The VIC Strata Magazine | October 2021

The VIC

STRATA MAGAZINE OCTOBER 2021

Don’t trust a one-man band with your money (or your Owners Corporation Management) Page: 8 - 9 | Strata Consultants

Can I claim on strata insurance if a tree branch falls on my car?

Page: 14 - 15 | Strata Insurance Solutions

Selling common property when one owner says “No” Page: 26 - 27 Bugden Allen Graham Lawyers

About Us LookUpStrata is Australia’s Top Property Blog Dedicated to Strata Living. The site has been providing reliable strata information to lot owners, strata managers and other strata professionals since 2013.

As well as publishing legislative articles to keep thier audience up to date with changes to strata, this family owned business is known for their national Q&A service that provides useful responses to lot owners and members of the strata industry. They have created a national network of leading strata specialists across Australia who assist with 100s of the LookUpStrata audiences’ queries every month.

Strata information is distributed freely to their dedicated audience of readers via regular Webinars, Magazines and Newsletters. The LookUpStrata audience also has free access to The LookUpStrata Directory, showcasing 100s of strata service professionals from across Australia. To take a look at The LookUpStrata Directory, flip to end of this magazine.

Meet the team

Nikki began building LookUpStrata back in 2012 and officially launched the company early 2013.

With a background in Information Management, LookUpStrata has helped Nikki realise her mission of providing detailed, practical, and easy to understand strata information to all Australians.

Nikki shares her time between three companies, including Tower Body Corporate in SEQ, and is currently in her third term on the SCA (WA) Education and Proffessional Development Committee.

More recently Nikki has become known for presenting regular strata webinars, where LookUpStrata hosts a strata expert to cover a specific topic and respond to audience questions.

Nikki Jovicic Owner / Director

Liza came on board in early 2020 to bring some structure to LookUpStrata. She has a passion for processes, growth and education. This quickly resulted in the creation of The Strata Magazine released monthly in New South Wales and Queensland, and bi-monthly in Western Australia and Victoria. As of 2021, LookUpStrata now produce 33 state based online magazines a year.

Among other daily tasks, Liza is involved in scheduling and liaising with upcoming webinar presenters, sourcing responses to audience questions and assisting strata service professionals who are interested in growing their business.

Liza Jovicic Sales and Content Manager

Learn more here → https://www.lookupstrata.com.au/about-us/ You can contact us here → administration@lookupstrata.com.au

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Contents 04 Remedial repairs and restoration

18 Bird Mites

Benefits of cost control and project management

Health and safety of residents

06 Committee conflict

20 Owners Corporation Funds

Barred from the meeting

Can Strata Managers Earn Interest?

08 Don’t Trust a One-man Band

with Your Money

22 Noise Nuisance Caused By Pipes

(or Your Owners Corporation Management)

12 Making the most of a

substantial maintenance fund

What are our options other than a term deposit?

14 Strata Insurance Claim

What if a Tree Branch Falls on My Car?

16 Owners Corporation Maintenance

Do you know what to include in the maintenance requests?

Should the OC fix this?

24 The Power of Proxies 26 Selling Common Property

When one owner says ‘‘No’’

28 Roads, Rates and .... No

Rubbish Collection?

A (double) charged Issue for strata

30 The VIC Strata Directory

Thanks to our sponsors

Remedial repairs, restoration and cost management There are several key areas that have the potential to impact an Owners

Scenario 1 – Cost verification audit

Corporation when it comes to responding to either emergency situations,

A Client experienced damage to their property as a result of water

or it’s need to address building repairs whether it be as a result of an insurance claim or the need to maintain building/s within your Strata Plan.

entering the property following recent floods. Carpet within 5 rooms were impacted requiring water extraction and restoration back to pre-damaged

It can often be challenging when confronting these matters large or small,

condition. The Client engaged the expertise of a restoration expert in this

and knowing what steps are necessary to ensure the most efficient and

area.

economic solution. Strata repairs can be complex, there are many factors

As is all too often the case in these situations a reactive approach and the

to consider ensuring both the symptoms and underlying cause/s are addressed to minimise the chance of reoccurrence or ongoing issues, or in the case of an emergency response mitigate further risk or damage to property or person.

