A body corporate or owners corporation (as updated by the Owners Corporations Act 2006) is a stand-alone legal entity and is that legal entity that owns and manages common property.
A body corporate or owners corporation as such can enter into contracts, open and operate bank accounts, and can issue legal proceedings – or be party to legal proceedings. That is to say, an owners corporation can sue another party or be sued by another party.
In Victoria, VCAT (and sometimes the courts) are full of legal matters involving owners corporations and owners corporation disputes.
There are a long list of matters that might lead to legal proceedings involving owners corporations, some common ones include:
- Financial matters – the issuing and collecting owners corporation levies, disputes over how levies are calculated and issued to owners, the owners corporation pursuing lot owners for overpaid OC levies;
- Decision-making disputes – how owners corporation or Committee resolutions were passed, the effectiveness and legality of resolutions, the method of how resolutions were sent and passed, the enforcement of OC resolutions;
- Maintenance disputes – the owners corporation or lot owners neglecting building maintenance and upkeep, disputes regarding whether a repair cost should be borne by the owners corporation or lot owner(s), fence disputes between the lot owners, the OC, and neighbouring properties; lot owners altering or impacting common property without due approval;
- Breaches of owners corporation rules – lot owners or visitors parking in private or visitor car parks, noises complaints and disputes, pet ownership complaints, unlawful usage of lots, non-compliance with uniformity of building appearance such clothes lines or shade sails on balconies or otherwise changing the external appearance of the lot, unauthorised or unapproved signage either within private lots or on common property; and
- Owners corporation management contracts disputes – the unscrupulous and unprofessional owners corporation management company refusing to accept their termination notice from the OC, the owners corporation management company claiming to have lengthy contracts and seeking unreasonable compensation regarding ‘break costs’.
Understanding Body Corporate Responsibilities
The owners corporation, through its decision making mechanisms of holding an AGM and electing a Committee, raises funds to maintain the common property. The responsibilities and duties of the body corporate / owners corporation includes also the managing of all the service contracts and contractors necessary for adequate building upkeep.
Owners corporations in Victoria are compelled by Section 46 and 47 of the Owners Corporations Act 2006 to repair and maintain both common property and services:
Owners corporations in Victoria must also have a dispute resolution process including internal grievance procedures, hearing procedures, and communicaiton procedures. The OC Act also sets out requirements for the management of OC funds:
Grounds for Legal Action
Individuals may have grounds to sue the body corporate / owners corporation when there’s clear negligence in property maintenance, failure to address disputes, or mismanagement of funds. Occupational health and safety is also another that owners corporations should be mindful of as it can risk area when it comes to legal proceedings against the owners corporation
A few years ago, we had an owners corporation in Melbourne’s northeast contact us to help to terminate the developer appointed OC management company and change to a better OC management services provider. As part of the disclosures, the Committee informed us that they had legal case that was close to resolution. A visitor to the building had slipped in their car park – one of the ground floor tenants had left residue oil in the area nearby their grease trap. Ultimately the owners corporation and insurance companies paid this visitor a substantial sum due the injury sustained and resultant loss of wages.
Legal Process and Considerations
Individuals in deciding whether or not to sue the body corporate / owners corporation should remove the emotion out of the matter and look at the facts at hand. Individuals should also consider whether all avenues have been exhausted including consultation with the Committee and/or OC Manager.
Alternative dispute resolution methods and the importance of documenting grievances before pursuing legal action can often save individuals unnecessary time and money associated with legal proceedings.
Individuals and owners corporations should be aware that there are time limitations on certain matters. Building defects is definitely an important timely matter that all Committees and owners corporations should action before time limitations expire.
Case Studies and Precedents
VCAT in full of owners corporation cases in Victoria and the VCAT database is publicly assessable to search for any applicable cases.
A recent strata management matter involved a tenancy dispute with the tenant having failed to achieve what he wanted in NCAT, brought proceedings in the Supreme Court of NSW. The proceedings audaciously was claiming for damages of $850 million against the owners corporation. The tenant was claiming that the OC was somehow undertaking a criminal conspiracy to cause loss to the tenant. Ultimately common sense prevailed and the Court not only dismissed the application but ordered that the applicant pay the OC’s legal costs on an indemnity basis.
So all disputes are balanced and reasonable – and it’s often unfortunate that some matters need to go far.