10 Things Every Victorian Lot Owner Should Know About Their Owners Corporation

Owning property within an owners corporation is different from owning a standalone house.

When you purchase an apartment, unit, townhouse or other lot within a Victorian owners corporation, you acquire an interest in a broader legal and physical structure. You own your lot, share an interest in common property and become a member of the owners corporation responsible for managing that common property.

That brings with it rights, responsibilities and financial obligations that can have a significant impact on both your day-to-day enjoyment of the property and its long-term value.

For lot owners, one of the most important things to understand is that assumptions based on how a building has historically operated are not necessarily the same as legal ownership or responsibility.

Documents matter.

Here are ten areas every Victorian lot owner should understand.

1. The Plan of Subdivision Is Fundamental

One of the most important documents affecting any property within an owners corporation is the registered Plan of Subdivision.

The Plan of Subdivision identifies the lots within the development, the common property and the boundaries between them. It can also identify separate or accessory lots such as car spaces, storage bays and storerooms.

This becomes particularly important when questions arise about areas that an owner or resident has used for many years.

For example, the fact that an apartment owner has historically parked in a particular car space does not necessarily mean that the car space forms part of that owner’s title.

Similarly, the fact that a particular storage cage has apparently been associated with an apartment for many years does not, by itself, establish that the storage area belongs to that apartment.

The starting point should be the registered Plan of Subdivision and the relevant title documents.

The Plan determines whether the area is part of a private lot, a separate accessory lot or common property. Historical occupation, numbering on a wall, labels placed on storage cages or informal arrangements between previous owners should not be treated as substitutes for checking the registered plan.

This is particularly important when buying or selling a property, undertaking renovations or attempting to resolve a dispute about parking or storage.

Where the plan is complex or the boundaries are unclear, owners should obtain appropriate professional advice rather than relying on assumptions.

2. Lot Entitlement and Lot Liability Are Different Things

The terms lot entitlement and lot liability are sometimes used interchangeably in casual discussion, but they have different functions.

Lot entitlement broadly relates to a lot owner’s share of ownership of the common property and their voting entitlement.

Lot liability, by contrast, determines the proportion of certain owners corporation expenses for which the lot owner is responsible.

Both are recorded in the owners corporation schedule forming part of the Plan of Subdivision.

This distinction matters when owners are reviewing fees or questioning why different apartments contribute different amounts.

A larger apartment, for example, may not necessarily have exactly the same lot liability as a smaller apartment. The relevant allocation is the one recorded for the subdivision, subject to any subsequent lawful amendment.

Owners who want to understand how their contributions are calculated should therefore look beyond the dollar amount on their fee notice and understand the lot liability attaching to their property.

3. Common Property Is Determined by the Plan, Not by Assumption

Owners frequently make assumptions about what constitutes common property.

A hallway is obviously likely to be common property. But matters become considerably less obvious when dealing with balconies, windows, external doors, pipes, garden areas, basement infrastructure or boundaries between adjoining lots.

The position can differ from one development to another.

Victorian guidance makes clear that common property is the property identified as such on the Plan of Subdivision.

Accordingly, statements such as “the owners corporation always looks after windows” or “everything outside the plaster belongs to the owners corporation” should be treated with caution.

The correct answer can depend upon the particular plan, its boundary notations and the circumstances of the development.

That distinction is important because responsibility for repairs can involve substantial sums of money.

Before an owner or committee decides who should pay for significant works, the relevant Plan of Subdivision should be reviewed.

4. Owners Corporation Fees Fund the Operation and Preservation of the Property

Owners corporation fees are not simply an administrative charge.

They fund the operation, maintenance and management of the common property and the owners corporation itself.

Depending on the development, expenditure may include building insurance, cleaning, gardening, lift servicing, essential safety measures, common electricity, security systems, management fees, repairs and major building works.

Owners should therefore look beyond the question of whether fees are “high” or “low”.

A low annual levy is not necessarily evidence of good management.

If an owners corporation continually underfunds maintenance, the apparent saving may simply defer expenditure until a major repair becomes unavoidable. At that point, owners may face a substantial special levy.

A better question is whether the owners corporation is collecting an appropriate amount having regard to the age, condition, services and future maintenance needs of the property.

5. Maintenance Planning Matters

Buildings are depreciating physical assets.

Roofs deteriorate. Waterproofing systems fail. Paint coatings break down. Pumps and mechanical equipment reach the end of their useful lives. Lifts require major upgrades. Concrete, façades, plumbing and drainage systems eventually require significant attention.

These costs should not come as a complete surprise.

Victoria’s owners corporation framework imposes different maintenance planning obligations depending upon the tier of the owners corporation. Larger Tier 1 and Tier 2 owners corporations are required to have maintenance plans and maintenance funds, while smaller owners corporations may choose to adopt them.

Regardless of whether a formal maintenance plan is compulsory, prudent owners should take an interest in the long-term condition of their building.

When reviewing an owners corporation’s finances, useful questions include:

What major works are expected over the next five to ten years?

Has money been set aside for them?

Are there known building defects?

Are important works continually being postponed?