The associated costs of responding to such matters often causes financial

drive to respond to the situation resulted in the Client being charged well above industry standard rates and additional charges including but not limited to the following: • Inflated drying equipment charges

concern to Owners as they try to navigate value vs competitiveness

• Unwarranted project management fees

and achieve desired outcomes. Neither can be measured if you don’t

• Unnecessary storm loading costs

have clarity in what you want to achieve. It is critical to define both your

• Double dipping of holiday loading (it was included within their original

objective and the extent of work required. Be clear in what you expect from your service provider and outline your objective:

hourly rates) An after services audit identified that this was a simple restoration job

• You require repairs to be all inclusive

where when process and best practice were applied to determine the

• You need it to conform to statutory requirements

actual costs associated with repairs. Using industry knowledge of costs

• You need a warranty of Guarantee • Extent & cost are balanced with the benefits.

based on cubic metre rates, appropriate allocation and distribution of equipment, quantification and application of necessary chemicals and materials, and associated labour costs significant savings were achieved.

Sedgwick often come across scenarios where large financial savings can be realised if proper process and due diligence are applied. A small

Original invoice provided =

$21,364.74

investment by an Owners Corporation in taking the extra time to

Fair & reasonable costs incurred =

$5,284.51

understand or obtain guidance about how to deal with these situations

Saving =

$16,080.23

can pay huge dividends and ensure the desired outcome the first time round. Below we share 2 real scenarios of what can result when you understand what’s needed and controls and measures are put in place.

First time complete and defined scope of works • • •

Only 1 quote required Minimise scope creep and variations Empowering owners with information to obtain like for like quotes

Value for money • • •

Pay the right price for works required Professionals to negotiate cost on your behalf $500 excl. GST brings you piece of mind

Peace of mind • •

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Application of standards to repair methodology Additional support in obtaining alternative quotes & other specialty service

Scenario 2 – Cost control and project management throughout works

Sedgwick’s strategic and measured response with consideration to

Larger and more complex jobs require a different approach. For these

remove and replace vs restore approach in conjunction with a drying plan

types of situations the engagement of expertise at the front end can ensure a proactive approach is taken to manage and respond to repairs and/or restoration requirements right from the get go. Cost and Scope control measures are put in place and maintained for the duration of the

accompanied by strip out of a component of wall linings saw a controlled, quantified and streamlined approach that resolved the repair and restoration aspects of the job, minimising risk, further damage, delay in hand over and cost savings across the board.

works.

A strata building under construction is going through the fit out stage

Original quote =

$158,025.00

when vandals break into the complex, destroying property and turning

Comparison quote =

$57,084.00

on the fire hydrants in common areas causing water damage to both

Saving =

$100,941.00

building and contents (including floor coverings). Sedgwick were engaged to review an initial quote and proposed scope of works for the remedial repairs and restoration. It was identified that the Scope of Works was lacking in detail and there was minimal forensic information provided to substantiate the proposed works.

Following Sedgwick’s attendance to site, the engagement of a preferred panel supplier was provided with a defined scope covering all elements of restoration from labour costs, to equipment requirements and placement.

The initial restoration only allowed for the installation of 181 x air movers, 62 dehumidifiers and 4 x Axial fans over an undefined period of time. The review was able to identify that the available power load at the site would not support this approach and raised concerns around secondary damage

When it comes to remedial repairs all too often Owners lack the technical knowledge to understand what is value for money and often will accept the quote put in front of them, this does not always translate the best value for money. As the old adage goes ‘you get what you pay for’. It is important to remember PRICE is what you pay, VALUE is what you get.

Engaging an expert to help guide you through this process is highly recommended. They will assist in understanding the issue/s, what needs to be done in each individual situation and facilitate/manage on your behalf the many stakeholders involved to ensure you achieve the desired outcomes the first-time round, saving both time and cost.

Having a designated plan of attack is paramount when it comes to

(possibility of mould growth).

implementing a program of remedial or restoration works.

Sedgwick Building Consultancy & Repair Solution Services

Building consultancy

Repair solutions

• Defect reports & forensic engineering

• Emergency make safe

• Scope of works

• Fire water damage restoration

• Dilapidation & risk surveys

• Leak detection

• Dispute mediation and expert witness

• Contamination response

• Contractor procurement and cost validation

• Building repairs

• Construction management

• Cost validation services

1300 735 720 sales@au.sedgwick.com

1300 654 599 sales@au.sedgwick.com 5

Committee conflict Barred from the meeting Q

After lodging formal complaints about the committee, I was barred from the Zoom meeting while the complaints were discussed. Should I have been able to present my viewpoint?

After several years of getting no committee response to complaints about the committee, I lodged a formal complaint. I joined the committee last year to try and push through changes and resolve the issues.

At the AGM, the manager barred me from the ZOOM meeting for about 30 min while the committee discussed the complaints with the other owners. It was deemed I was being vexatious and any management fees would be charged to me or any other lot owner in future.

