[JulieMcLean]

Yes, it is the same process for Company Title or a Service Company.

Write to the Company Secretary (usually the strata manager) and ask that it placed on AGM for investigation.

[JulieMcLean]

There is a procedure in the Transfer of Land Act 1958 (Vic) for the conversion of stratum title lots to a subdivision of lots and common property with an owners corporation. The procedure is as follows:

1. The service company unanimously resolves in general meeting to change the to a subdivision with an owners corporation.
2. Surveyors prepare a plan of subdivision into lots and common property with an owners corporation. Changing boundaries may trigger other compliance issues, so usually the plan is drawn to reflect the same boundaries (interior face). Any leases for carpark need to be redrawn.
3. Solicitors locate all the certificates of title and obtain the consents of the owners and all parties mainly mortgagees who have a registered interest endorsed on any title. This make take a while to contact everyone and get permission.
4. The service company applies to the Registrar of Titles for registration of the plan of subdivision and all certificates of title and consents to the application are deposited with the Registrar. Rules may be considered and registered at this time as well.
5. The Registrar of Titles registers the plan of subdivision and the owners corporation is created. Certificates of title issue for the new lots in the names of the owners.
6. An application is made to the Australian Securities and Investments Commission for the deregistration of the service company and any funds need to be dealt with.
7. The first annual general meeting of the new owners corporation is held within six months of registration of the plan and in accordance with the Owners Corporations Act 2006.

Depending on how many lots are involved it could take 12 to 18 months just to contact all the relevant parties. The main disputes as such will be around the allocation or transfer of car parking arrangements and the setting of lot liability and entitlement.

You need an experienced company share conversion lawyer.

Have you commenced the process or just wondering where to start?

[JulieMcLean]

Hi LovetheView,

I have trained all over Australia and I can tell you that what we do is the same here and worldwide, we face the same challenges. The requirements of legislation vary in each state, with some being very prescriptive and others being very vague. Whatever you have got is the minimum standard, the minimum operating procedure and the minimum governance, so you can definitely learn from others.

I am in Victoria, and I constantly refer to Qld or NSW as a guide on how to proceed. For example, in Qld the body corporate can set the major spending limit by ordinary resolution at a general meeting. There is no minimum or maximum amount that can be set. If no amount is set, the limit is the lesser of either:

• $1,100 multiplied by the number of lots in the scheme. or

• $10,000.

For example, the limit for a body corporate with 5 lots would be $5,500 ($1,100 x 5 lots), as this amount is less than $10,000.

In a 15 lot scheme the limit would be $10,000, because it is less than $16,500 ($1,100 x 15 lots).

Note: it does not prevent the body corporate or the committee from spending more than the major spending limit—it just requires 2 quotes to be considered.

In Victoria a committee can spend up to twice the annual budget – which can be a scary amount with no requirement for quotes by the committee! So, we could use the interstate experience and implement a spending delegation. So, this provides some good procurement governance that is absent from Victorian legislation.

So, you will definitely get value from being a member of OCN. You will have an opportunity to network with others who have already gone through an issue that you might be facing, learn the good and bad parts of legislation, hear about useful resources. 

OCNA (Owners Corporation Network Australia) has a strategic plan to expand to support owners Australia wide. It will take time to get to Tassie but it’s coming!

[JulieMcLean]

I assume you mean you a stratum with a service company or a company title.

Both are formed under the old Companies Act Cth (now Corporations Act Cth). When formed they have what is called Articles of Association or Memorandum, which sets out how decisions are made and who can make them.  So, you would need to check your specific deed to see how many directors are required to make a decision. It’s often just a few directors required to make decisions on behalf of the company for certain activities. If there is a carpark & lease to all units, not as much as a problem if someone will miss out. Their activities are regulated like any other company.

If not all benefit from a carpark a company may need to consider that those who do benefit pay for the privilege. If the leases are created before conversion, then the lease needs to deal with the assignment/transfer of the parties, to allow for the change in entity. When converting from Stratum to Strata, the existing leases may just transfer (if worded properly).

You will need to obtain legal advice to draw up the leases, but make sure the lawyer is properly briefed with the intention to convert to strata in the future. You will definitely need legal advice for the conversion from stratum to strata.

