Effective financial management is essential to maintaining a comfortable living environment and protecting the long-term value of a strata property.
For Owners Corporations (OCs) in Melboune, a key part of this responsibility lies in how budgets, levies, and spending authorities are set, particularly when it comes to Owners Corporation Committee spending limits.
Under the Owners Corporations Act 2006 (Vic) (OC Act), OC Committees are empowered to make many operational decisions on behalf of lot owners once elected. However, that authority is not unlimited.
Spending limits, when properly set at the Annual General Meeting (AGM), help ensure funds are used responsibly, transparently, and in line with the owners’ expectations.
When spending limits are unclear or poorly defined, it can lead to overspending, disputes, and a loss of trust. When set well, they strike the right balance between good governance and efficient day-to-day management.
Key Takeaways:
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Clear limits reduce the risk of misuse, disputes, and potential personal liability for Committee members.
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Clear thresholds ensure overspending is avoided while maintenance stays efficient. They also make sure urgent repairs can be approved quickly.
- Spending limits should reflect the building’s size, finances, and future plans. A tailored approach supports long-term asset value and financial stability.
What is an owners corporation Committee in Melbourne
An OC Committee is elected by lot owners (and eligible proxy holders) to act on behalf of the Owners Corporation.
Most Owners Corporations in Victoria appoint a professional OC management company to assist with day-to-day administration. Where a professional manager is appointed, the Committee’s role is to:
- oversee the manager
- approve expenditure within authorised limits
- ensure compliance with Victorian legislation
- act in the best interests of the Owners Corporation
This raises an important governance question:
Should the owners corporation set spending limits separately for the Committee and the OC manager?
In most Victorian buildings, particularly Tier 1 and Tier 2 OCs, the answer is yes. Clear delegation avoids confusion, delays, and financial overreach.
The role of the OC Committee in financial management
OC Committees play a central role in managing the corporation’s finances and ensuring funds are used appropriately.
Budgeting and financial planning
The Committee prepares and oversees the proposed annual budget for approval at the AGM. This includes allocating funds for:
- administration costs
- maintenance and repairs
- insurance
- utilities and services
- long-term capital works
Levy setting
Under sections 23 and 24 of the OC Act 2006 (Vic), the Owners Corporation may raise annual fees and special levies to meet its financial obligations.
While the Committee prepares recommendations, levy approval ultimately rests with the Owners Corporation through the required resolution process.
Maintenance plan implementation
For Tier 1 and Tier 2 OCs (more than 50 lots), a maintenance plan is mandatory under Victorian law. The Committee must ensure:
- the plan is properly funded
- capital works are anticipated
- maintenance fund allocations align with forecast expenditure
Financial oversight
The Committee must ensure spending stays within approved limits unless additional approval is obtained through the appropriate resolution process.
Many Committees only realise the difference strong financial oversight makes when they compare their current management approach with what’s possible under a more structured arrangement.
For example, a townhouse Owners Corporation in Glen Huntly approached Strata Management Consultants after experiencing unclear fee structures and limited financial transparency from their long-standing manager.
Through a structured tender process and side-by-side proposal analysis, the Committee appointed a new manager with clearer cost controls and fixed disbursement terms, reducing annual management costs by $421 while improving financial accountability.
Strata Management Consultants helps Victorian OC Committees review their current manager and, where needed, transition to carefully vetted Melbourne managers aligned with their building’s governance needs.
The focus isn’t simply changing managers, but strengthening financial oversight and protecting the long-term stability of the building.
OC financial record-keeping obligations
Proper financial record-keeping underpins transparency and trust.
Under the OC Act, Owners Corporations must:
- keep records of all income, expenditure, assets and liabilities
- maintain accurate financial reporting compliant with tax and GST obligations
- make records available for inspection by lot owners in accordance with legislative requirements
Failure to maintain proper records can expose the OC to disputes and regulatory scrutiny.
Types of owners corporation spending limits
Spending limits form a critical part of financial governance.
Section 72(2)(e) of the OC Act requires that the proposed annual budget be presented for approval at the AGM. This is typically when spending authorities are established or confirmed.
Routine maintenance
Routine maintenance covers regular and recurring works such as cleaning common areas, gardening, and minor repairs. These costs are usually funded through annual fees and are essential to preserving the building’s condition and value.
Capital expenditure (CAPEX)
Capital expenditure relates to significant, long-term investments such as roof replacements, lift upgrades, repainting, or major driveway works. These costs are generally funded through the maintenance fund and guided by an approved maintenance plan.
