Why the need for an owners corporation in the first place? An owners corporation is created for the purposes of administering and managing shared property.
Key takeaways:
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Multiple owners corporations (OCs) help fairly allocate costs and responsibilities in mixed-use or multi-building developments by grouping lot owners with shared services and interests.
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OC1 typically owns the land and shared property, while OC2, OC3, etc., manage distinct areas like residential-only or commercial-only facilities (e.g., lifts vs. waste collection).
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Each OC is a separate legal entity, with its own meetings, funds, and rules, making expert setup and management essential for smooth and equitable operation.
Why don’t freestanding houses need an owners corporation?
The great Australian dream was traditionally the suburban house on a quarter-acre block. Having your own house and land also means that there is no common property or shared assets – well, maybe perhaps just the fence you shared with your neighbours.
Fences in Victoria are covered by the Fences Act 1968 (see below), and fencing disputes can actually be quite common.
How does an owners corporation work in a multi-dwelling building?
In an apartment building, the hallways, stairways, lifts, gardens, the physical building itself, and the land the building stands on are common property. It is the owners corporation that owns the common property, with each owner in the building being a member of that owners corporation.
An owners corporation is created when the plan of subdivision is registered. Where there is just one owners corporation, it is called Owners Corporation No. 1 (in Victoria).
Owners Corporation No. 1 is the unlimited owners corporation that typically owns the land, the building, and all the common property. Every lot owner will be a member of Owners Corporation No. 1 (OC1).
When do you need multiple owners corporations in a Victorian development?
In the above Plan of Subdivision – a building of 27 apartments and 1 commercial shop on the ground was created to contain only one owners corporation. This oversight by the surveyor and developer ultimately created a lot of issues for the apartments owners and the shop owner.
The shop owner was happy about having to contribute to the servicing costs of the lift and car stacker units – given that he was on the ground floor and actually didn’t have use or access to the residential lift lobby.
Conversely, the apartment owners were unhappy about their waste removal costs being higher, as having the commercial café meant that the building required more regular waste collection.
The owners corporation management company we helped the Committee transition to ultimately mediated between the parties and came up with some resolutions that fairly allocated costs (effectively on a “user pays basis”).
Admittedly, these are not big numbers in the scheme of things, but in our experience, it’s always the principle of the thing that upsets people.
Situations like this are common in mixed-use and multi-OC buildings, and they’re not always obvious until problems start surfacing.
When cost allocation or responsibilities don’t feel fair, it’s often less about the structure itself and more about how it’s being managed.
If your building has a multi-owners corporation setup and these issues sound familiar, we can guide a change in management where a different approach would better support the building. You can get in touch with us here to talk it through.
How should OC1, OC2 and OC3 be set up in a mixed-use development?
The correct set-up or a better approach, might have been the creation of 3 owners corporations (i.e. a multiple owners corporation building):
- Owners Corporation No. 1 (OC1, the unlimited owners corporation) would be the legal entity that owns the land, the building, and common property shared by the residential owners and commercial owners. OC1 would also house expenses and contracts such as the building insurance, caretaking/cleaning, and common utilities;
- Owners Corporation No. 2 (OC2, limited owners corporation) would house expenses relating to just the residential lot owners, such as the lift servicing and car stacker servicing; and
- Owners Corporation No. 3 (OC3, limited owners corporation) would house expenses relating to just the commercial lot owners, such as the separate waste collection and the maintenance/cleaning of the grease trap.
Multiple owners corporations are also utilised when there are separate buildings and in staged developments. It’s pretty common to see multiple owners corporations when buildings start to have more than 60 or 70 lot owners.
The Plan of Subdivision, or rather the OC1 Report (obtainable from Landata Victoria) will always tell you when there are multiple owners corporation involved:
Having said that, there are certainly examples (especially in broad-acre estates) whereby 500 or more lot owners are all grouped together under one owners corporation. We have also worked with Committees where there might only be 100 lot owners, but there exist 10 owners corporations.
How are multiple owners corporations managed?
Managing multiple OCs can present its own set of challenges. It’s worth noting that each owners corporation (within a multiple owners corporation configuration) is a legal entity in its own right – in that it can open and operate a bank account, enter into contracts, and hold meetings.
Ultimately, this also means each and every Owners Corporation will effectively have its own set of lot owners / members, elect its own strata management Committee, hold its own Annual General Meeting, and have its own set of funds and accounts.
We might write another article on the Challenges of Managing Multi-OC Buildings.
Fencing legislation in Victoria:
Owners Corporation legislation in Victoria:
- Owners Corporations Act 2006
- Subdivision Act 1988 (Vic)
- Victorian Civil And Administrative Tribunal Act 1998
How to Change Owners Corporation Management Companies?
Strata Management Consultants ™ has been helping and guiding Committees on how to change owners corporation management companies since January 2014. We guide you through the process of changing body corporate management company, and everything is done according to the body corporate rules and regulations. Speak to a Strata Consultant about changing owners corporation managers on 03 9007 2618.
