Strata reforms criticised as “tinkering around the edges”

Long-awaited reforms to Victoria’s owners’ corporation laws have been criticised by strata advocates as lacking the structural change needed to fix major problems in the state’s growing apartment sector.

While the Victorian Government has backed most recommendations from an expert panel review into the Owners’ Corporations Act 2006, Southbank residents and industry figures say the response leaves significant issues unresolved for high-rise communities.

The review found Victoria’s owners’ corporation (OC) sector had grown significantly since the Act was introduced in 2006 and was no longer being adequately served by the existing regulatory framework.

According to the report, Victoria now has almost 129,000 active OCs, covering more than one million lots, with about one in five Victorians owning and/or living in a home governed by an OC.

That figure is expected to grow as the state pushes to deliver more apartments and medium-density housing.

Drawing on stakeholder submissions, broader consultation and independent research, the expert panel made 51 recommendations across seven terms of reference.

The government response supports 46 recommendations in full, part or principle. Three recommendations remain under review, while two were not supported.

The two recommendations not supported relate to short-stay accommodation: imposing occupancy limits for short-stay lots and aligning the definition of “principal place of residence” in the OC Act and Short Stay Levy Act.

The government has backed a broad package of reforms aimed at strengthening consumer protections, improving accountability and transparency, and modernising the way OCs are regulated.

The changes include a more proactive role for Consumer Affairs Victoria, expanded enforcement powers, new penalties for breaches of the Act, a licensing scheme for OC managers, a central hub for key OC information, and stronger education resources for committees and lot owners.

Other supported reforms include measures to improve sustainability in apartment buildings, better rules around financial hardship, stronger requirements for maintenance planning, and changes to short-stay accommodation notification.

Minister for Consumer Affairs Paul Edbrooke said one in five Victorians lived in a strata property and deserved “a fair go”.

“If you live in an apartment, a unit or a townhouse, Labor has your back,” Mr Edbrooke said.

“If you’re a strata manager taking kickbacks and illegal commissions, you are squarely in our sights.”

But Strata Title Lawyers principal and regular Southbank News columnist Tom Bacon said the government’s response appeared to be “more tinkering around the edges, without structural or substantial reform”.

“Crucially, there’s just not enough detail,” Mr Bacon said.

“They use the terms ‘support in principle’ and ‘support in part’ but where is the actual draft legislation?”

He said the pace of reform remained a concern, particularly given the time already taken to respond to the expert panel’s recommendations.

“If it has taken them six months to read the expert panel report and the 51 recommendations, and work out whether to support in full, support in part, support in principle or not to support at all, then how long will it take to actually draft the legislation itself?” Mr Bacon said.

Strata operator and advocate Alex McCormick was also critical, describing the reform direction as “a very frustrating week in Victorian strata”.

“The change in legislation to follow the review will increase administration, possibly regulation, and accomplish very little else,” Mr McCormick said.

He said protections for owners in genuine financial hardship were positive, but warned that “how hardship is determined will be the trick”.

“Honestly, I think I would have better stomached a set of changes that came down like a tonne of bricks on bad manager behaviour,” he said.

“Why? Because at least then we’d know that government was finally aware that strata exists.”

Mr McCormick said the government had failed to address problems with the way different types of schemes were categorised.

“They couldn’t even fix the tiers so that 100 townhouses and 1000-lot skyscrapers, and 2500 stand-alone houses in estates are classified differently,” he said.

For Southbank, where apartment living is the dominant form of housing, the reforms are expected to be closely watched.

Southbank3006 president David Hamilton said the reforms represented an important step forward for Victoria’s growing strata sector, but agreed several major issues remained unresolved.

“Southbank3006 welcomes the release of the review panel’s report into the Owners’ Corporation Act and applauds the Victorian Government’s endorsement of many of the report’s recommendations, particularly those aimed at improving sustainability in high rise, governance, education and transparency within owners’ corporations.”

He said practical support for sustainability upgrades, including “how-to guides” from the Department of Energy, Environment and Climate Action, would help OC committees negotiate what was often “a complex technical, legal and commercial minefield”.

Mr Hamilton also welcomed the review’s recognition that some owners could experience genuine short-term difficulty paying OC fees, but said hardship reforms needed careful safeguards.

“Most importantly it has asked that investor owners receiving rental should be cut out from any measures introduced to address genuine temporary hardship,” he said.

But he said the review had “missed several significant opportunities for structural reform that strata owners have been seeking for many years”.

He said the most notable omissions were the lack of full regulation of facility and building managers, and the failure to enforce structural separation between real estate agents, OC managers and facility managers, particularly in Tier 1 high-rise buildings in Southbank and Docklands.

“Sorting out the mixed incentives and conflicts that arise should be a priority and not left to chance,” Mr Hamilton said. “Hoping for good behaviour is futile and the existing provisions have been bypassed.”

While the government has supported incorporating building managers into the Act, it has not supported extending that to a licensing or registration system.

Mr Hamilton said the review also failed to properly confront flaws in the way OCs make major decisions.

The government has supported measures to encourage greater participation, including electronic communication, longer voting ballot periods and earlier distribution of meeting papers.

But Mr Hamilton said those changes were unlikely to solve the problem of low engagement in high-rise buildings.

“The problem in Victoria lies in outdated quorum and special resolution laws that prevent important decisions from being made efficiently, even where there is strong support among active participants,” he said.

Southbank3006 argues Victoria should bring its quorum laws into line with NSW, South Australia and Western Australia, where special resolutions are based on owners present in person or represented by proxy.

“At present those who choose not to vote in Victoria distort the outcome for those who actively participate, but in the other states they don’t have that power,” Mr Hamilton said.

He said changing quorum laws would reduce decision-making paralysis and make it easier for OCs to implement building upgrades, rule changes and sustainability initiatives.

“Just giving people more time to ignore meetings and agenda will do little,” he said.

Mr Hamilton was also critical of the government’s decision not to establish a dedicated Strata Commissioner, saying NSW and Queensland offered stronger models for improving governance and sector performance.

The review instead recommended a dedicated function within Consumer Affairs Victoria, which the government supports in principle.

Mr Hamilton said there was also a case for moving responsibility for OC legislation from Consumer Affairs to the Minister for Housing and Building, reflecting the central role apartment living now played in Victoria’s housing system.

“As apartment living continues to grow across Victoria, particularly in Melbourne’s inner-city communities, the government should revisit its response,” Mr Hamilton said.

For more: engage.vic.gov.au/ocactreview •