This is a great resource for Stratum & Company Title Understanding Company Title Requirements – JFM Andreyev (jfmlaw.com.au) The legal company is based in NSW, but as Companies fall under Commonwealth legislation, it doesn’t matter where you are based, except perhaps for the neighbourhood disputes chapter, some states (like Vic) have implemented local solutions.

Hope that helps.

[JulieMcLean]

Hi FromTheNorth,

In Victoria (and could be the same interstate) Section 16 of Water Act 1989 sets out your responsibility for the damage caused by your water leaving your property. However, the aggrieved person has to be able prove it was water coming from your property.

There was interesting case in VCAT. The common property slab had a cored hole, that should have been sealed and as a result that allowed the escaped water to penetrate and damage many more apartments than should have if the hole had been sealed. VCAT then determined that the common property was at fault for some of the claim.

So, whilst at first glance, it is your responsibility, there may be other contributing factors that may be worth investigating. Of course, the legal action you might get drawn into will cost to defend, so have a commercial outlook when thinking about it. It could be cheaper just to make an offer for the repair of her car.

[JulieMcLean]

Hi Frazer,

In Victoria, the boundary of a lot will be interior, median or exterior face. The boundaries between floors is most likely either interior or median and in either case the waterproof membrane is most likely a lot owner responsibility. This has been determined by VCAT a number of times but will depend on the interpretation of your plan. In addition, it is more likely that it was the failure of the membrane that caused the damage of the water leaking that is the subject of the claim rather than shower base itself.

Membranes fail overtime and is not considered an accident; hence it is not covered by insurance.

With respect to the shower base itself, you could ask the insurer why the shower base itself was not covered.

[JulieMcLean]

Hi Sydney1501,

I was inspired by your post to ask a panel of committee members their experience and thought I would share some of their practices:

1. They start the budgeting process by the 3rd quarter (even sooner if possible) of the financial year.
2. They ask the SM for excel output of the financials and to extrapolate the last quarter for budget purposes.
3. In Vic there is not an office bearer called “Treasurer” but those on the call have appointed one.
4. They then do essentially as you have done, check contracts for CPI adjustments, insurance outlooks, for admin fund, review contractors recommendations.
5. They review the Maintenace Plan, Reserve fund, capital works or sinking fund for both anticipated work in the budget year and the balance of the fund.
6. Once financial year end occurs, they confirm the actual figures of the last quarter.
7. Proposed budget circulated and feedback from owners reviewed for both funds.
8. Everything is finalised about a month out from the date of the AGM.

With respect to the deficit they all supported your position, absolutely fund the deficit and leave the loan as is.

Unfortunately, we ran out of time to discuss the governance aspect of how agreement is reached. But they all agreed it is a very important discussion and it is to be continued 🙂

[JulieMcLean]

Hi Bluie,

Have you offered your expertise to the Committee to help them navigate what needs to done? Committee’s are volunteers and are not necessarily engineers, lawyers, accountants etc. I am sure they would welcome your help with your idea of a plan of how to tackle the issue.

My guess is they are stuck on “who is responsible” which requires an interpretation of the plan. This needs to be done by a lawyer or land surveyor. This advice will cost anywhere from $2,000 – $10.000 depending on how large and complex the plan is.

Once the boundaries are defined and using the engineers report a clear responsibility and who benefits analysis can be done. Again, this may need legal advice to determine the basis of “benefit”. This advice will cost between $2,000 – $5,000 (but could be more if complex).

With this information, the committee can seek quotes from project managers – who can identify the scope of works, draw up tender, request for proposal or simple quotes depending on the size of the project, obtain tender/quote, assess the tenders/quotes and make a recommendation to the committee for the works. Seeking quotes from PM will cost if the strata manager is undertaking the task (hourly rate), unless the committee does it.

Then the committee needs to consider the funding methods for the Project Manager cost, plus the repair cost and voting thresholds. Hold the meeting, pass the resolutions and start to raise the necessary levies based on the legal advice in step 2.

I don’t know how frequently your committee meets. If is a large scheme it might meet monthly, if small it might only meet quarterly. To navigate this process and achieve the necessary funds could take more than 12 months.

If you have a funded Maintenace Plan, then funding the works may be quicker.

Hope that helps.

