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  • Samantha Reece

New body corporate rules to be implemented in Victoria

In December 2021, major changes to Victoria’s existing body corporate laws and regulations come into place. One of the most substantial of these is the introduction of a tiered system of responsibilities – and it’s important for all body corporate committees to understand where their property fits, and what their responsibilities are under the new system.

The Acts and regulations

Every state has its own strata property legislation, and in Victoria, the key laws are contained in the Owners Corporation Act 2006 (sometimes simply called the ‘OC Act’). This Act, together with its more detailed regulations, form the bulk of laws relating to how owners corporations (also known as body corporates) are to be established, managed, and held accountable. There is more information on this act here.

The problem with this broad property legislation however, is the fact that strata properties come in different sizes and set-ups, so applying a standard regulation to vastly different properties has often been a problem.

The solution? The Owners Corporations and Other Acts Amendment Act 2021, and in particular, its introduction of a tiered system of categorising properties and obligations.

The bigger the property, the greater the responsibilities

Under the 2021 amendments, which come into effect on 1 December 2021, properties will fall into one of five categories based on the number of lots.

Tier One: More than 100 lots

Tier Two: From 51 to 100 lots

Tier Three: From 10 to 50 lots

Tier Four: From three to nine lots

Tier Five: Two-lot subdivisions

The more units there are in a strata property, the greater the responsibilities and management expectations.

Of the many new rules under the amendments – ranging from disposing of abandoned goods up to strict record keeping requirements and adhering to maintenance plans – five in particular impose different obligations on owners corporations depending on their tier level:

Maintenance plans. All tier one and tier two owners corporations must have a written maintenance plan in place, and follow it. Such plans aren’t required for the three lower tiers, however they can still be very useful, and financially prudent.

Financial records. Tiers one, two and three must keep detailed, properly prepared financial records each year. Tier four only needs to present its financial statements when charging any levies (which would also generally be each year).

In addition to simply having the financial statements prepared, higher tiers have additional obligations. A tier one corporation’s financial statements must be independently audited every year. For tier two, statements just need to be checked by a chartered accountant, while tier three body corporates must simply present them at the AGM.

Committees. Currently, owners corporations can have committees of up to 12 people. Under the new laws, from December 2021 that will be reduced to a maximum of seven for tiers one, two and three (unless owners vote to retain the status quo). However, there is no obligation on tier four or five body corporates to have a committee at all.

Manager. Tier one corporations must appoint a specialist strata manager for the owners corporation unless the owners vote by special resolution (i.e.75%) not to. For other tiers, having a professional owners corporation manager is voluntary.

Valuations. With the exception of tier five, all owners corporations must get a valuation done on property to be insured, to make sure the cover is adequate. These valuations will help to prevent body corporates under-insuring their properties and discovering too late that there is not enough money in the insurance pay-out to cover any restoration required.

A word on insurance

Building and public liability insurance remains compulsory for all owners corporations – regardless of the tier. Under the amendments however, owners corporations can now charge a specific levy to cover strata insurance needs including claims excesses, or changes to insurance policies.

It’s worth remembering that compulsory insurance only covers the common property, building and public liability for personal injury or property damage on common areas. Owners corporations for larger properties, especially those in tiers one, two and three, can consider looking beyond the minimum required by law, and consider cover for other unexpected – and often expensive – events such as machinery breakdown (e.g. lifts and pumps), fraud or theft, committee liability and legal expenses. A full explanation of possible strata insurance can be found at specialist strata insurer Flex Insurance.

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