What are the functions and powers of an Owners Corporation? How and when should these powers be exercised? Andre Ong, Accredited Specialist (Property Law) looks at two common situations which illustrate the role of an OC.

Introduction

When buying or selling an apartment or a unit, the topic of the Owners Corporation (OC) always comes up. Lately, there has been more and more discussion around whether an OC can impact the sale of a property or even influence the sale.

Below are some examples of recent situations that our Property Law team has encountered.

Situation 1

The Vendor of an apartment sought advice as to the extent of disclosure that an OC was required to make in the Certificate pursuant to Section 151 (“Certificate”) of the Owners Corporation Act 2006 (“Act”) attached to the Section 32 Statement. The Certificate contained issues about water ingress in the building and suggested that the origin of the water leak was from the client’s apartment. The Vendor was concerned that as there was no conclusive proof that the water ingress originated from their apartment, the disclosure by the OC was premature and therefore had the effect of not only scaring away potential buyers, but also devaluing their property. The matter was further exacerbated as the Vendor was not able to resolve matters directly with the OC committee.

Outcome

This is an issue of balancing the Vendor’s disclosure obligations and the Owners Corporation’s responsibility.

Situation 2

In another matter, a Purchaser’s lender required important building documents to confirm the works undertaken by the OC for cladding rectification in the building, prior to granting loan approval. The OC Manager refused to release relevant documents on the basis that it was outside the scope of information required to be made in the Certificate under the Act. Initially, the Vendor was unable to procure the building documents from their OC, however, after forceful correspondence to the OC by both the Vendor’s lawyer and our Property Law team, the relevant documents were finally released to our Property Lawyers.

What is the role and remit of an Owners Corporation?

In the above circumstances, a key question that comes to mind is that what are the functions and powers of an OC? How and when should these powers be exercised?

The Functions of an OC – Section 4

An OC is regulated by the Owners Corporation Act 2006 (“Act”). Section 4 of the Act states that the ‘Functions’ of the OC include management and administration, repair and maintenance of the common property, taking out insurance, providing an Owners Corporation Certificate and to ‘carry out any other functions conferred on the Owners Corporation’ by Law.

Additional Powers of an OC – Sections 5, 6 and 7

Section 6 (b) of the Act further extends the ‘Powers of owners corporation’, stating that it has ‘all other powers that are necessary to enable (it) to perform its functions’. Section 5 - imposes a duty on the OC to ‘act honestly and in good faith’ when carrying out its functions and powers and to ‘exercise due care and diligence’. Lot Owners’ ‘rights and duties’ are defined in Part 7 of the Act which includes compliance with the Act and the rules of the OC.

Maintenance and Debt Recovery – Sections 46, 47 and 49

Sections 46 and 47 of the Act put an obligation on the OC to repair and maintain the common property. Under Section 49, the OC is able to recover as a debt, the costs associated with the repairs and maintenance from the Lot Owners. Any major alterations and repairs require the passing of a special resolution at an OC meeting.

Duty of the OC - Disclosure - Section 151

Despite the above, Lot owners often find themselves in a position where their interests directly conflict with the powers and duties conferred on the OC - a situation which frequently leads to a dispute.

The duty of the OC to disclose important and relevant information under Section 151 of the Act (such as a potential water leak affecting the common area of a property) to potential buyers, clearly outweighs the interests of a Lot Owner selling a property who may be concerned that such a disclosure may influence the sale price. The failure to disclose may also leave the seller open to a breach of their disclosure requirements under Section 32 of the Sale of Land Act. In Jopam Nominees Pty Ltd v Owners CorporationNo 1 PS 4474926 (Owners Corporation) [2016] VCAT 851, VCAT considered the conduct of the OC in determining whether the OC had engaged in misleading and deceptive conduct by failing to include all the licences in the Section 151 Certificate.

The OC must act in good faith, and OC managers are subject to rules of professional conduct. An OC Manager must not engage in ‘misleading or deceptive conduct’ which would result in a breach of the Australian Consumer Law and Fair Trading Act 2012.

Resolving disputes between Lot Owners and the OC - Part 10

Part 10 of the OC Act allows for dispute resolution mechanisms with the OC. However, the first step should be to attempt an informal resolution. In the event the issue remains unresolved, a party should proceed with submitting a formal complaint to the OC (with a possible resolution before a grievance committee), failing which, lodging an application with VCAT will be an option.

How Sharrock Pitman Legal can help?

As Accredited Specialists in Property Law, our lawyers advise Lot Owners, OC Committees as well as Owners Corporation Managers on strategies to resolve disputes which may arise. Where issues cannot be resolved, our Litigation team can provide advise on managing the dispute at VCAT or through the Courts.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.‍

Written by a member of our Legal Team

Andre Ong

For further information contact

Andre Ong

Andre is a Principal of Sharrock Pitman Legal.

He heads our Property Law Group and is an Accredited Specialist in Property Law (accredited by the Law Institute of Victoria). He also deals with Commercial Law. For further information, contact Andre Ong on his direct line (03) 8561 3317.

Body Corporate Disputes: Leaking roofs

What are the functions and powers of an Owners Corporation? How and when should these powers be exercised? Andre Ong, Accredited Specialist (Property Law) looks at two common situations which illustrate the role of an OC.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.

You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE:

(03) 8561 3318

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Can an Owners Corporation have an impact on the sale of a property?

What are the functions and powers of an Owners Corporation? How and when should these powers be exercised? Andre Ong, Accredited Specialist (Property Law) looks at two common situations which illustrate the role of an OC.