Key Takeaways:
- Significant alterations to common property need a special resolution, ensuring major costs are backed by a strong majority.
- Members altering common property only need an ordinary resolution since they cover the costs themselves.
- Owners corporations must still secure protections like indemnities, insurance, and compliance to avoid future risks.
The key obstacle to an owners corporation carrying out a significant alteration to common property is the passing of a special resolution unless the alteration involves some element of urgency and the preservation of health and safety.
Under section 52 of the Owners Corporation Act 2006 (Vic)(“Act”) an owners corporation must not make a significant alteration to the use or appearance of common property unless the alteration is:
- first approved by a special resolution of the owners corporation; or
is permitted by the maintenance plan; or - it involves upgrading works for the common property that are approved by the owners corporation by way of a special resolution; or
- there are reasonable grounds to believe that an immediate alteration is necessary for safety purposes or to prevent significant loss or damage.
When does an alteration to common property require a special resolution?
The passing of a special resolution is no easy task.
It requires 75% of the total votes for all the lots affected by the owners corporation or if a poll is demanded by a member, the count is conducted on the basis of each unit of lot entitlement being counted as one vote.
By comparison, an ordinary resolution is much easier to achieve because it only requires 50% of votes cast at a meeting of members on the basis of one vote per lot or if a poll is demanded, the count is conducted on the basis of each unit of lot entitlement being counted as one vote.
Can a lot owner alter common property without a special resolution?
Interestingly, the restriction imposed by section 52 of the Act only applies to owners corporations, and does not affect owners corporation members.
In other words, members are not required under the Act to obtain a special resolution to make a significant alteration to the use or appearance of common property. Approval of the alteration by an ordinary resolution is sufficient.
Why do lot owners only need an ordinary resolution for common property alterations?
At first glance it may seem unusual but if you consider it carefully it’s not really so strange.
When the alterations are to be carried out by the owners corporation the cost of the works must be borne by the owners corporation and shared among the members.
On the other hand when common property alterations are to be carried out by a member it is assumed that the member is to bear the costs of those works.
This is usually the case because the member has asked the owners corporation for permission to carry out the works presumably because, while the alteration to common property may be of some benefit to the owners corporation, the member’s proposal is designed (first and foremost) for the benefit of that member.
What protections should an owners corporation require when a member alters common property?
Even when a member is to pay the cost of the works to be carried out to alter the common property, an owners corporation acting prudently and in accordance with its obligations under the Act, must seek to retain some control over the works so as to protect the interests of the owners corporation. For example, an owners corporation must seek an undertaking from a member that:
- the member will indemnify the owners corporation and the other members from all loss and damage arising out of the works;
- the member must take out appropriate insurances for the protection of the owners corporation and the other members; and / or
- the member must repair any defects in the common property caused by or arising out of the works;
- the member must comply with all laws relating to the works;
- the member must give the owners corporation on completion as ‘built’ plans;
- the member must give to the owners corporation on completion all occupancy permits and other formal certificates and ‘sign offs’ usually given in respect of the relevant works; and
- the member will not cause a nuisance to use and occupation of other lots in the subdividing by owners and occupiers of these lots.
How can expert strata management support help with common property alteration decisions?
Common property alterations can involve voting requirements, compliance obligations and ongoing risk management. If your Committee is looking for clearer guidance, stronger governance support and a more responsive management approach, expert strata consultants can help. Contact our team to discuss your owners corporation’s needs.
