This Q&A about Owners Corporation levy increases in Victoria.
Table of Contents:
- QUESTION: Can an owners corporation increase the annual budget to fund a large upgrade instead of raising a special levy under the benefit principle?
- QUESTION: Can an owners corporation seek reimbursement from a negligent strata manager for legal fees waived due to the strata manager’s levy administration error?
- QUESTION: We received an email about paying a special levy. The levy is required because the owners corporation has cash flow issues. Does the OC need to hold an AGM to get an ordinary resolution before sending a special levy notice?
- QUESTION: Our Strata manager has requested we pay our next due levies a month early. Can they do this?
Question: Can an owners corporation increase the annual budget to fund a large upgrade instead of raising a special levy under the benefit principle?
Our Tier 4 owners corporation refuses to establish a maintenance fund. It now faces a large repair and upgrade expense that is four times the annual fees budget. The committee, controlled by three of six owners, is trying to cover the cost by increasing the annual budget over several years, which has already more than doubled quarterly fees in the past three years. This approach charges all owners equally.
Sections 52 and 53 of the Owners Corporations Act 2006 state that upgrade works costing more than twice the annual budget must be approved by special resolution and funded via a special levy apportioned under the benefit principle. By raising the annual budget instead, the committee appears to be avoiding this requirement and charging owners unfairly. Is the annual budget intended only for ongoing, recurring expenses? Is the committee legally allowed to increase it in this way to fund a one-off major upgrade?
Answer: The response depends upon whether the work is maintenance and repairs, or an upgrade.
Long-term maintenance needs are a frequent ‘point of debate’ within community living. While the Owners Corporations Act 2006 (the Act) lays out the framework, there is a lot of grey areas for many of the circumstances that arise, and this leads to a lack of clarity as to ‘how’ the Act comes into effect. Let’s try and unpack what is happening from a holistic viewpoint.
First off, there are six owners, and as you rightly observed, a quorum is achieved for any decision once three owners vote the same way. Any ordinary resolution of the owners corporation can be made by three in favour. If all six owners vote and there’s a tie of three-a-piece, the chairperson has a casting vote. As this hasn’t been raised in your background, we can set that aside for now.
Secondly, there are two considerations – the approval for the works, and the funding + payment of the works.
Let’s start with the works themselves. The owners corporation has a “repair /upgrade” expense. This is actually a really critical detail – so let’s play each pathway out.
“Repair” – the owners corporation has a fundamental obligation within the Act – see Section 4;
4 Functions of owners corporation
An owners corporation has the following functions—
- to manage and administer the common property;
- to repair and maintain—
- the common property;
- the chattels, fixtures, fittings and services related to the common property or its enjoyment;
- equipment and services for which an easement or right exists for the benefit of the land affected by the owners corporation or which are otherwise for the benefit of all or some of the land affected by the owners corporation;
This is reiterated further in section 46, but as an obligation under the word “must”.
And under section 11 of the Act (and let’s presume also via delegation at the AGM), the committee is delegated the powers and functions of the owners corporation;
11 Management of owners corporation and power to delegate
- If no delegation is in force under subsection (2)(a), the committee of the owners corporation is delegated all powers and functions that may be exercised by the owners corporation, except for—
- those powers and functions set out in subsection (3); and
- those matters which must be determined at a general meeting under section 82.
What are the limitations of subsection 3?
- An owners corporation must not delegate any of the following powers or functions under subsection (2)—
- a power or function that requires a unanimous resolution, a special resolution or a resolution at a general meeting;
- the power of delegation under that subsection.
So, in short, if a special or unanimous resolution is required, then it’s not a committee decision.
Summarising what this all means – if the item is a ‘Repair’, then whatever that item is, can be approved by committee (or by an ordinary resolution at a general meeting of the owners corporation), insofar as the necessary works are concerned.
“Upgrade” – it’s not clearly defined down to the Nth-degree what constitutes an “upgrade”, this is the wording of s53 of the Act;
53 Upgrading of common property
- An owners corporation may by special resolution approve the carrying out of upgrading works for the common property and the levying of fees on lot owners for that purpose.
- (1A) Subject to subsection (1B), the fees must be based on lot liability.