Does the Owners Corporation have the power to do this?

Should I have been allowed to express my viewpoint regarding the complaints and hear what was said, especially as it was regarding committee unfair treatment and their repeated failure to follow model rules?

The attitude towards me by others, once I was allowed back into the meeting, was one of annoyance.

I was removed from the committee at the AGM and this has been reported in the AGM notes along with the complaints lodged, which are incorrect.

Can I ask for the AGM notes to be corrected and reissued?

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A

If there are discussions in the meeting that the Owners Corporation deems you are conflicted, it would be in the best interest of the Owners Corporation to not include the conflicted party in the discussion.

The Owners Corporations Act 2006 could levy fees (expenses of the Owners Corporation) to lot owners according to lot liability. Therefore, if the Owners Corporation is levying fees to you, it should be based on your lot liability.

In annual general meetings, during the voting period of that meetings, all owners must be given the opportunity to vote. On the other hand, if there are discussions in the meeting that the Owners Corporation deems you are conflicted, it would be in the best interest of the Owners Corporation to not include the conflicted party in the discussion. I make the distinct point in these two circumstances – all owners must not be hindered from voting at an annual general meeting and owners who are conflicted, in my view, should not be included in discussions, where the Owners Corporation is investigating if they will action the complaint submitted.

Minutes of the annual general meeting could be amended at the next annual general meeting where the majority of the members (present and eligible to vote at the meeting) resolves to amend those minutes.

READ MORE ON THIS TOPIC HERE

Rochelle Castro | RC & Co Lawyers law@rccolawyers.com

Photography: Shayan-Hefzi and Aleksandra-Sapozhnikova on Unsplash

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We provide end-to-end solutions that eliminate and prevent the proliferation of virus and bacteria, creating healthy environments for your staff, customers and guests. In addition we customise a wide range of scents that will leave a lasting impression of delightful wellbeing.

Better air, better health, better business.

Get in touch! 1300 728 760 or info@aiodourcontrolsystems.com.au

aiodourcontrolsystems.com.au 7

Don’t Trust a One-man Band with Your Money (or Owners Corporation Management) Good owners corporation management companies are hard to come by and good owners corporation managers even more so.

The Ever Growing List of Owners Corporation ManagersManagement A few years ago, we obtained a copy of the list of registered owners corporation managers from the

Working in owners corporation management can be a

Business Licensing Authority – that Microsoft Excel list

challenging assignment.

had 773 entries.

Buildings in 2019 have evolved to become complex entities. The management of these complex entities requires aptitude and knowledge across a multitude of legislation and regulations.

Yet, becoming a registered owners corporation manager in Victoria remains staggeringly simple – it can be achieved in a matter of days.

The last time we checked (earlier this year) that list had All that an individual (or a company) has to do is fill out

ballooned to over 1,300 entries.

a form and pay a lodgement fee of $206.10 – very much akin to a tale of medical practitioners in the old Wild

What is worrying is that the overwhelming majority of

West. And indeed there has been a plethora of new

these new operators are one-man bands without any prior

entrants and arrivals hanging up the shingle and calling

strata management experience and/or the accounting

themselves owners corporation managers.

smarts to manage the books of owners corporations.

Nowhere else is this more pronounced than in Victoria – an astonishing 29% of registered owners corporation managers are less than 3 years old.

Murphy’s Law – What Can Go Wrong, Will Go Wrong…

Owners corporation managers look after the funds of your building: - they’re tasked with collecting levies; - they have authority over your bank account; and - they make large recurring payments out of your funds for outgoings for the building (as well as deductions for their own fees and charges).

Source: Macquarie Bank report – age of strata businesses

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Small operators when they’re starting out seldom have critical mass (of clients) to cover their overheads.

Good small operators are generally those who have stumped the capital to buy an established business or a franchise, which comes with a few benefits of:

Then one day, the owners corporation manager (quite literally) fell off the face of the planet. Phone calls were not returned. Emails bounced. The books and records of the owners corporation were (and are) nowhere to be found.

As the Committee dug deeper it would become apparent that the accounting software platform being used to

- the prerequisite strata management software;

run their building wasn’t one of the established strata

- processes and procedures; and

software platforms but rather some online generic book-

- and the embedded intellectual know-how.

keeping software.

An OC Committee we worked with in Q3-Q4 2018 made

More alarming still, there was a gross mismatch be-

the mistake of going with a one-man band for their large

tween the cash at bank reported on the balance sheet

CBD apartment complex…

and the actual cash at bank per the bank statement.

