Question: Our building needs repairs urgently, and the committee wants to carry out improvements while the scaffolding is up. Is this a smart way to manage costs?
We own a unit in a run-down 12-lot building that needs a $220,000 roof replacement. The job will involve scaffolding and asbestos removal. Committee members are keen to include additional upgrades at the same time: balcony upgrades and painting the entire building. Both are needed, but they will add to the cost.
As chairperson of the owners corporation, I am putting together a proposal and special resolution to issue to all owners for approval. I plan to offer two options: roof replacement only, or roof replacement plus upgrades. The roof replacement alone will double our quarterly levy, so we’re concerned owners won’t vote for the extras.
Are owners required to approve the roof replacement, given it is needed for safety and insurance reasons, while the upgrades are non-compulsory? Is giving owners two separate options the best way to approach this?
Answer: Essential repairs to common property are a statutory obligation. Upgrades require a separate special resolution and are best kept as a separate motion to avoid confusion and jeopardising the essential works.
It’s always complicated when a big project is on the horizon. It can be a bit like looking for a new car. We have to buy the basics, the actual car. But hang on, we can upgrade the seats. Get a tow-ball. Maybe let’s get some roof racks, too. Hang on, tell me more about the drop-down screen for the back seat…
…and it plays out the same way, often with the best intentions, when big projects are undertaken in the strata space. “We’re doing XYZ, what else should we consider while it’s happening?”
So let’s unpack what needs to be done, and therefore should be prioritised, versus what might undo any progress at all if the buffet of options starts to turn people away.
The owners corporation has the statutory powers, and also the obligation, to repair and maintain the common property. This is referenced in the Owners Corporations Act 2006 (the Act) under 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;
And also section 46:
46 Owners corporation to repair and maintain common property
An owners corporation must repair and maintain—
- the common property; and
- the chattels, fixtures, fittings and services related to the common property or its enjoyment.
Whereby the common property must be repaired via replacement — degraded roof, rotting fascia, etc. — the owners corporation is empowered to do so. There ARE restrictions within the Act that prevent a repair/replacement from turning into a gold-plated upgrade. An example might be replacing a standard pine fence with a brick fence or colourbond alternative, etc. would require a special resolution per section 53.
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.
- Subject to subsection (1B), the fees must be based on lot liability.
- 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—
For context, section 53 is a complex piece of the Act and at times requires legal advice to properly apply and interpret, particularly when it comes to works that may cross over onto private property, as a balcony upgrade has the potential to do. For the purposes of addressing the query you’ve raised, there are several considerations.
For the roof and fascia, an ordinary resolution will be required. Similarly, for the loan, an ordinary resolution will be required if the amount is no more than the owners corporation’s annual budget. Each of these — the works approval, and entering into the loan — will require its own resolution, which presumably your manager will be able to provide you with.
If the loan amount exceeds the annual budget of the owners corporation, then a special resolution will be required per section 25:
25 Power to borrow money
- An owners corporation may borrow money—
- by ordinary resolution, if the amount borrowed does not exceed the amount of the current annual fees of the owners corporation set under section 23; or
- by special resolution in any other case.
- An owners corporation may repay money borrowed.
Involving the upgrades is more complicated and may require legal advice. The painting, if it is an upgrade rather than just a necessary repainting under sections 4b and 46, may require a special resolution on its own account. Similarly, it’s highly likely the balconies involve private property (although that would require a review of the Plan of Subdivision first), and would therefore either need to be privately funded, or if the owners corporation is to pay for it, a special resolution under section 12 of the Act:
12 Provision of services to members and occupiers
- An owners corporation, by special resolution, may decide—
- to provide a service to lot owners or occupiers of lots or the public; or
- to enter into agreements for the provision of services to lot owners or occupiers of lots.
- An owners corporation may require a lot owner or occupier to whom a service has been provided to pay the cost of providing the service to the lot owner or occupier.
Without further details, it’s tricky to provide specific guidance in this respect. In terms of practicality, I suggest that getting the roof and fascia done should be your priority for compliance with the Act, insurance purposes and obligations, and to generally improve, or at least not damage, the value of your assets. Generally speaking, if a proposal is unlikely to succeed or has a chance of success, it is advisable not to put it to a vote. There should be a clear cost-benefit basis for doing so, and if the owners corporation doesn’t have the funds or appetite for pursuing “optional” upgrades at this time, it would be better not to make the proposed resolutions for the roof works appear more complex or confusing than they need to be and therefore risk them not getting approved due to confusion.
In having the “deflating expectations” conversations with those wishing to pursue the balcony and potential upgrade path, it may be worth getting a preliminary legal view on whether the sought-after upgrades relate to private property. If they do, it may be something that can be pursued directly by the owners, by obtaining owners corporation approval for the renovation of the private lots and taking advantage of the scaffolding being in place as a convenience, perhaps even contributing to its cost.
This post appears in Strata News #791.
Alex McCormick SOCM alex@socm.com.au P: 03 9495 0005
