs additional costs arising from the particular use of a lot by the lot owner, it may levy additional annual fees on that lot owner (s 24(2B)). For example, an increased insurance premium due to the risks associated with short-stay residential accommodation. Functions and powers Functions An owners corporation is a statutory body that can sue and be sued. Its main functions include: • repairing and maintaining common property, fixtures and services; • ensuring that each owner keeps the externals of their lot in a state of good and serviceable repair; • financial management and administration, establishing budgets and special levies, and imposing interest; • creating and enforcing rules and dispute resolution procedures; • maintaining necessary insurance; • complying with governing legislation; • undertaking proceedings to recover debts; • providing owners corporations certificates; • using approved forms; • holding meetings; • maintaining an owners corporation register; and • record keeping. In carrying out its functions and powers, an owners corporation, the initial lot owner, a proxy, the committee and the manager must all act honestly and in good faith and must exercise due care and diligence (ss 5, 68, 89C, 117, 122). This places an onus on developers to fix building defects and justify that the extent and cost of long-term contracts is in the best interests of all owners. Delegation The OC Act (s 11) allows the owners corporation to formally delegate any of its powers and functions to the committee, the manager, a lot owner, chairperson, secretary or an employee of the owners corporation. The delegation of powers may be made by resolution or by instrument of delegation and must be made at a general meeting. A committee may