It would seem the manager was overwhelmed with the volume of payments and receipts, the volume of communications and meetings, resolving building issues, looking after the financials of the owner corporations under management – on top of running his own business…

It’s no easy task.

Where It Went Wrong – The Body Corporate Manager Then it started – communications slowed, meetings were not being held, and creditors hadn’t been paid. The lift

One of the first thing we did was to ask Macquarie Bank

company got in touch and as did the embedded energy

to put a freeze on the owners corporations’ bank account.

provider.

It’s a case that’s still under investigation and there are a still lot of unknowns – there is no suggestion of any wrongdoing but it does paint a cautionary tale.

9

What Financial Checks and Balances should Owners Corporation Committees be Instigating?

- Ask for regular financial statements from the owners corporation manager – we would recommend quarterly financial statements if your OC collects and spends more than $30,000 per annum.

- Review and scrutinise the expenses (all the different line items and the quantum of each of the expenses) on the Profit and Loss Statement.

- Review and evaluate the assets and liabilities of the owners corporation – are there sufficient funds to meet upcoming payments?

- Ask for a bank statement for each and every bank account that the owners corporation has – this includes bank accounts and term deposit statements for both

has to be a balance. At some point, Committees should be able to delegate and entrust the management company to do the right thing – that comes with appointing a quality company with proven track record in the first place.

We qualify and vet the companies we work with.

We don’t claim to work with every good manager in town but the ones we work with are pretty good and we stand behind their work.

Not sure if your owners corporation funds are in safe hands?

Speak to a Strata Consultant on 1300 917 848

How to Change Owners Corporation Management Companies?

admin and maintenance funds, across all the OC’s.

Strata Consultants Melbourne has been helping and - Cross-check the cash at bank balances on the balance

guiding Committees on how to change owners corpo-

sheets to the bank statements and term deposit

ration management companies since January 2014. We

statements.

guide you through the process of changing body corporate management company and everything is done ac-

Qualified & Approved Strata Management Companies As much as Committees should be responsible and oversee what the owners corporation manager is doing there

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cording to the body corporate rules and regulations.

Speak to a Strata Consultant about changing owners corporation managers on 1300 917 848 or email us at office@strataconsultants.com.au

Helping to fight low returns and rising levies for the Australian Strata Community.

A fresh solution to the new world of low returns, for your strata savings.

Book a call to discuss how we can help CLICK HERE

Contact Us Today 1300 482 736 www.strataguardian.com contact@strataguardian.com 25 Palmerston Crescent, South Melbourne 3205

Strata Guardian offers a proven, diversified, and riskadjusted investment service to help combat the effects of inflation on your building’s savings over the long term.

Strata Guardian Pty. Ltd. ABN 20 646 722 518 is a Corporate Authorised Representative of Strata Advice Pty Ltd - AFSL 528306

11

Making the most of a substantial maintenance fund Our building has accumulated a significant maintenance fund.

What options apart from a term deposit are available for our committee, given what’s allowable in Victoria?

Our building has accumulated a significant (>$1.5m) maintenance fund over the last 10 years.

Currently our maintenance plan shows that our bigger estimated costs of refurbishment of pool, a heating plant and outdoor areas are more than 6 years away. It seems a shame that this money should sit in term deposits over this time, whilst my superannuation has done so well this year. What options are available for our committee, given what’s allowable in Victoria?

The Victorian regulations allow you to consider other solutions.

It seems crazy that, after a remarkable year in equity markets, we have seen such strong performance in our superannuation investments. Yet for most Owners Corporations, accepting half a per cent return on their own building’s superannuation is supposed to be acceptable.

Much of this is due to a combination of factors arising from the pandemic and central bank responses, lowering the typical ‘risk-free rate’ to the point that pushes nearly everyone into riskier and higher returning assets. This reaction has seen a shift in asset prices like shares and property, as cash moves from being an asset class to just a short term holding class on the basis that over time, inflation will leave you with a negative real return if held for too long.

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A Look at the Legislation

Thankfully, the Victorian regulations allow you to consider other solutions. In rare legal plain speak, Section 26 of the Owners Corporations Act 2006 (VIC) offers owners corporations the ‘Power to Invest Money’ (and that’s it!) in the building’s maintenance fund detailed in Sections 40 through 45.

Unlike NSW and QLD legislation, there appears to be no clear link between the Owners Corporations Act 2006 (VIC) and the relevant Act governing the operation of funds held in trust. Still, by virtue of the fact that owners corporation maintenance funds are held in trust, it is fair to assume that this would also be the case. So off to Part 1 of the Victorian Trustee Act 1958 (VIC), we head for further clarification.

