The Law Handbook 2024

598 Section 6: Houses, communities and the road Borrowing money in excess of the current annual fees of the owners corporation requires a special resolution (s 25 (1)(b)). Reclassification of owners corporations Owners corporations are classified into five tiers: • tier 1 : more than 100 occupiable lots; • tier 2 : 51 to 100 occupiable lots; • tier 3 : 10 to 50 occupiable lots; • tier 4 : three to nine occupiable lots; and • tier 5 : a two-lot or a ‘services only’ owners corporation, which has no occupiable lots but contains services on common property (e.g. shared water, gas and sewerage pipes, pumps, drains, electrical and telecommunications infrastructure, and common property assets such as fences, pools, and water tanks). A car park bay or storage cage is not an occupiable lot notwithstanding that it may have a separate title. A tier 1 owners corporation must have its financial statements audited, whereas a tier 2 owners corporation’s accounts must be reviewed by an independent authorised accountant. Neither an audit or review is required for a tier 3, 4 or 5 owners corporation; it is optional. Maintenance plans and funds Only tier 1 and tier 2 owners corporations must prepare a maintenance plan for common property. Such plans may be amended by ordinary resolution. Any levies that are struck must be adequate to fund the plan. A maintenance plan is discretionary for tier 3, 4 and 5 owners corporations (s 36(2)). Once approved, an owners corporation must establish a maintenance fund and pay into that fund any part of the annual fees levied for the purposes of the maintenance plan (s 42). An approved maintenance fund (ss 40, 41) is equivalent to what is commonly known as a ‘sinking fund’ or ‘reserve fund’. Subject to any prior conditions, money may be paid out of the maintenance fund at any time in accordance with the approved maintenance plan (s 43). Money may also be paid out of the maintenance fund if the owners corporation, by special resolution, approves the payment (s 44) or without a resolution of members for urgent matters described in section 45(2). A maintenance plan is approved by ordinary resolution of the owners corporation (s 38(1)) at a general meeting, or by the committee. Implementation of the plan must be reported to the lot owners as soon as possible. Fees designated for the purpose of an approved maintenance plan must be paid into a maintenance fund in the name of the owners corporation, and the amount must be adequate to fund the plan (s 42). The plan must be provided at the first meeting of the owners corporation (s 67(d)). Repairs and maintenance Requirements of both parties The OC Act (ss 46, 47) requires an owners corporation to repair and maintain the common property and common services. The Act (s 129) also requires each owner to properly maintain the externally visible part of their private lot and any service that serves that lot exclusively. For example, in the event of a burst water supply pipe, the owners corporation must maintain the main line that serves all lots, but the lot owner must maintain the branch line that serves that lot exclusively, irrespective of whether the branch line is located on common property or private property. The location of the water meter is not relevant to the issue of liability. It is important to refer to the plan of subdivision to determine responsibility for maintenance. The location of boundaries is set out on the plan. Note that in all plans of strata subdivision the boundary between a lot and common property, or a lot and another lot, is the median of the wall unless the plan indicates otherwise (reg 31 SRR Regulations). In later plans of subdivision, the boundary between a common area and an individual lot is often the building line. The OC Act (ss 52, 53) enables the owners corporation to make significant alterations to common property by way of capital works. A special resolution of the owners corporation is required where: a the total cost of the works is estimated to be more than twice the total amount of the current annual fees; or b the works require a planning permit or a building permit before they can be carried out but does not