Reminder of New Owners Corporation requirements: December 1, 2021 Start date
Following the royal assent of Owners Corporations and other laws amending the Law of 2021 (Vic) in February 2021, changes to the Owned Companies Act, 2006 (Vic) (CO Act) will take effect on December 1, 2021.
These changes include the creation of a new five-tier system of owner companies, the expansion of promoters’ obligations with regard to the creation of owner companies and the limitation of the term of appointment of managers and contractual conditions. Some of these changes are shown below.
Company with five owner levels
A new five-level categorization of owner companies will apply based on the number of lots that can be occupied within an owner company. Different obligations will apply depending on the corporate category of owners. The 5 levels include:
- Level 1 – more than 100 habitable lots and is not a service-only OC.
- Level 2 – 51 to 100 habitable lots and is not a service-only OC.
- Level 3 – 10 to 50 habitable lots and is not a service-only OC.
- Level 4 – 3 to 9 habitable lots and is not a service-only OC.
- Level 5 – Allotment of 2 lots, or OC services only (exempt from certain provisions of the OC Law).
The Tier 1 and Tier 2 owner companies will have the most important obligations, including the requirement to have a maintenance plan, to have their financial statements audited and to prepare their financial statements in accordance with Australian standards.
The obligation of a promoter to act honestly, in good faith, with diligence and diligence in the interest of a company of owners applies for 10 years (previously 5 years) following the registration of the plan of subdivision. A developer should not:
- proposing an annual budget for the owners’ corporation that is unreasonable or unsustainable;
- vote on the resolutions of the owners’ corporation concerning defects in or on a building on the subdivision plan;
- designate as private land what would normally be common property or services; Where
- receive any payment from a manager of a company of owners in connection with the contract of appointment of that manager.
At the first owner company meeting, a developer must disclose any relationship with the owner company manager, any immediate or future financial transactions that will predictably arise from the relationship with the owner company manager and all the benefits that may arise for the developer as a result of this relationship.
The developer must also now provide the first meeting of the owners’ company with a maintenance plan, the building maintenance manual, an asset register, copies (or details) of all warranties and copies of all specifications, reports, certificates, permits, notices or orders relating to the plan of subdivision.
Appointment and functions of the director
A developer should not name himself or his partner as the managing owner of the company.
The contract for the appointment of a manager of a company of owners must not:
- exceed 3 years; and
- include certain terms that are prohibited. These are terms that deter the company owners from revoking or terminating the appointment. For example, a right of renewal only exercised by the manager, a requirement that the appointment be revoked only by special or unanimous resolution, automatic renewal, a restriction on the ability of the owner company to withhold consent to a transfer of the appointment contract (other than a requirement not to unreasonably withhold consent).
A manager has new obligations, including the duty to take reasonable steps to ensure that all goods or services are purchased at a competitive price and on terms, not to exert pressure on members in order to influence them. results of the vote or elections, disclose certain commissions or benefits and, like to hold the funds held by the manager on behalf of the company from the owners.
There are many other amendments that deal with day-to-day operational matters, including the financial power of the owners corporation to collect fees, annual reports to the owners corporation, the obligations of committee members and lot owners.