Sections 5 and 6 of the Victorian Trustee Act 1958 (VIC) offers a series of confirmations and considerations when working through some alternatives for your longer-term savings as a trustee: • An initial review of your trust deed is required to ensure no limitation on the allowable investments above and beyond what is prescribed in the Act. • Notwithstanding the above, the ability to invest in ‘any form of investment’ and at any time vary any investment is then permissible.

• Exercise the care, diligence and skill that a prudent person would exercise in managing the affairs of another person.

• Implement annual performance reviews of the trust investments Like all well-considered investments, Sections 7 and 8 of the above Act details a list of further factors that should be addressed to ensure the validity of the decision when exercising the power of the investment. Here are a few points of note, but not all of them: • A duty to invest trust funds in investments that are not speculative • A duty to take advice and the power to use trust funds to obtain this advice • The purpose of the trust and circumstances of the beneficiaries

• The desirability of diversifying the trust’s investments • The nature of and accompanying risks of the proposed investment • The potential for capital appreciation, along with the prospect of capital loss • The length of the term of the proposed investment against the probable duration of the trust • Consideration of tax liabilities, likely income return and timing of this income • The liquidity and marketability (i.e. ability to sell) of the investment • Costs and fees of the investment – are they reasonable?

• The likelihood of inflation affecting the value of the trust and its investment In a similar fashion to what is allowable in NSW and QLD, the Victorian legislation is also demonstrative of the allowances for owners corporation committees to consider broader investment options above and beyond the less than desirable cash and term deposit rates.

Conclusion

Given the above, as the financial controller, or member of your owner’s corporation committee, the task now is to confirm that your buildings trust deed does not impede your options, and a professional legal check is highly recommended. Once verified, you can start the search and review what options are in front of you for selection. If you have no experience in the sometimes-hazardous world of investments, there is always help available.

We are happy to say that support is at hand, so if you feel you would like to explore some options, feel free to reach out to Strata Guardian and see if our investment service can help your strata savings diversify away from negative real returns and the prospect of rising strata levies.

READ MORE ON THIS TOPIC HERE

Timothy Fuller | Strata Guardian admin@strataguardian.com

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Can I Claim Against Strata Insurance if a Tree Branch Falls on My Car? 14 www.lookupstrata.com.au

Q

Can I make a claim against the strata insurance for a tree branch (on common property) falling on my vehicle?

A

Vehicle owners generally have low prospects of a successful claim against the body corporate (and the strata insurance policy) for a fallen tree branch.

As the property section of a strata insurance policy does not extend to cover vehicles, the only consideration in this instance can be the public liability section of a strata policy. This section covers damage to another person’s property, however, the test for cover applying is that the vehicle owner demonstrates that the owners corporation is legally liable for the damage.

Legal liability isn’t always straightforward and in some instances is ultimately determined by solicitors and judges. Based on our experience, vehicle owners generally have low prospects of a successful claim against the body corporate (and the strata insurance policy) for a fallen tree branch.

If the tree branch damaged the vehicle because of an “act of God” such as a storm, negligence and legal responsibility can be difficult to prove.

If however, the tree branch fell and the owners corporation had previously been advised that the tree branch was in need of maintenance and they failed to act, there are greater prospects of a successful claim.

We always recommend that vehicle owners lodge a claim on the policy that insures the vehicle. If there is a case for the motor insurer to make a recovery against the owners corporation, they will do this on behalf of the vehicle owner and usually refund the excess.

Otherwise, if you believe the owners corporation is legally responsible and you don’t wish to lodge a claim or do not have motor insurance, the alternate option is to deal with the issue via the processes set out in Consumer Affairs Victoria for complaint handling in your owners corporation.

READ MORE ON THIS TOPIC HERE

Tyrone Shandiman | Strata Insurance Solutions tshandiman@iaa.net.au

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Owners Corporation Maintenance Who should do the work?

Q

A

When an Owners Corporation Manager submits a maintenance request to a supplier, what information should they supply?

What checks should be carried out and what insurance should be in place?

When we receive maintenance requests from Owners Corporation Managers for small maintenance jobs, most committee members and managers aren’t aware of the requirements.

We receive lots of maintenance requests from Owners Corporation Managers for small maintenance jobs, sometimes with minimal scopes of work being supplied. Maintenance works over $5,000 fall under the Domestic Building Contracts Act 1995 and a Major Domestic Building Contract needs to be entered prepared between the builder and the owner / the Owners Corporation (OC). However, most committee members and managers aren’t aware of these requirements.

