Entitlement and liability

When determining the lot entitlement, the owners corporation must take into account the value of each lot and the proportion that value bears to the total value of the lots affected by the owners corporation.

When determining the lot liability, the owners corporation must take into account the amount that is just and equitable for the owner of each lot to contribute towards the administrative and general expenses of the owners corporation. The statutory basis for the allocation of lot entitlement and lot liability are sections 27F(2)(a) and 33 of the Subdivision Act.

The entitlement and liability of each owner is expressed in the plan of subdivision. Lot entitlement ultimately determines the voting rights of each owner and the lot owner’s share of any income the owners corporation may receive. The alteration of lot entitlement and lot liability requires a unanimous resolution that can be difficult to obtain. Alternatively, an application can be made to the Victorian Civil and Administrative Tribunal (VCAT) if owners wish to challenge this allocation.

The requirements for an exemption from the obligation to have a unanimous resolution are set out in section 34D of the Subdivision Act. This section covers issues such as when it is impractical to obtain a member’s vote, or when more than 50% of the voting rights support the ballot and the purpose is likely to bring economic or social benefits to the subdivision as a whole that are greater than any disadvantage to the members who did not consent. Note that the same exercise must be undertaken for each owners corporation where there are multiple owners corporations affecting a lot.

The owners for the time being, and any purchaser in possession of a lot, are liable to pay any outstanding fees, charges, contributions or amounts owing to the owners corporation in respect of that lot (s 28(1) OC Act). For this reason it is important to ensure that any arrears are adjusted and paid at settlement or the new owner will become responsible.

Under section 28(2) of the OC Act a member of an owners corporation is not liable to pay or contribute to funds of an owners corporation exceeding the member’s lot liability. The section prevents the making of any resolution or rule that imposes a fine or administration fee or charge to an individual lot owner. It does not apply in circumstances where repairs, maintenance or other works are undertaken wholly or substantially for the benefit of some, or one, but not all of the lots affected by the owners corporation (s 28(3)) and that may include special levies for extraordinary items of expenditure (for an example, seeInsurable risk”).