December may seem a long way off but for strata residents in Victoria, it will see a new dawn for their Owners Corporations as laws passed last month eventually come into effect.
The State government hasn’t come up with a completely new law to replace their 2006 Owners Corporation Act, but they could have, so wide-ranging and profound are the changes that will come in later this year.
And as residents in NSW contemplate what we want our strata laws to say and do, we might look to the south for some inspiration.
And one of the areas under close scrutiny are building manager contracts, who can appoint them, how they can be terminated and how they can’t rip off strata owners with dodgy deals.
Here are some of the highlights where Victoria’s strata laws catch up with NSW and, in some cases, breeze past them.
Five tiers of strata
Victoria strata is now divide into five tiers (not four as we say on this week’s podcast):
- Tier One – More than 100 lots;
- Tier Two – 51 to 100 lots;
- Tier Three – 10 to 50 lots;
- Tier Four – 3 to 9 lots;
- Tier Five – 2 lots.
Some tiers will have specific regulations for them, other tiers will be exempted from general regulations that apply elsewhere. FYI, Tiers two, three and four do not exist in NSW.
Legal proceedings for claims up to $100,000 can now go ahead with a simple majority at a general meeting. Currently, a special resolution is required to issue proceedings which explains why Victoria has far fewer strata cases go to court or the Tribunal.
It’s not because they don’t have the same problems as NSW – it’s because it’s hard to get a super-majority when a lot of owners just aren’t interested
Benefit Principle can apply to Annual Fees
Annual fees (or levies) can be charged to individual lot owners if the owners corporation has incurred additional costs because of the way the lot owners uses the lot.
Watch out for Airbnb hosts being slugged for additional costs for security and cleaning. Owners corporations will also be able to pass on additional insurance costs to lot owners whose use of their lots has required the extra cover.
Audits and Maintenance Plans
Tier one owners corporations must audit their financial statements and tier two owners corporations must have their financial statements reviewed by a CPA or Public accountant. Tier one and two owners corporations must prepare and approve a maintenance plan.
Limits on management contracts
Developers will be restricted in engaging managers and entering into contracts at the first annual general meeting. Contracts can only be entered into for a maximum period of three years.
In NSW it’s one year from the first AGM then three thereafter, but that only applies to strata managers, not building facilities managers.
Developers initial obligations now apply for 10 years rather than five years. Also, initial owners (and their associates) must not be appointed as Owners Corporation managers or vote on defects resolutions. They must not also designate as a private lot what normally would be common property or services or effectively pre-sell the management contract.
Committees must have no more than 7 members unless there is an ordinary resolution which increases that to 12 members (as it is now).
Management contracts must not include restrictive and unfair terms such as:
- Requiring a general meeting or a special resolution to revoke the manager’s appointment;
- allowing the manager the option to renew the contract at their behest;
- automatic renewal of contracts;
- demanding termination notices of longer than 3 months for tier one and tier two owners corporations or one month for all other tiers.
Goods and services
Managers will also be required to take reasonable steps to ensure that any goods or services are procured at competitive prices and on competitive terms.
There are dozens of other aspects of the law changes that will, individually and collectively, make a huge difference to the way strata is run in Victoria.
For a full summary, go to this page posted by Tisher Liner FC Law, from which we shamelessly purloined the above information.