Works over $16,000 will require a registered builder to perform the works and also provide Home Warranty Insurance for the works undertaken, for residential buildings 3 levels and under the Insurance certificate is issued by the Victorian Managed Insurance Authority

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– VMIA a state government run agency. Once the cover is affected, VMIA will forward the Warranty Insurance Policy directly to the owner.

Before committing to any works being undertaken, the OC must ensure the builder has the right qualifications and is registered in the appropriate category for the works. All builders need to be registered with the Victorian Building Authority – VBA. If the builder is in fact registered then the next step is to check if they are qualified to undertake certain works.

For example, there are limitations on builders CCB-L what does it mean? The ‘L” stands for ‘Limited’ which means the builder is Limited in only undertaking certain works for example a CCB-L (Corporate Commercial Builder – Limited) or CDB-L (Corporate Domestic Builder – Limited) may only be restricted to undertaking works on low rise buildings. This means they cannot carry out works on buildings that are higher than 15 metres, that is generally buildings up to 5 levels.

Always try and deal with builders that hold either a CDB-U (Corporate Domestic Builder – Unlimited) for residential works and a CCB-U (Corporate Commercial Builder – Unlimited) for non-residential buildings or residential buildings where they are over 5 levels. Also, check the builder’s registrations on the VBA website to ensure they are current and registered. The search is free.

READ MORE ON THIS TOPIC HERE

Paul Cummaudo | Roscon Group info@roscon.com

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Bird Mites Health and safety of residents

An owners corporation must “act honestly and in good faith; and exercise due care and diligence.”

Establishing Responsibility and a Duty of Care

Section 5 and section 117 of the Owners Corporation Act 2006 imposes a responsibility and a duty of care for both the Owners Corporation as a collective; and individual members of its elected committee. The wording in both sections are the same and read: An owners corporation and members of its elected committee must – “act honestly and in good faith; and exercise due care and diligence.”

The purpose of an owners corporation -and by extension, its elected committee- is detailed within section 4 of the Owners Corporation Act 2006. The functions of an owners corporation include:

Our unit has been invaded by bird mites coming from the common property roof area.

Should the owners corporation be responsible for the health and safety of residents?

Last autumn our unit was invaded by bird mites coming from the common property roof area. Our daughter had to seek medical attention for extensive bites from the insects.

We had the interior of our unit treated by a pest control agent and he recommended highly that an external inspection be conducted to address the problem comprehensively.

The OC Committee has refused to engage a pest control service to conduct an inspection and has furthermore refused to allow us access to have an inspection conducted at our own expense.

This seems to be a breach of the OC’s obligation to protect resident’s health and safety from hazards located on common property.

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a. t o manage and administer the common property; b. to repair and maintain— i. the common property; ii. the chattels, fixtures, fittings and services related to the common property or its enjoyment; The requirement to repair and maintain the common property is solidified within section 46, where the Act details that an owners corporation must “repair and maintain the common property, the chattels, fixtures, fittings and services related to the common property or its enjoyment.”

Provided a lot owner can reasonably prove that an issue is originating from the common property, it is our view that an owners corporation and members of its elected committee have a duty of care to “act honestly and in good faith; and exercise due care and diligence” by taking appropriate steps to investigate the concern, and if required, commission any needed action.

Failure to do so may constitute a breach of numerous obligations and duty of care under sections 5, 46 and 117. It is worth noting, by a feature of section 118, if it is found that a member of a committee does or does not do something resulting in a breach of their obligations and duty of care under section 117 – they lose the liability protections afforded to them under the Act.

What can a lot owner do in this circumstance?

If an owners corporation and its committee fail in their duty of care, Part 11 sections 162, 163 and 165 offers a potential remedy to aggrieved lot owners through an application to VCAT. Section 163(b) permits a Lot Owner to make an application against the owners corporation (see section 162(a)) about its operation. If a lot owner can convince a member that an order to do or not do something is fair and reasonable, the VCAT member has power under section 165 of the OCA2006 and the VCAT Act 1998 to order the owners corporation to do something and/or comply with the Act. Section 165(c)

also provides for monetary awards relating to restitution and damages; however, you may want to seek further legal advice around this as under section 109(1) of the VCAT Act 1998, the default position when awarding costs is that each party is to bear their own costs, and damages may only be awarded if deemed fair to do so. For an example of a recent case that demonstrates that cost awards are the exception, not the rule, see paragraph 13 of Hopper v Owners Corporation SP 25940G (Owners Corporations) [2021] VCAT 707.

