Can lot liability be changed in Victoria?

Yes, but it is complex. Lot liability is set in the plan of subdivision and determines how levies are calculated. Changing it usually requires a unanimous resolution of the owners corporation and an amended plan lodged with Land Use Victoria. A licensed surveyor and legal advice are often required.

What happens if an owner does not pay owners corporation levies?

Levies are a legal debt under the Owners Corporations Act 2006 (Vic). If an owner does not pay, the owners corporation may charge interest, commence recovery proceedings and recover reasonable legal costs. Unpaid levies can delay a sale or refinancing until cleared.

Can a special levy be challenged in Victoria?

Yes, if proper procedure was not followed. A special levy must be approved in accordance with the Owners Corporations Act 2006 and the rules of the owners corporation. An owner may challenge it if notice was defective, the resolution was invalid or costs were not allocated correctly. Disputes can be referred to Consumer Affairs Victoria and VCAT.

How To Calculate Body Corporate Levies?

Key takeaways:

Your share of OC levies isn’t random, it’s calculated using lot liability set in the plan of subdivision.
What you see on your levy notice includes more than just admin fees. There’s a long-term plan behind the numbers.
Unexpected costs like insurance spikes or special levies can be managed with better planning and engaged committees.

In Victoria, owners corporation levies are calculated by taking the total budget and dividing by the total lot liability for that given owners corporation. Each lot owner’s levy contribution can be then calculated by multiplying the lot liability for that given lot (per the OC report which can be obtained from Landata Victoria).

Committees and OC managers always need to ensure that levy contributions are correctly calculated to minimise issues and disputes later on. Section 23 (3) of the Owners Corporations Act 2006 states that “annual fees set must be based on lot liability”.

What do owners corporation levies cover?

When an owner or investor receives their levy notice they will see two key components – the Admin (i.e. administrative / operating fund) and the ‘Sinking’ (i.e. the maintenance fund).

image of an example of body corporate levies fees

Section 23 of the Owners Corporations Act 2006 states:

Owners corporation may levy annual fees
(1) An owners corporation may set annual fees to cover—

(a) general administration; and
(b) maintenance and repairs; and
(c) insurance; and
(d) other recurrent obligations of the owners corporation.

(2) If the owners corporation has an approved maintenance plan, the annual fees must include fees that are—

(a) designated for the purpose of the maintenance plan; and

(b) sufficient to allow the maintenance plan to be implemented.

The difference between lot entitlement and lot liability

In Victoria, a distinction is formed and made between lot entitlement and lot liability. For more detail, see our guide to how lot entitlements are calculated. The Owners Corporations Act 2006 defines these as:

lot entitlement in relation to a lot affected by an owners corporation, means a number specified in the plan as the lot entitlement for that lot, expressing the extent of the lot owner’s interest in any common property affected by the owners corporation.

lot liability in relation to a lot affected by an owners corporation, means a number specified in the plan as the lot liability for that lot, expressing the proportion of the administrative and general expenses of the owners corporation which the lot owner is obliged to pay.

How owners corporation budgets are set

Section 72 (2) (e) of the Owners Corporations Act 2006 requires for the proposed annual budget of the owners corporations to be included on the Notice of AGM for voting at the AGM.

The setting of the annual budget for buildings in their second year and beyond is made easier as there then exists prior year’s actual expenditures to act as reference point for the current year’s budget. The setting of the annual OC budget should be a consultative and interactive process between the Committee and the OC manager.

How shared expenses are allocated in an owners corporation

Share expenses for common property, amenities, and facilities are by shared by all owners on the basis of lot liabilities. There can however be additional costs that get incurred by the owners corporation as a result of particular lot owners, occupiers, or uses.

Section 23 (3A) and Section 23A of the Owners Corporations Act 2006 makes allowance for these scenarios as it enables that OC to pass onto any costs that would be unfair to be shared solely based on lot liabilities. The aim and importance with communal living is about equitable allocation.

Maintenance plans and maintenance fund contributions in Victoria

Under the Owners Corporations and Other Acts Amendment Act 2021 which took effect from 1 December 2021, Tier 1 and Tier 2 owners corporations in Victoria must prepare and approve a maintenance plan. Tier 1 and Tier 2 owners corporations in most cases are likely to engage a specialist building consultant or quantity surveyor prepare a maintenance report and plan for their building.

Owners Corporations in Victoria that are classed as Tier 3 to 5 are not required to prepare and approve a maintenance plan but can choose to do so.

Key expenses that influence your owners corporation levies

Administrative costs are very much driven by the building and what assets, facilities, and amenities the building has. We have seen buildings with 30 lots with an annual gardening expense of $32k as the building was required to have a vertical garden as part of its planning permit.

Broadly speaking, administrative costs can classified into:

key service contracts (i.e. cleaning, caretaking, gardening, ESM servicing, lift servicing, garage door servicing, pump servicing);
repairs and maintenance (i.e. electrical, plumbing, gate repairs, fence repairs);
insurance (i.e. building replacement, officer’s bearers’ liability, fidelity cover, machinery breakdown etc.); and
administrative & compliance costs (i.e. the cost of the OC manager including mgmt. fees, disbursements, and additional fees/charges, cost of ATO compliance including cost to lodge BAS/tax returns).

Sample OC budget showing administrative expenses

What is a special levy?

Owners corporations may need to raise special levies when there is a shortage of funds or unexpected expenditure. Special levies can generally not always popular as to owners and investors it’s an unplanned and unanticipated costs that can sometimes be significant.

Special levies can best be avoided through proper budgeting, cashflow planning, and sound OC management input. Owners looking to better manage or reduce unnecessary owners corporation costs should also understand the common causes of high OC fees.

If special levies become frequent or unexpected, it can point to gaps in budgeting or forward planning.

In these situations, a brief conversation with a strata specialist can help clarify whether a change in management would support more consistent planning and, if so, guide the Committee through that transition to improve budget predictability over time.

Why have owners corporation levies increased in Melbourne?

Owners corporation levies in recent years have been subject to inflationary pressures and can often be impacted by broader economic factors. The owners corporation in running its annual administrative budget is after all going to the market and procuring services and services contracts.

The other big that has driving OC budget and levies has been insurance and the insurance market. In some cases, flammable cladding and other significant risks have increase OC insurance premiums by 400% or more.

As always, communication and transparency with owners is key. We’ve seen proactive Committees and invested OC management companies spend the time to inform and educate owners through newsletters and information sessions.

Good governance is the key to stable levies

The goal of owners corporation levies is to ensure that the building runs smoothly, services and standards are maintained, and property values are upheld. This can be achieved (and probably can only be achieved) through good governance.

Good governance requires interested owners, proactive OC Committees, and a professional owners corporation management company (and manager).

Since January 2014, Strata Consultants Melbourne has specialised in helping OC Committees to make the change to good, professional OC management. If you’re happy with the running and management of your OC, speak to us on 03 9007 2618.