Owners corporations

A manager of an owners corporation who receives a fee or reward must be registered (s 119 Owners Corporations Act 2006 (Vic) (‘OC Act’)). The penalty for non-compliance is 60 penalty units (s 178).

A registered owners corporation manager must:

• pay an annual registration fee to the Business Licensing Authority (s 183);
• act honestly and in good faith in the performance of the manager’s functions;
• exercise due care and diligence; and
• not make improper use to gain an advantage personally or for any other person (s 122(1)).

A volunteer manager has similar immunity to a committee member (s 123). Such immunity may be viewed as alleviating the need to have office bearers’ liability insurance, although the prospect of funding a legal defence is a consideration.

A tier 1 owners corporation must appoint a manager (this is optional for other tiers). A manager cannot be appointed for a period that exceeds three years. It is the owners corporation that determines any offer of renewal thereafter.

A manager’s contract of appointment must not include terms (s 119A) that:

• require any resolution beyond a simple resolution or the requirement to convene a general meeting or take any other prescribed step before revoking the appointment of the manager;
• allow the manager to renew the contract of appointment at the manager’s option;
• require a tier 1 owners corporation to give three months or more notice of its intention to revoke the manager’s appointment;
• provide for the automatic renewal of the contract of appointment if the owners corporation fails to give notice, in accordance with the terms of the contract, of its intention to not renew the manager’s contract, in which case the contract continues on a monthly basis or shorter period equal to the contractual notice; and
• restrict the ability of the owners corporation to refuse consent to an assignment of the manager’s contract of appointment but not if the assignee is a member of a professional body or association approved by the Director of Consumer Affairs.

A manager must:

• take reasonable steps to ensure that any goods or services procured by the manager on behalf of the owners corporation are procured at competitive prices and on competitive terms;
• not exert pressure on any member to influence the outcome of any decision of the owners corporation;
• provide written notice to the chairperson of the owners corporation disclosing any commission, payment or other benefit that the manager is entitled to receive, other than from the owners corporation, before entering into a contract for the supply of goods and services and those details must be included in the manager’s report at the owners corporation’s annual general meeting;
• immediately on becoming aware that a proposed contract is with a supplier with whom the manager has a beneficial relationship, and before the contract is entered into by the owners corporation, provide written disclosure to the chairperson of the owners corporation of any beneficial relationship with that supplier.

The terms ‘associate’ of the manager, ‘control’ and ‘executive officer’ are defined in the OC Act (s 68(5)).

A manager must hold all money on behalf of separate owners corporations in separate bank accounts but may hold moneys in the same bank account if:

1. each owners corporation is on the same plan of subdivision, and each has consented;
2. the bank account is a statutory trust account held by a licensed estate agent, legal practitioner or licensed conveyancer.

A person guilty of specified criminal offences is not eligible to register as an owners corporation manager if contrary to the public interest.

Regrettably, there are no educational requirements in order to be licensed as an owners corporation manager, and there is no requirement to engage in continual professional development.

The initial owner or an associate of the initial owner must not be appointed as the manager of the owners corporation or vote on any resolution relating to a building defect on the plan of subdivision or receive any payment from the manager of the owners corporation in relation to the manager’s contract of appointment.

The appointment of any manager prior to the first meeting of the owners corporation expires at the first meeting (s 67B(1)). Under section 119(1D) of the OC Act, a person must not be appointed as the manager of the owners corporation for a period that exceeds three years.

The manager of an owners corporation must submit a report of the manager’s activities to each AGM, including details of professional indemnity insurance held (currently $2 million) (s 126 OC Act).

Records must be returned, not merely made available for collection, within 28 days of the manager’s appointment being terminated (s 127) even though fees to the manager may remain outstanding.

If the manager does not comply with section 127, the owners corporation must commence legal proceedings against the manager. To do this, 75 per cent of the owners corporation members must agree to a special resolution (s 18(1)) or to an ordinary resolution if the matter is within the civil jurisdictional limit of the Magistrates’ Court (s 18(2)). Achieving this may be difficult considering the manager holds the records of the names, addresses and contact numbers of the owners corporation members. Therefore, in such circumstances, VCAT allows a single member to make an application on behalf of an owners corporation under sections 169I and 169J of the OC Act.

Under section 119(6) of the OC Act, an owners corporation can dismiss a manager. Once the manager’s appointment is revoked – even if the term of employment has not ended – there is an absolute obligation under section 127 for the manager to return funds and records within 28 days. A committee may dismiss a manager unless the owners corporation decides that the manager can only be dismissed at a general meeting (see s 82). Any term in the manager’s employment contract stating that the decision to dismiss a manager can only be made at a general meeting is invalid under section 202 because it excludes, modifies or restricts the operation of the OC Act.

When a manager is dismissed before the end of the term of their employment, the manager may be able to sue the owners corporation for breach of contract. In such circumstances, damages are limited to the loss of profits for the unexpired term and not the agreed fee for that period.