[JulieMcLean]

Hi Jimmy, just a correction. SCA (Vic) was never called it’s self OCN. Nor would I call it fledgling. In its 30 plus years history it has been:

1989 IBCM – Institute of Body Corporate Managers

2007 OCV – Owners Corporation Victoria – reflecting the change in legislation from body corporate to owners corporation.

2011 Strata Community Management Vic – reflecting the desire of all states and territories to unite as a federal body.

OCN Docklands as it was known however has struggled in the past and indeed has been fledgling. However, the good and exciting news is we now have a Victorian board member on the OCN board and I hope this is a big turning point for us in Victoria.

Fledgling no more for Victoria. Both organisations SCA and OCN are already working together to bring sustainability solutions, disaster resilience and best practices for the benefit of both owners and managers. I agree there will always be differences and times we will both speak independently but most of the time we are working to support each other when we can.

There is so much good we can do together and the reason why I and so many others volunteer.

Keep up the good work Jimmy.

[JulieMcLean]

Can I add a different perspective.

From the thread we know, whilst the manager has approved the window replacement, it would seem the problem stems from history.

“We now have three different types of windows/doors on the front of the building (think sliding vs swing and off centred vs centred) so it all looks a bit of a mess”

This says volumes to me.

1. The first unit window/door replacement went ahead and nobody – committee or owners did nothing about it. And not just at the time was nothing said but even at the next AGM, because if they had the committee or the owners corporation would have considered  “how do we want windows/door replacements to go in the future” recorded in the minutes This was the time to act and put a design guide in place- not 2023. The owners corporation has by default accepted this standard as it failed to do anything about it.
2. A second person has gone ahead and done a renovation and in the absence of any guidelines in place has done what they want as well. Its unknown if they asked permission, but again it would seem that no guidelines were developed after the second renovation. The owners corporation has by default again accepted this standard as it failed to do anything about it.
3. Now a third person has followed the others and replaced their windows. They have done the right thing and asked for permission. For some reason, everyone now thinks it should be different for the front unit wanting to replace their windows when the other two units who did the work can keep their windows.

I am not sure what outcome you think you are going achieve. At VCAT the following questions will be asked by someone:

• Was it reasonable that the front unit installed windows of a style and colour of their choice, based on the renovations that had already taken place and in the absence of any design/style guides?
• Was it reasonable for the strata manager to approve on behalf of the owners corporation the request, based on the renovations that had already taken place and in the absence of any design/style guides?

If you want this to stop then you need to put in place a design guide to control the type, colour and material of windows for the building, but don’t expect the 3 units to rip out what they put in, but rather include the words upon replacement windows will comply with the following standard. xxx. it will take time but the building will be around for a long time.

Develop the design guide, table at AGM and have the owners vote on the matter, if you can get a special resolution, add it to your Rules, then that is  even better.

While you are thinking about design guides, you might also think about other areas you would like to have control over. Like blinds, awnings, paint colour, where equipment may be mounted, fly screen door type etc.

If you haven’t already got a particular design guide in place when a request or a breach comes for consideration, that is the time to put one in place, not after the horse has bolted.

Then your manager can (hopefully) do the right thing.

[JulieMcLean]

Smoke drift is a breach of Model Rule 1.4 Smoke penetration:

A lot owner or occupier in a multi-level development must ensure that smoke caused by the smoking of tobacco or any other substance by the owner or occupier, or any invitee of the owner or occupier, on the lot does not penetrate to the common property or any other lot.

The tenant may have a right to smoke, but not if their smoking is a hazard or nuisance to others.

You can find the Model Rules on the Consumer Affairs website https://www.consumer.vic.gov.au/housing/owners-corporations/rules/model-rules

All owners, occupiers and visitors and guests are bound by the Rules.

Perhaps pass the Model Rules to the neighbour in the first instance. If it continues, apply to VCAT for a cease and desist order.

[JulieMcLean]

Assuming the Plan number starts with a SP or RP, your property is a strata plan. This means the common property is all the land on the plan excluding the footprint of each unit or accessory unit which is defined by buildings.

Being strata the horizontal boundary will be stated on the legend which typically will be “lies within floor/ceiling” or it will state a height and depth “25 feet above” or “3 feet below”. The vertical boundary will be median, unless otherwise stated.

So what does that mean to you.

