Owners’ corporation changes shut down

By David Schout

A bid to make it easier for owners’ corporations (OCs) to take legal action against corrupt developers has been shut down in the Victorian upper house.

Amendments put forward by the Victorian Greens, which also sought to impose a three-year cap on all contracts entered into by a building developer, received no support from both major parties.

Introduced by MLC for Northern Metropolitan and the leader of the Victorian Greens Dr Samantha Ratnam, The Greens argued that the 1.5 million Victorians who live in or own property within an OC setting were not adequately supported by current legislation. 

They sought to reduce the threshold to trigger legal proceedings against a developer within an OC from 75 to 50 per cent. 

“I’ve spoken to many residents in the big apartment towers and they don’t feel supported by the current OC laws. This bill was the perfect opportunity to fix that,” Greens Member for Melbourne Ellen Sandell said.  

“The Greens’ amendments would have tightened the rules on what potentially corrupt developers could do while supporting residents to take legal action against them. We will continue to advocate for those residents until the government provides them with adequate protection and support.”

The amendments looked to lower the barrier for OCs seeking legal action particularly around building defects and cladding rectification, which has become a significant issue in recent years.

They also sought to protect building occupants against long-term contracts entered into by the developer at the completion of a building’s construction, in which subsequent owners are then forced to foot the bill.

Reports suggested some of these were uncompetitive “multi-decade contracts”.

Strata Title Lawyers CEO Tom Bacon said he was disappointed by the response of the major parties. 

“I’d say that owners’ corporations all throughout Victoria will be dismayed by how out of touch both the Labor and Liberal parties are with their constituents,” Mr Bacon said.

“Both major parties defeated the Greens’ sensible amendments to limit all management and facilities contracts to three years, and to permit owners’ corporations to sue developers and builders for defects and flammable cladding by ordinary resolution. We see now where the favouritism lies. It’s not with owners and investors and everyday folk. It’s with the developers and construction companies, and with election donors.”

Mr Bacon said the result did not bode well for OCs going forward. 

“We can no longer expect any consumer protection from the government for the apartment sector. Frankly, apartments do not represent a good investment in Melbourne anymore.”

The Labor government defended the bill — titled Owners’ Corporations and Other Acts Amendment Bill 2019 — after rejecting the amendments.

“This bill delivers a package of 36 substantive reforms that streamline and modernise the regulation of the Victorian owners’ corporations while enhancing protections for lot of owners,” Minister for Local Government and Suburban Development Shaun Leane said in the Legislative Council on February 16.

“This is done by improving the quality of owners’ corporation managers, expanding and improving developers’ duties to the owners’ corporations they create, improving governance and financial administration and internal relations of owners’ corporations, and improving the regulations of owners’ corporations in retirement villages.”

Minister Leane argued that the potential impacts of limiting service contracts to a maximum of three years could be “severe”. 

“The consequence could be severe, particularly for utility providers, who require certainty beyond three years for the viability of their businesses. It could result in owners’ corporations struggling to find businesses willing to provide the most basic services – that is, water and electricity – given that the contracts would be for a maximum of three years,” Mr Leane said. 

Barbara Francis of resident lobby group We Live Here criticised both the government and opposition in failing to properly address issues raised by The Greens.

“They’re [The Greens] the only ones that have any real handle on what’s going on,” she said. 

The Greens also sought to lower the barrier for owners to install solar panels on a building’s roof from a “special resolution” (75 per cent OC vote) to an “ordinary resolution” (50 per cent), but this too received little support.

While all three amendments were all rejected by the government, Samantha Ratnam used the opportunity to press the government on the delayed review of the Short-stay (Accommodation) Act 2018, which was earmarked for 2020. 

“The short-stay industry has largely been left to set its own rules, with the government only intervening to implement a complaints process and avoiding implementing any real regulation of the industry,” Dr Ratnam said. 

“Now we are facing the need to reinvent our cities in light of the havoc wreaked by COVID, this is a perfect time to be looking at how we make our cities more liveable.”

Minister Leane said the review would “start this year.

The passing of the Amendment Bill was celebrated by the short-stay accommodation industry, with The Hotel Conversation reporting that accommodation industry agency ResortBrokers had led a campaign to amend the proposal which would have limited service contracts to three years.

“The company [ResortBrokers] engaged with the key ministers including the Victorian Treasurer, Minister for Tourism and the Minister for Consumer Affairs and successfully achieved an amendment to the Bill which effectively protected contracts that facilitated hotel and serviced apartment operations from the restrictions of Section 67B,” the report stated •

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