Practical Solution

It is rarely in the interest of an owners corporation to be taken to VCAT, and the members of its committee will be cognisant of this. We recommend that lot owners and their appointed committee keep communication between parties open, constructive, and in good faith – to try and meet the interest of all parties without the need to get the tribunal involved.

READ MORE ON THIS TOPIC HERE

Michael Darby Quantum United Management Pty Ltd michael@quantumunited.com.au

19

Can Strata Managers Earn Interest on OC Funds?

Q

Can strata managers earn interest on the Owners Corporation money?

If a Strata Manager pools all their Owners Corporation’s money into one bank account, can they legally earn interest from the pooled accounts? They state they are unable to provide bank statements due to privacy.

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A

1 December 2021 amendments to the Owners Corporations Act 2006 will require Owners Corporation Manager’s to hold client funds in an individual bank account.

It may seem like I am going on a long tangent – but there is a purpose to my meandering response, so please hang with me!

The Owners Corporation Manager is an employee of the Owners Corporation. The Manager is simply arranging for the holding and managing of funds on behalf of their client. They are a steward if you will.

For many years it has been best practice for Owners Corporation Managers to administer individual bank accounts on behalf of each individual client, with each account held in the name of the Owners Corporation. There

is absolutely no doubt that an individual bank account system provides unparalleled levels of transparency and accountability compared with a pooled/shared bank account system. It also does away with (or at least makes far more difficult) the ability for opportunistic individuals to do things like skimming interest or misusing their client’s funds.

It is the Owners Corporations money, not the Managers.

The holding of individual bank accounts is in fact a regular recommendation I make to friends when they are asking what to look for in a new manager.

Any argument that individual bank accounts require any significant burden or mountainous workload

(compared with pooled) has been thoroughly eliminated, with modern strata software making the administering of individual bank accounts a relative breeze.

Unfortunately, the legislation in Victoria has never required Owners Corporation Managers to hold individual accounts despite the majority of the industry agreeing that this solution is in the best interest of Owners Corporations.

However on that note, I am very happy to report that

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Don't fall behind!

from 1st December 2021, amendments to the Owners Corporations Act 2006 will require Owners Corporation Manager’s to hold client funds in an individual bank account (S122 2 B).

The amendments go further, to state that any interest earned on Owners Corporation funds is the Owners Corporations interest (S122 4). This seems like a very common sense statement to make, but it is good to see the government closing up this loophole.

Deryck Walker | SMTI

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Owners Corporations will be changing from 1st Dec 2021 Let us help you get up to speed in a single session with our small group, or one-on-one OCAA intensive online training

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21

Noise Nuisance Caused By Pipes

Q

We have two issues with noise due to the poor design of pipes and gutters around our unit. Is the owners corporation responsible for fixing these issues?

We have two noise issues.

We live in an apartment with a unit directly above separated by a steel and concrete composite slab. As a result, waste services travel through the slab and enter airspace (enclosed in a bulkhead) in our bedroom. When our upstairs neighbours urinate, we hear the whole thing throughout the house. It is louder than someone using the toilet in our own apartment. Given that the pipes are common property, is it the Owners Corporations responsibility to adequately soundproof these pipes?

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We also have common property box gutters that sit inside our apartment, once again enclosed in a bulkhead.

The gutter is the main collection for three large sections of roof on our apartment complex so it receives large quantities of water when it rains.

The bulkhead is just metal bracing, plasterboard with minimal loose weave synthetic insulation that appears to offer no acoustic benefits whatsoever.

When it rains the sound that the gutter makes is deafening—you cannot have a conversation near it without raising your voice significantly.

Once again given that the gutter is common property, is it the Owners Corporations responsibility to adequately soundproof the gutter?

A

At the end of the day, the OC is only responsible to repair and maintain services, not to “improve” them.

The short answer is, no.

But you may have a case to present……

Firstly, it would be beneficial for the owners affected by the excessive noise levels to investigate whether other lots are experiencing the same issue.

It’s true, the Owners Corporation must repair and maintain (common) services.

Section 47 of the OC Act 2006 states: An owners corporation must repair and maintain a service in or relating to a lot that is for the benefit of more than one lot and for the common property.

What needs to be determined in this case, is whether the waste and other (internal) drains are actually serving their purpose as intended.

It may simply be a case of poor building design, a lack of soundproofing or both. The case of excessive noise could be dismissed seeing the drains together with the external box gutters are functioning as intended.

