Owners corporations

The dispute resolution provisions in the OC Act are complex. Disputes may be resolved in the following ways.

Under section 152, any lot owner, occupier, or manager may make a complaint in writing in the approved form about an alleged breach of the OC Act, OC Regulations or rules by a lot owner, occupier or manager. This section precludes a complaint against the owners corporation or the committee unless the complaint relates to something done by the manager on behalf of the owners corporation or committee. A complaint cannot be made about a personal injury. A complaint can no longer be made to an owners corporation in relation to the recovery of any fees, charges, contributions or amounts owing to the owners corporation.

Under section 153, the owners corporation must respond to a complaint under section 152 in three ways: i it may provide a notice to rectify a breach (s 155)

followed by a final notice (s 156) and ultimately, an

application to VCAT; ii it may decide to take no action; or iii it may apply to VCAT for an order requiring the

person to rectify the breach. A person may formally request the Director of Consumer Affairs Victoria (CAV) (see ‘Contacts’ at the end of this chapter) to refer a matter to conciliation (s 160). This is availa­ ble to a current or former lot owner, mortgagee of a lot, an insurer, an occupier, buyer and manager (s 161).

VCAT may determine any dispute under the OC Act, OC Regulations, rules or the Subdivision Act.

Therefore, a buyer or insurer can complain to CAV but not to VCAT, whereas the reverse applies to a former occupier or manager. Unless the Director of CAV is approached, there is no formal means of dispute resolution by conciliation or mediation.

An owners corporation is prevented from taking action under Part 10 or applying to VCAT for an order in relation to an alleged breach unless the dispute resolution process required by the rules has first been followed and the owners corporation is satisfied that the matter has not been resolved through that process (s 153).

However, in 2016 the Supreme Court ruled that an owners corporation can apply directly to VCAT (i.e. without first going through the dispute resolution process) if the respondent fails to make a complaint. This decision appears to have been made incorrectly; it is difficult to imagine a circumstance where a lot owner would make a complaint about themself.

VCAT may make an order dismissing or striking out an application by an owners corporation for an order requiring the rectification of a breach referred to in section 153 if it is satisfied that the owners corporation has not complied with that section (s 164).

Disputes under the Subdivision Act do not require internal dispute resolution procedures (s 34).

The internal dispute resolution process is set out in model rule 6 of the OC Regulations (sch 2). An owners corporation may make its own rules regarding this process.

Within 14 working days of receiving a complaint in the approved form, a meeting must be held between the parties in dispute and either the grievance committee or the owners corporation. At the meeting, each party can be represented by a lawyer or another representative.

If the owners corporation decides to not take action, nor to apply to VCAT for an order relating to an alleged breach, it must notify the complainant and set out reasons for its decision (s 154).

Alternatively, prior to taking legal action, the owners corporation may ask the person to rectify the breach; if this is not done, the owners corporation can issue a final notice (ss 155–157).

If the owners corporation does not respond, or if the complainant is unsatisfied with the outcome, conciliation through CAV is available. There is nothing to prevent the complainant (not the owners corporation) applying directly to CAV and avoiding the internal dispute resolution process.

Section 159 requires that the owners corporation reports at an AGM any complaints received and where action is taken at VCAT. The report must not identify the parties in dispute.

The Owners Corporations List of VCAT hears owners corporations disputes and is a no-cost jurisdiction. You may need VCAT’s consent to be legally represented.

VCAT may hear and determine a dispute or matter relating to:

• a term of a contract of appointment of the manager of an owners corporation and whether the term is fair. (In so doing, VCAT must consider Part 2-3 of the Australian Consumer Law (Victoria) as if a reference in those parts to a consumer contract was a reference to the manager’s contract of appointment.) The key unfair contract terms provisions in the ACL&FTA that were unavail­ able to owners corporations have been specifically incorporated into the OC Act;
• the disposal by an owners corporation of goods abandoned on common property. VCAT may make an order requiring a lot owner to pay to the owners corporation reasonable costs incurred by the owners corporation in recovering an unpaid amount from the lot owner. VCAT may make an order requiring an occupier of a lot to grant entry to a lot or a building on a lot to a person authorised by an owners corporation to carry out repairs, maintenance or other works on behalf of the owners corporation on common property. If a person fails to comply with a rule of an owners corporation, that imposes an obligation that is binding on that person. Previously, VCAT could make an order imposing a civil penalty not exceeding $250 payable to the Victorian Property Fund. That amount has increased to $1100 and is now payable to the owners corporation. Under the OC Act (s 168), VCAT can award monetary orders, including expenses and costs on application. There is a presumption that a successful party will be awarded relevant filing and hearing fees. An owners corporation must follow up a notice with a final notice before applying to VCAT (s 157). An owners corporation can apply to VCAT for an exemption from compliance with certain requirements under the OC Act (s 170). An application for an exemption from the requirement to have a unanimous resolution requires that the vote in favour of the resolution be at least 75 per cent, with no votes in the negative (s 171(4)). Under clause 51ADA of schedule 1 of the VCAT Act, VCAT may make an order for costs incurred by an owners corporation other than costs incurred by a professional advocate such as those of a manager. New provisions of the OC Act clarify how a lot owner may apply to VCAT for an order that authorises the lot owner to commence, prosecute, defend, or discontinue a specified proceeding on behalf of the owners corporation (div 1b of Pt 11).

The OC Act includes specific provisions under Parts 10 and 11 for the handling of complaints about alleged breaches of conduct prescriptions applying to short-stay accommodation arrangements. VCAT may make orders including granting compensation, ordering civil penalties and prohibiting the use of a lot for short-stay accommodation. In certain circumstances, a short-stay provider and the occupant and the owner may be jointly liable for satisfying VCAT orders for compensation, rectifying losses or paying a civil penalty.