- (1B) Fees for upgrading works carried out wholly or substantially for the benefit of some or one, but not all, of the lots affected by the owners corporation must be levied on the basis that the lot owner of the lot that benefits more pays more.
- In this section upgrading works means building works for the upgrading, renovation or improvement of the common property where—
- the total cost of the works is estimated to be more than twice the total amount of the current annual fees; or
- the works require a planning permit or a building permit before they can be carried out—
but does not include works that are provided for in an approved maintenance plan or works referred to in section 4(b).
So, in short – repair would fall under the authority of an ordinary resolution, and upgrade requires a special resolution. Note especially that s53(2)(b) also explicitly confirms that s4(b) works do not count as an upgrade, and thus do not require a special resolution.
For funding, s23 of the Act spells out that the owners corporation may set annual fees;
23 Owners corporation may levy annual fees
- An owners corporation may set annual fees to cover—
- general administration; and
- maintenance and repairs; and
- insurance; and
- other recurrent obligations of the owners corporation.
If the works in question are a repair, it seems fair and reasonable for the owners corporation to build up the fees to cover the works over a period, if the state of repair facilitates this – i.e. let’s call it, ‘important but non-urgent’. The wording in subsection (d) touches on “other”, so it’s prudent to consider whether this implies that the repairs required must be specifically recurrent in their own right. I would venture ‘no’, are a repairs as a general recurrent category and obligation. That is, it’s expected there will be a recurrent need to fund repairs, and the statutory obligation to undertake those repairs.
Owners corporations accrue annual surpluses frequently. Those funds then enter the general surplus of the owners corporation and, under the broad delegation to the committee (or as otherwise resolved by the owners corporation), may be spent accordingly. If a special levy were to be required, the committee or owners corporation can resolve to raise a levy of an amount up to twice the annual fees before a special resolution is required.
If the works in question are actually an upgrade – and again, this is not well specified or defined in the Act when applied in practical terms, then per s53(1), a special resolution is required for the works approval and any levying required.
Circling back – it’s all in the details. Without knowing the works in question, this is about as far as we can take things. You may wish to consider seeking legal advice from an experienced strata lawyer to address the question of whether it’s s(4)(b) maintenance and repairs, or s(53) upgrading.
Alex McCormick SOCM alex@socm.com.au P: 03 9495 0005
This post appears in Strata News #762.
Question: Can an owners corporation seek reimbursement from a negligent strata manager for legal fees waived due to the strata manager’s levy administration error?
One unit holders was not charged strata levies for the first 12 months of ownership. When discovered by our strata manager, the owner entered into a payment arrangement, which they have maintained. However, the owner failed to pay new levies as they fell due. If the owner continues with the current payment arrangement, it will take at least 18 months to catch up.
The owners corporation commenced legal proceedings to recover the outstanding levies. In response, the owner lodged a complaint with VCAT to dispute legal costs. This situation only occurred because the strata managers failed to issue levy notices when ownership was transferred to the new owner. If the committee agrees to waive the legal costs, can we request reimbursement of the legal fees from the strata manager?
Answer: If there has been a breach of the manager’s duties, it may expose them to liability for loss or damage caused to the OC.
Under Section 31 of the Owners Corporations Act 2006 (Vic), a lot owner must pay any fees and charges set out in a valid fee notice within 28 days of the date of that notice. This requirement applies even where the owner is on a payment plan for prior outstanding levies unless the OC has specifically agreed to defer payment of new fees. In other words, payment arrangements for old debts do not suspend the obligation to pay new levies on time unless there is a separate agreement to that effect.
In this case, the owner has continued to make payments under an agreed plan for the initial 12 months of missed levies but has not paid subsequent levies as they fell due. The OC was, therefore, entitled to pursue recovery action for the new debts.
The question is whether the OC is within its rights to seek reimbursement of legal costs from the strata manager, given that the manager appears to have failed to issue levy notices to the current owner during their first year of ownership.
Under Section 134(1) of the Act, a vendor must notify the OC of the new owner’s name and address within one month of settlement. Similarly, under section 134(2), the new owner also has an obligation to notify the OC of their details within that same timeframe. These provisions are critical in ensuring the OC has accurate records and can issue levy notices to the correct person.
