Owners’ corporation laws tweaked

Owners’ corporation laws tweaked
Barbara Francis & Rus Littleson

The Victorian Government’s long-awaited amendments to owners’ corporation (OC) laws are now coming into force.

The government has been under pressure for some time to stamp out a number of inequitable practices indulged in by many developers for several years.

With around one in five Victorians being part of an OC, strata management problems have impacted millions of people. Ostensibly to address numerous resident concerns from this growing quarter, the government has enacted a raft of updates aimed at purging the worst excesses of an underregulated property development industry.

Is yours a Tier 1 site?

OC law in Victoria now recognises that different size developments need different rules. Different-sized developments have been stratified into Tiers – not to be confused with COVID exposure site classifications! Most inner-city apartment developments will fall into Tier 1, covering buildings with more than 100 lots, or into Tier 2 which covers those with 51 to 100 lots.

Tier 1 buildings will need to conform to “higher standards of accountability”. VCAT beware The new laws might result in a bit more action down at Victorian Civil and Administrative Tribunal (VCAT) or the Magistrates’ Court. In some situations, an OC is no longer required to pass a special resolution to begin legal proceedings. Under the amendments, OCs will be able to initiate proceedings for claims up to $100,000 simply by passing an ordinary resolution. 

This is surely a reform that will warm the cockles of any lawyer’s heart. Insurance – cui bono? Under section 23A of the new laws, an OC can pass on the cost of increased insurance premiums caused by a wilful act of a lot owner. This could have enormous significance for the short-stay industry where insurers charge a premium for the increased risk associated with transient guests.

Similarly, the insurance excess for a claim for out-of-control party damage to common property can be sheeted home to the culprits rather than being subsidised by all lot owners. Certainly, the 2021 amendment makes it clear that owners and occupiers of lots are considered responsible for their guests’ behaviour.

Is this really cui bono (“who benefits”) law to help residents recover increased costs? In this aspect, the 2021 amendment betrays a spectacular lack of consilience with the short-stay amendment of 2018. These two amendments – enacted three years apart – overlap very untidily. Our fear is that this newly-minted legislative ambiguity could lead to a precedent-setting court case that will only add to the contentment and felicity of lawyers, and not provide any benefit at all to residents.

Proxy farming blocked? Nope.

Long the bane of residents in developer-dominated OCs, bulk proxy farming is being reined in under the new legislation. The Victorian Government says the restriction is intended to prevent the practice whereby an individual gathers as many proxies as possible and “wields an unfair and disproportionate influence”.

This part of the amendment, section 89D, has a massive loophole, being a five per cent limit on the number of lot owners for whom you can hold proxies, rather than a limit on lot entitlements. Under the amendment, a lot owner could hold the proxies of just a handful of owners with large holdings and still “wield an unfair and disproportionate influence”.

This part of the amendment is surprisingly regressive, favouring large landholders over individual lot owners. Track record on reforms: not so good Will the new rules help residents much? We’ll wait and see. The government’s track record in solving issues for apartment dwellers is, sadly, quite poor. For example, the changes introduced in the Owners’ Corporation Amendment (Short-stay Accommodation Bill) introduced in February 2019 were meant to help prevent short-stay apartments being used to host unruly parties.

The meagre changes supposedly permitted VCAT to:

  • Impose fines of up to $1100;
  • Award compensation of up to $2000 for loss of amenity; and
  • Stop apartments that have been used for unruly parties from being rented out as short-stay accommodation for a period of time.

How has that worked out? Not well.

Firstly, our monthly reporting in this column about unruly parties – replete with coverage of drunken abuse, gross behaviour and police call-outs – has continued unabated, with short-stay party chaos defying the OC legislation and COVID restrictions with frightening energy.

Secondly, we keep checking the court records: Not in one instance can we find a case where VCAT made a finding that awarded any of the remedies to any resident. Way past the deadline We are now approaching the anniversary of a major deadline missed by the state government.

In 2018, the government committed to a post-implementation review of the Owners’ Corporation Amendment (Short-stay Accommodation Act). The government promised the review within two years of the commencement date of February 2019. That means the review was due before February 2021.

While we understand that lockdowns and restrictions have interfered with normal government operations, this review is of the utmost importance. The Act as it was enacted has been a dismal failure and an embarrassment to the government. And it needs to be fixed before the pre-pandemic problems flood back. There is an opportunity right now to learn from the disaffected stakeholders and discover how to solve otherwise intractable issues.

This is the written commitment dated August 14, 2018, from the Director of Policy and Corporate Services in Consumer Affairs Victoria:

“Thank you for your email of July 27, 2018, to the Hon Marlene Kairouz, Minister for Consumer Affairs, Gaming and Liquor Regulation, regarding the regulation of short-stay accommodation in Victoria.

The Minister has noted your correspondence and asked Consumer Affairs Victoria (CAV) to respond on her behalf … “As noted in the government’s response to the Parliamentary Inquiry into the Act, a post-implementation review will be undertaken within two years of commencement to examine the effectiveness of the reforms (including issues raised during the Inquiry) and determine if any further legislative changes are required.”

We also asked about this promised review when we met recently with the current Minister for Consumer Affairs, Melissa Horne. It is now nearly three years after the Bill was enacted and we hope sincerely that the new Minister will prioritise this important review. Let’s make 2022 the year of change for the better.

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