The Law Handbook 2024

Chapter 6.5: Owners corporations 597 general meeting, any other prescribed documents, and a statement advising that further information on prescribed matters can be obtained by inspection of the owners corporation register (s 151(4), (5)). A certificate must be issued after receiving an application and a fee (s 151(3)). The OC Regulations prescribe different maximum fees depending on the urgency of the request; these fees are indexed annually. The maximum period to issue a certificate is 10 business days. Certificates must be sealed with the owners corporation’s common seal unless the owners corporation has resolved not to use the seal or it is provided by the vendor. A resolution is not required under section 20 of the OC Act. Section 21(2A) allows the sealing of an owners corporation certificate to be witnessed by a registered manager or the chairperson. The Sale of Land Act requires the inclusion of an owners corporation certificate in every section 32 vendor’s statement (s 32F) (where applicable). A certificate is not required where the information within the certificate is provided in the vendor’s statement or if the owners corporation has not in the previous 15 months held an annual general meeting and has not fixed any fees, or held any insurance, thereby rendering it inactive. Due to the owners corporation’s obligation to insure common property, (see ‘Insurance’, below), an owners corporation with common property other than a two-lot plan of subdivision can never be inactive. Note that section 150 of the OC Act makes it mandatory for the owners corporation to provide copies of documents kept in the register upon payment of a reasonable fee. Carrying on a business As members have unlimited liability for any debts of an owners corporation, the owners corporation is not permitted to carry on a business (s 13) but may participate in a registered company that carries on a business (e.g. a gym), as the business entity would be expected to have limited liability. Two-lot subdivisions A subdivision with two lots (e.g. two apartments or two villa units that usually share a common driveway) is exempt from having to comply with many of the sections and divisions of the OC Act. For example, section 7(1) exempts a two-lot owners corporation from compulsory insurance of the common property. Note that this could leave owners personally liable for an injury on common property if public liability insurance on common property is not included in the lot owner’s individual insurance policy. Under section 11 of the Sale of Land Act, a person cannot sell a lot affected by an owners corporation unless the vendor or the owners corporation has a current insurance policy in accordance with the OC Act. This prohibition does not affect a two-lot subdivision. Financial management Tax, interest and fees An owners corporation is considered by the Australian Tax Office to be a company and so must pay tax at the current company rate on all income exceeding $1. Income is money received (e.g. bank interest or rent from leasing common property) but not fees paid by members, which are regarded as mutual funds. The ability to charge interest on outstanding fees is capped at the maximum rate of interest payable under the Penalty Interest Rates Act 1983 (Vic) (s 29). It is necessary to pass a resolution to apply penalty interest and the decision to charge interest must be authorised at a general meeting. A committee has discretion to waive or to reduce penalty interest. Such a decision must be explained by the owners corporation at an annual general meeting. The notice of any fees and charges due and payable by the lot owner must allow at least 28 days for payment and must state the applicable interest rate and details of the dispute resolution process under the rules in respect of disputed fees and charges (s 31). A final notice must be provided thereafter as a prelude to legal action (s 32). Professionals (e.g. estate agents) can hold member’s funds in their statutory trust account. A separate bank account may be opened for each owners corporation or held in a manager’s pooled or trust account (s 27). An owners corporation that has an approved maintenance plan (see ‘Maintenance plans and funds’, below) must keep separate accounts for its maintenance fund (s 33(2)). This does not require a separate bank account.