If the new owner failed to comply with their obligation under Section 134(2) by not providing their contact details, the OC or its manager would not have had the necessary information to issue fee notices. In that case, the manager cannot be held to be at fault.
On the other hand, if the OC manager was properly notified of the change in ownership but failed to properly address the levy notices or issue them at all, this may indicate a failure to exercise due care and diligence, as required under Section 122 of the Act. For example, if the manager received the transfer of ownership details via the vendor’s solicitor or a certificate request but failed to update their records, they could be held responsible for the oversight. If there has been a breach of the manager’s duties, it may expose them to liability for loss or damage caused to the OC.
To determine whether reimbursement ought to be pursued, the committee should review:
- Whether and when the manager was notified of the change in ownership;
- Whether the manager had enough information to issue levy notices; and
- Whether the failure to issue those notices caused the current situation and subsequent legal costs.
It should be noted that in fee recovery proceedings, the Tribunal generally takes the view that it is only fair that the lot owner who fails to pay owners corporation fees should contribute a greater amount to the cost of a fee recovery application than the other lot owners.
Fabienne Loncar Moray & Agnew Lawyers E: floncar@moray.com.au P: 03 8687 7319
This post appears in Strata News #745.
Question: We received an email about paying a special levy. The levy is required because the owners corporation has cash flow issues. Does the OC need to hold an AGM to get an ordinary resolution before sending a special levy notice?
Answer: Confirm where the authority came from to raise the levy if you have concerns about the process.
There are several scenarios where a special levy can be raised, and these are covered under Section 24 of the Owners Corporations Act 2006.
In short, an ordinary resolution must be passed by the owners corporation in order to raise a special levy, provided the levy to be raised is not more than twice the total amount of the current annual fees set under Section 23. Ordinary resolutions can be passed by all the owners, either at a General Meeting or by ballot. They can also be passed by a committee, at a meeting or by committee ballot. Most of the time, the committee will make these decisions based on the information they have at hand.
On some occasions, and where necessary, the manager may be authorised to raise a special levy in the event cash falls below a threshold or a specific number. This is not typical but does happen where there is authorisation through the Contract of Appointment or a delegated authority – maybe at the AGM.
It’s important to check these points and confirm where the authority came from to raise the levy if you have concerns about the process.
Joel Chamberlain Horizon Strata Management Group E: joel.chamberlain@horizonstrata.com.au P: 03 9687 7788
This post appears in the February 2025 edition of The VIC Strata Magazine.
Question: Our Strata manager has requested we pay our next due levies a month early. Can they do this?
My Strata Manager just issued our quarterly levy bill but expects levies to be paid one month early. We’ve just paid the last levy payment on 1 April. The next levy payment would normally be due 1 July but our strata manager wants it paid by 1 June so they could make sure it was paid before the end of the financial year. Is this legal?
Answer: The Owners Corporations Act 2006 says that the owners corporation may determine when annual fees are to be paid.
The annual fees are set by the owners corporation who may also determine when annual fees are to be paid. The Owners Corporations Act 2006 says that the owners corporation may determine when annual fees are to be paid. If such a decision has not been made then it might be that the manager has been delegated the power to make such a decision.
It is likely that the annual fees will have been set at the annual general meeting and at the same meeting the timing of the payment of those fees has been determined. If that is the case then the fees ought to be struck according to those resolutions. It is generally accepted practice to split the annual fees into four payments with each one being payable on the first day of each quarter but that is not a legal requirement.
If the owners corporation has not set a date or a change is needed then who decides on timing of striking annual fees will depend on whether there is a committee in place and on the delegations given by the owners corporation or the by the committee. That having been said it would be very unusual for there to be an additional payment needed towards the annual fees required at the end of the year but there might be a good reason for this and I would suggest inquiring with the manager as to why this came about.
So, given the above, it might be legal to make the fees payable on the first of June depending on what resolutions have been made and on what authority they have been struck on that date. Perhaps a more helpful question to ask, rather than “is it legal”, may be “is it reasonable, under the circumstances”, to have struck the fees on that date.
Anton Silove MBCM Strata Specialists E: administration@mbcm.com.au P: 1300 777 276
This post appears in the May 2022 edition of The VIC Strata Magazine.
Have a question about owners corporation levy increases in Victoria or something to add to the article? Leave a comment below.
This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.
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