Owners corporations must maintain common areas. The corporation’s powers may be delegated to a manager or chair or secretary. It may lease or licence parts of the common property. Prospective buyers must receive owners corporation certificates. Two-lot subdivisions are exempt from many of the requirements. The subdivision plan decides the boundaries for who pays for repairs. Implied easements restrict what owners may add to the building. Reinstatement and replacement insurance is required for shared services. Annual general meetings must not be more than 15 months apart and matters to cover are set by law. Un-financial lot owners are ineligible to vote. Power of attorney can only be held by a family member of a lot owner. The dispute resolution provisions of the Owners Corporations Act 2006 (Vic) are complex. Complainants may seek conciliation or mediation from Consumer Affairs Victoria. VCAT may determine disputes.


Norman Mermelstein

REIV Accredited Owners Corporation Specialist

Neville Sanders

REIV Accredited Owners Corporation Specialist

Financial management of owners corporations

Last updated

1 July 2021

Tax, interest and fees

An owners corporation is considered to be a company by the Tax Office and 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) and 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 accounts. 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.

Borrowing money in excess of the current annual fees of the owners corporation requires a special resolution (s 25 (1)(b)).

Prescribed owners corporations

Under regulation 6 of the OC Regulations, a ‘prescribed owners corporation’ is:

  1. an owners corporation that levies annual fees in excess of $200 000 in a financial year; or
  2. an owners corporation that comprises more than 100 lots including any accessory lots (e.g. a car park or storage area).

A prescribed owners corporation must, after the end of each financial year, have its financial statements audited (s 35(2) OC Act). An owners corporation may apply in writing to the Director of Consumer Affairs Victoria for an exemption from the requirements of this subsection (s 35(6)).

A prescribed owners corporation must prepare a maintenance plan setting out certain requirements, such as major capital items anticipated to require repair or maintenance within the next 10 years (s 37(1)(a)) and the estimated cost (s 37(1)(d)). The prescribed items of a capital nature are common property structures, including the roof, stairways, balustrades and window frames; common property services, such as shared water, gas and sewerage pipes, pumps, drains, electrical and telephone infrastructure; and common property assets, such as fences, pools and water tanks (r 7). It is significant to note that while a prescribed owners corporation must prepare a maintenance plan under section 36(1), there is no compulsion to approve the plan under section 38. However, a failure to implement a maintenance plan might be seen as a failure to act honestly and in good faith or as a failure to exercise due care and diligence (s 5).

Maintenance plans and funds

A maintenance plan is discretionary for a non-prescribed owners corporation (s 36(2) OC Act). 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.

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