Duties and rights of lot owners and occupiers
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Duties and rights: lot owners and occupiers
A lot owner must comply with the:
- Owners Corporations Act 2006 (Vic) (‘OC Act’);
- Owners Corporations Regulations 2018 (Vic) (‘OC Regulations’); and
- rules of the owners corporation (s 128 OC Act).
A lot owner must give notice to the owners corporation of any application by the lot owner for a building permit or planning permit or the certification of a plan of subdivision affecting the lot (s 133 OC Act), however consent of the owners corporation is not required. The period of notice is not specified.
Under section 134 of the OC Act, both a lot owner who sells and a person who acquires a lot must advise the owners corporation within one month of completion of the contract.
A lot owner who does not occupy the lot or who will be absent for more than three months must provide the lot owners mailing address for service of notices (s 136 OC Act). The lot owner not in occupation of the lot must give a copy of the rules of the owners corporation to the occupier of the lot (s 136).
An occupier of a lot must comply with the OC Act, OC Regulations and rules of the owners corporation and must not use or neglect the common property (s 137 OC Act), but there is no provision that the lot owner reveals particulars of the occupier to the owners corporation.
Duties and rights: initial lot owners (developers)
Developers, as initial owners, must be cognisant of their obligations under the OC Act.
It is common practice for initial owners to earn lucrative income by leasing prominent areas of the roof from an owners corporation. These areas are ultimately used for billboard advertising and/or mobile tower communication. The head lease is usually for a term of 99 years at a ‘peppercorn’ rent with no obligation for the developer to maintain any segment of the roof. Instead of leasing, the developer may alter the plan of subdivision and purchase a desired area. That is less common because it entails costs such as owners corporation fees, annual land tax and municipal rates.
The initial owner is one of six classes under the OC Act (s 68) with an obligation to act honestly and in good faith. Although ‘good faith’ is not defined, it is associated in the OC Act with concepts of honesty, due care and diligence, fairness, the avoidance of conflict of interest, and acting in the interests of the owners corporation. The commandeering of common property by an initial owner for the benefit of that owner to the exclusion of other or subsequent lot owners fails the test of acting in good faith.
Amendments to the OC Act (effective 1 December 2021) have made this practice more problematic. Under section 68(4B)(b), the initial owner of land affected by an owners corporation must not designate as a private lot what normally would be common property or services. ‘Initial owner’ means the person who was the applicant for the registration of the plan of subdivision (s 68(5)).
The amended OC Act fails to consider that an existing owners corporation, either limited or unlimited (defined in the Subdivision Act), may be totally purchased for refurbishment or redevelopment. In such circumstances, section 68(4B)(b) does not apply as the developer is not the initial owner. However, the duty to act in good faith does apply as the developer is the owners corporation.
A developer should be wary that it could be sued by the owners corporation if it acted contrary to its obligations under the OC Act. A developer, a manager or former manager, an occupier or former occupier of a lot, or a mortgagee may commence legal proceedings to resolve an owners corporation dispute (s 163), provided the action is commenced within six years.
A 99-year lease with regular market rent reviews is valid. The fee could be nominal if the lease is non-discriminatory and is applicable to all lot owners, such as the use of common property for the parking of vehicles.