A well-funded maintenance strategy can reduce the likelihood of sudden financial shocks and help preserve the quality of the property.

6. The AGM Is an Important Part of Property Ownership

Many lot owners treat the annual general meeting as something relevant only to committee members.

That can be a mistake.

The AGM provides owners with an opportunity to consider matters such as budgets, levies, insurance, contracts, maintenance, committee appointments and other decisions affecting the property.

Even owners who cannot attend should read the notice, agenda, financial information and minutes.

For investors, this can be particularly important.

A rental agent manages the tenancy. They do not necessarily monitor the broader financial health, maintenance strategy or governance of the owners corporation on behalf of the property owner.

Ultimately, those matters can affect the owner’s asset.

An informed owner should therefore keep an eye on both the performance of the individual property and the condition of the development as a whole.

7. The Committee Plays an Important Governance Role

Depending on the size and structure of the owners corporation, a committee may be responsible for making a range of decisions between general meetings.

Committee members are generally lot owners volunteering their time.

An effective committee can make a substantial contribution to a development by scrutinising expenditure, overseeing contractors, identifying maintenance priorities and ensuring issues are addressed in a timely manner.

However, committee membership should not be viewed as conferring ownership or control over the building.

The committee must operate within the authority available to it and within the broader statutory and governance framework applying to the owners corporation.

Good committee governance is generally characterised by proper records, transparent decision-making and a focus on the interests of the owners corporation rather than individual preferences.

Lot owners should take an interest in the committee’s work and, where appropriate, consider contributing themselves.

8. Owners Corporation Insurance Does Not Replace an Owner’s Own Insurance

The existence of owners corporation insurance can give owners a false sense that everything associated with their property is insured.

That is not necessarily the case.

The owners corporation will generally arrange insurance required in relation to the building and other relevant owners corporation risks, but individual owners may still require their own cover.

Owner-occupiers may need contents insurance.

Landlords may require landlord insurance covering risks associated with the tenancy.

Owners may also have improvements, fixtures, belongings or other interests that are not covered in the way they assume under the owners corporation’s policy.

An owner should therefore understand what the owners corporation’s policy covers rather than relying simply on the existence of a certificate of currency.

Insurance questions can become particularly important after water damage, fire or another major incident, when the distinction between building property and an owner’s contents or improvements can have significant financial consequences.

9. Renovations Should Be Checked Before Work Begins

Owners should not assume that because renovation work is being undertaken “inside their apartment”, no owners corporation issues arise.

Renovations may affect common property, building services, waterproofing, noise transmission, structural elements or the external appearance of the development.

Works involving bathrooms, flooring, plumbing, air-conditioning, balconies, external doors, windows or structural changes deserve particular attention.

Depending upon the proposed work and the particular development, consent or other approvals may be required.

There may also be rules governing contractor access, working hours, protection of lifts, disposal of building waste and use of common property.

The sensible approach is to investigate these requirements before contracts are signed and work begins.

Rectifying unauthorised works after the event can be substantially more expensive and contentious than obtaining the necessary approvals beforehand.

10. Owners Corporation Rules Apply Beyond the Owner

Every Victorian owners corporation is subject to rules governing matters relating to the control, management, use and enjoyment of lots and common property.

These commonly deal with issues such as parking, noise, pets, waste, behaviour on common property and interference with other residents.

Importantly, the rules are not relevant only to owner-occupiers.

They can also apply to tenants, occupiers and other persons using lots within the development.

That means investors should make sure their tenants are appropriately informed of the owners corporation rules.

Owners should also distinguish between an owners corporation rule and an informal practice within a development.

The fact that something has “always been done that way” does not necessarily mean it is an enforceable rule.

Likewise, a committee cannot simply create new restrictions informally because a majority of committee members prefer a particular outcome.

Proper process matters.

Good Owners Corporation Governance Protects Property Value

An owners corporation is much more than a mechanism for collecting fees and arranging gardeners.

It is responsible for managing shared property and making decisions that can have long-term financial consequences for every lot owner.

A development with appropriate maintenance, adequate financial planning, good records, effective insurance and sensible governance is generally in a much stronger position than one that continually postpones difficult decisions.

Lot owners do not need to become experts in owners corporation law.

They should, however, understand the documents governing their property.

In particular, owners should know where to find their Plan of Subdivision, understand their lot entitlement and lot liability, read important meeting documents and take an interest in significant maintenance and financial decisions.

And when questions arise about what an owner actually owns, the answer should not be based simply on historical use.

A car space does not become part of an apartment merely because successive residents have parked there. A storage cage does not necessarily belong to a particular lot simply because it has carried that apartment’s number for many years.

The Plan of Subdivision and registered title arrangements are the starting point.

That principle: check the documents rather than relying on assumptions — is one of the most valuable habits any lot owner can develop.

Good owners corporation management depends on owners, committees and managers understanding the legal structure of the property they are managing. When that foundation is clear, maintenance decisions, financial planning and day-to-day management are considerably easier to get right.

This article provides general information for Victorian lot owners and is not legal advice. Owners should obtain professional advice where there is uncertainty about title boundaries, ownership, legal obligations or a particular dispute (Consumer Affairs Victoria).