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Owners corporation law

18 Mar 2014

Owners corporations need to be aware that, before they can commence legal proceedings against any party in any court or tribunal, they must first pass a special resolution at a general meeting.

The exception to this rule is where the owners corporation is either enforcing its rules or seeking to recover levies.

A special resolution requires 75 per cent of the total value of unit entitlements of the building to be passed in favour of the motion, either at a general meeting or through a ballot or “postal vote”.

Developers and builders (who are most often the target of legal proceedings being filed by owners corporations) are aware of this particular law, and are only too happy to sell a 25 per cent stake in buildings to overseas investors in non-English speaking countries.

This makes it difficult for an owners corporation to secure enough votes to file legal proceedings, as it must rely on these overseas investors to sign and return their ballot in favour of the resolution.

It is also possible to obtain a special resolution by passing an interim special resolution, whereby the resolution is passed by 50 per cent of the value of unit entitlements, and where no more than 25 per cent of the building petitions the secretary against the special resolution within 29 days.

The 75 per cent threshold is a curious notion for the Victorian lawmakers to settle on. In New South Wales and Queensland for instance, the identical motion only requires 50 per cent of those that turn up to the meeting or send proxies to vote in favour of the motion.  

It seems that in those states, if over half of the building approves of the decision, then that’s an appropriate policy position to adopt.

As it stands, there is too much risk that a “fractured” building, one where a vocal minority can act to quell a mainly apathetic majority, can deny residents that chance to air legitimate claims in the court.

It is hoped the lawmakers of Victoria shall re-visit this particular issues when it next conducts a review of the legislation.

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