Emergency spending
Emergency spending addresses urgent and unforeseen events that pose safety risks or could cause further damage if left unattended. While some emergencies may require immediate action, they should still be reported to lot owners as soon as practicable, and special levies may be required to cover the cost.
Legal framework for OC Committee spending in Victoria
The OC Act allows an owners corporationto levy annual fees to cover:
- general administration costs
- maintenance and repairs
- insurance
- other recurring obligations necessary for the building’s operation
While the Act does not prescribe specific dollar limits, it empowers the owners corporation to set spending limits through an ordinary resolution at the AGM. This ensures that lot owners retain control over how their money is used.
Section 43 – Payments from the maintenance fund
- Subsection (3): Expenditure must not exceed what is reasonably required for its purpose or any spending limit set by the OC.
- Subsection (4): Spending must comply with any additional conditions imposed by the OC.
- Subsection (5): All expenditure must be reported to lot owners as soon as practicable after it occurs.
These provisions reinforce the importance of clear spending authorities and transparent reporting.
OC Committee spending that is not permitted
Committee members must always act in the best interests of the owners corporation. Spending that is not permitted includes:
- Personal benefit: Using OC funds for personal gain or unauthorised third parties.
- Unreasonable or unnecessary expenses: Costs that are excessive or unrelated to the proper operation or maintenance of the property.
- Bypassing approval processes: Failing to follow required resolutions or approvals set by the OC Act or the AGM.
Consequences of unauthorised spending
Committee members have a legal duty to act in the best interests of the OC. Exceeding spending limits or engaging in unauthorised spending can have serious consequences:
- Personal liability: In extreme cases, Committee members could be held personally liable if they acted recklessly or with a disregard for their duties under the Act. This may involve legal action by the OC itself or aggrieved residents.
- Loss of trust and potential removal: Unauthorised spending can erode resident trust in the Committee. The OC Act allows for the removal of Committee members who breach their duties.
- Legal action: Residents who believe the Committee has misappropriated funds can take legal action to seek recovery of those funds.
Factors influencing owners corporation Committee spending limits
The OC Act and recent updates like the Owners Corporations and Other Acts 2021 (Vic) emphasise responsible financial management through spending limits. But how are these limits determined? Here’s how several factors play a role:
1. Property size and complexity
Larger buildings (Tier 1 & 2 with over 50 lots) naturally have more extensive maintenance needs thus mandated to have a maintenance plan outlining anticipated expenses for major repairs and replacements (CAPEX) like roof repairs, elevator upgrades, or repainting the exterior. This plan and a dedicated Maintenance Fund, help establish a clear picture of future spending requirements, influencing the overall spending limit.
Smaller buildings (Tiers 3-5) may choose to have or not have a maintenance plan, but having one can still be a valuable tool in setting appropriate spending limits.
2. Financial health of the OC
The current financial state of the OC significantly impacts spending limits. A healthy reserve fund allows a more flexible approach, potentially enabling higher spending limits for unforeseen maintenance needs or proactive improvements.
Conversely, an OC struggling financially might need to set tighter spending limits to prioritise essential repairs and ensure enough funds are available for day-to-day operations.
3. Long-term planning
Forward-thinking OCs consider future needs when setting spending limits. This may involve budgeting for upcoming major projects or spreading out costs for anticipated repairs over time.
The maintenance plan, if established, becomes a crucial guide in this process. By proactively planning and setting aside funds, the OC can avoid the financial burden of unexpected large expenses and ensure the building’s long-term well-being.
Why the right OC manager matters when setting spending limits
Spending limits are typically set at the AGM, often alongside delegation to the OC manager.
For example, an Owners Corporation may resolve:
- the OC manager must obtain three quotes for works over $9,000
- the Chairperson may approve expenses up to $9,000
If your Committee feels unsupported or uncertain about financial decisions, it may be time to review your management structure.
We help Victorian Committees transition to qualified Melbourne OC managers aligned with their building’s needs, strengthening financial governance and long-term stability.
Clear thresholds help routine matters move forward efficiently while ensuring larger expenses receive proper oversight.
The right OC manager plays a key role in making this work, keeping spending within approved limits, planning, and providing clear financial guidance to the Committee.
If you’re considering a change, you can contact our Consultants here to discuss your situation confidentially.
We’ll help you assess whether your current manager is meeting legislative obligations under the Owners Corporations Act 2006 (Vic) and guide you through a structured transition process if needed.