It really sounds more like poor design and workmanship that is causing the excessive noise, whether it’s from the waste drains or similarly from your external box gutters.

A suggestion to tackle this concern would be to approach your owners corporation committee and raise the issue

with them. This is clearly affecting your quality of life and enjoyment of living at the property. If you have obtained similar complaints from other owners, this will strengthen your argument. Present your case to the committee in the hope they investigate options for a resolution to this noise concern. A sympathetic committee (or OC) may consider improving what is causing owners a great deal of anguish. At the end of the day, the OC is only responsible to repair and maintain services, not to “improve” them.

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This situation is unique seeing what is causing the noise isn’t “broken or damaged” and in need of repair. They are obviously poorly designed or inadequately enclosed. Having said that, there’s certainly no harm in asking. As mentioned, it would be an advantage to determine if residents in other lots are experiencing the same thing.

If you are due to have an AGM soon, it could be a good opportunity to raise this issue as an agenda item and discuss the matter at the meeting.

Guy Garreffa | StrataPoint guy@stratapoint.com.au

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The Power of Proxies

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Q

If an Acting Chair’s proxy was rescinded on the day of the Special General Meeting by his Lot Owner (wife) in favour of another external legal person, is the Acting Chair still a committee member?

An Acting/Interim Chair’s proxy was rescinded on the day of the Special General Meeting by his Lot Owner (wife) in favour of another external legal person for the Special General Meeting. It is correct that the rescinded member was not a Committee member at the Special General Meeting but attended as he was given a proxy by another Lot Owner.

Is he still a Committee member and if he is, can he vote on matters unless at a General Meeting/ Committee meeting till the next AGM? Was the rescind just for the Special General Meeting?

Gregor Evans | The Knight ella@theknight.com.au

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A

If a Committee Member has been elected by holding a proxy on behalf of a Lot owner and that same Lot owner rescinds the proxy then in my opinion the Acting Chair is no longer a Committee member.

Section 103 (2) of the Owners Corporations Act 2006 states the following: 2. T he members of the committee must be lot owners or hold proxies on behalf of lot owners.

If a Committee Member has been elected by holding a proxy on behalf of a Lot owner and that same Lot owner rescinds the proxy then in my opinion the Committee Member is no longer a Committee member.

The Committee Member can only re-join the Committee if they are elected or co-opted back on.

25

Selling Common Property When one owner says "No"

Our owners corporation would like to sell some common property. One owner out of 8 says “no”. Can we proceed?

I own a unit in a block of 8. There is a block of land at the end which is owned by our block.

The land is worth about $200,000, so each owner’s stake is $25,000.

Seven owners would like to sell the block, but every time the matter is raised one owner votes “no”. She owns the unit next to the block and has moved her fence in order to use some of the block for her garden. She doesn’t want anything built next to her.

Is a vote of 7/8 enough to be able to sell? Can we force her to move her fence back to its original position?

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Like every case, it would come down to evidence about what the proper value is and what other amenity type issues there are.

Well, I think two things arise out of that. One is the plan amendment and the other is the notion of the fence.

Dealing with those separately, factually It sounds very much like the Butten v Khung & Ors (Real Property) [2010] VCAT 252 or the ‘ALDI’ example* where most owners want to sell but one person doesn’t. This isn’t a circumstance where they lose Title. I’d imagine that this parcel is common property that can be carved out and disposed of. It very much looks like it’s the ‘ALDI’ example if that’s the case.

If you get a fair purchase price the tribunal would require some evidence that the sale value has some relationship with proper realisable value. That would deal with the economic best interest.

As far as the social best interest goes, well I suppose the sole lot owner’s arguments are going to be probably more planning arguments such as: • overshadowing • overlooking • and the proximity of any construction that might occur Those would have to be balanced out, so this case, like every case, would come down to evidence about what the proper value is and what other amenity type issues there are. It looks pretty similar to the ‘ALDI’ example on its general principles.

In regards to the fence, it’s of course common where owners abutting parts of common property see them as their fiefdom and that they can use them as their own and fence them off, etc. It’s a plain breach of the model rules.

Whether or not you’re owners corporation has

registered rules, I don’t know but you probably don’t need them. The model rules make it clear that an owner or occupier must not obstruct other owners and occupiers or lawful interests from their ability to access common property so that fence can be removed apropos a rule breach. *Refer to Tim Graham’s recently recorded VIC Webinar: How to alter your plan of subdivision

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Tim Graham Bugden Allen Graham Lawyers tim@bagl.com.au

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