Owners Corporations Amendment Bill 2013 – annual fees, special levies and the benefit principle

Following Macaulay J’s decision in Mashane Pty Ltd v Owners Corporation RN 328577 [2013] VSC 417, amendments were made to the OC Act to clarify the basis on which annual fees are set by OCs, and the way in which OCs recover costs and levy special fees.

Lot owners ordinarily pay for OC works in accordance with their lot liability. But, where works are “wholly or substantially” for the benefit of only some of the lots, the “benefit principle” in s28(3) of the OC Act may apply and the benefited lot owners can be asked to contribute a larger proportion of the cost.

The Amendments clarify that:

  • The benefit principle does not apply to annual fees. Annual fees are set according to lot liability, including costs for repairs, maintenance or other works (s23 OC Act).
  • The benefit principle applies to fees for extraordinary items of expenditure including those relating to repairs, maintenance or other works, undertaken wholly or substantially for the benefit of some lot owners (s24 OC Act). So, those who benefit more, pay more. Where no lot benefits more than another lot, fees are calculated according to lot liability.
  • The benefit principle applies to fees for upgrading works on the common property (s53 OC Act)

Although the benefit principle does not apply to annual fees, the Second Reading Speech for the Bill appears to indicate that an OC can recoup actual expenditures (rather than future expenditures) of annual fees on repairs, maintenance or other works undertaken wholly or substantially for the benefit of some only of the lots on the basis of the benefit principle under s49 of the OC Act.

It is unclear whether this applies to payments from the maintenance fund to implement a maintenance plan, in particular where the repairs are not urgent.

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