Most likely the areas you refer to as exclusive use are common property. In Victoria we don’t have exclusive use bylaws, but the OC has the power to lease or licence any part of common property by special resolution.

I would suggest that your OC revisit all previous approvals and acknowledge those approvals and formalise the future management of those areas by granting lease or licence to individual owners.

The upside, a proper lease/licence covers all the assumptions like maintenance, repair, replacement, improvements, any limitations of use, insurance. These are the topics that lead to most disputes so good to have clarity.

The downside, if you are the only one with an area like this, the cost of preparing the lease/licence will be your cost. If there are others in same situation but not all, the cost will be shared by those needing the lease/licence.

[JulieMcLean]

The Benefit Principle may be applied in three different circumstances:

1. Section 23 (3A&B) allows an annual budget expense, normally paid based on lot liability, to be based on benefit. This does not relate to just maintenance but includes use and only in the circumstance where lot liability is not adequate.

2. Section 24 (2A) relates to where a special levy is to be raised for planned repairs, maintenance or other work, the benefit principle is to be considered.

3. Section 48 relates to where the OC has done the work and now recovers as a debt from the lot or lots that benefit from that work. It is often associated with Section 49 – Notice of Repair.

So, for the first example of toilet use, there is a difference between the lot having access to the common toilet facility and the lot opting not to use the common property toilet. For latter to be considered the access would have to be removed so the occupier of the lot or their guests could not access the toilet permanently. If the toilet could not be isolated, then the benefit (or lack of benefit ) is not established.

Then when compiling the annual budget, the cleaning, consumables, repairs and maintenance costs associated with the common property would be removed from the budget and raised as additional annual levy to those lots that benefit from the toilet as per Section 23.

Alternatively the OC could lease (special resolution) to the lots who benefit from the toilet and assign all costs to the lease holder.

In the second example for roof replacement, Section 24 would be used especially if a special levy is to be raised, which triggers the requirement to consider the benefit principle. If the amount to repair the roof is more than twice the budget then a special resolution will also be required.

Please note that the threshold test for applying the benefit principle is “some but not all” and in most cases all lots benefit from works to common property. So apply sparingly, it’s a slippery slope that can get out of control very quickly.

[JulieMcLean]

If the leak was an insurable event eg burst pipe, then a claim by the lot with the damaged floor can be made. If the damage was caused by failure of common property the OC pays the access.

If the damage was caused by failure of lack of maintenance to the common property eg gutters were full then the insurance may not respond. The OC is responsible for the reinstatement.

However  in either case the OC may turn it’s mind to the benefit principle and recover some or all from the lot. For example if the floor is 15 years old and new floor is to be laid, then a proportional contribution may apply.

If it is a failure of private property then you have a damages claim against the lot owner above unless it is an insurance claim. In which case the excess is paid by either the lot owner or by you depending on the benefit received but often is negotiated.

If the excess is very high for unresolved common property water claims, then the OC may also contribute to the excess payment. For example excess for water damage is $10,000 when normally it is $1,000, if the work required is greater than $10,000 the OC needs to contribute to the excess as well.

Hope that helps

[JulieMcLean]

Getting the owner of the lot to take the matter seriously is the problem here. They simply don’t understand the implications of the new minimum rental standards have on them, even though they are not the landlord. The liability they are exposed to – your loss of rent, repair to your property and if that involves mould, this could be significant.

By the same token, you need to be able to show that you expidateded the matter in way that didn’t increase those costs unfairly.

The quickest way for you to get the owners attention and hopefully resolve the issue is to apply to VCAT seeking an order to stop water flowing from their apartment to yours.

This is because most people will reach out and try to resolve something like this before it gets to the next stage as soon as they receive a letter from VCAT rather than let the matter proceed to VCAT.

Section 16 of the Water Act is your better friend for this matter, followed closely by Section 129 of the Owners Corporations Act.

I would also specify that the balcony be water tested to identify the leak, rather than have a plumbers best guess. You don’t want this to drag on, you need it fixed.

You can find a guide on the VCAT website for filling in the application form or you can speak to a lawyer for their guidance and assistance.

Some might suggest getting the owners corporation involved but without knowing the property boundaries of your lot this has not been suggested. Adding another party to the matter just increases the time taken to resolve as it requires many more people to be involved and can be easily derailed and it will cost more but it is also a plan B!

[Author]

Replies