Which Owners Corporation Fees are Enforceable: VCAT Lessons

By Alicia Hill, Principal and Maxim Oppy, Law Clerk

The recent Victorian Civil and Administrative Tribunal (the Tribunal) decision in Owners Corporation No. 1 PS511700W v St Marys Investments Pty Ltd dealt with a dispute over fees charged to a lot owner for services that were provided to a larger development within which the Owners Corporation land was a subdivision.

The reasoning of the Tribunal provides insight into which fees charged by an Owners Corporation will be enforceable against Lot Owners. It serves as a reminder that fees are not limited to services relating solely to the land of the Owners Corporation.

Owners Corporations

In Australia, ownership of multi-occupancy developments, including resorts, is arranged through strata title. In this system individuals own lots within a development, whilst the remaining common property is held by all lot owners collectively. An Owners Corporation is created to manage the common property, and some elements of the lots. Every lot owner is a member of the Owners Corporation and may vote on certain matters.

Owners Corporations in Victoria are governed by the Owners Corporation Act 2006 (Vic) (Act), which provides that one function of an owners corporation is to repair and maintain chattels, fixtures, fittings and services related to the common property or its enjoyment and equipment and services which exist for the benefit of land affected by the owners corporation.

Background

Owners Corporation No. 1PS511700W (the OC) was created on plans of a subdivision called The Signature Estate, comprising part of the Sanctuary Lakes Resort Development in Point Cook, a residential community containing over 1000 lots with dozens of owners corporations.

St Marys Investments Pty Ltd (St Marys) owns a lot on the plan of the subdivision for the Signature Estate and is a member of the OC.

At an Annual General Meeting in August 2019, Sanctuary Lakes Resort Services Ltd (SLRS) was reappointed as the OC’s manager. The appointment included a contract to supply a large number of services including maintaining vegetation, parks and the lake; providing 24/7 private security patrols and private house security; and providing recreation services such as a gym, pool and tennis court.

These services were provided largely to the wider Sanctuary Lakes Resort Development, rather than within the Signature Estate. SLRS was also allowed under the contract to negotiate and enter agreements with third parties for the provision of some or all of the services, and that the cost of these could be recovered from the lot owners through Owners Corporation Fees.

On 3 July 2019, the OC sent St Marys a fee notice in accordance with the Act seeking the sum of $2,640 for SLRS’s costs. St Marys refused to pay the fee, even after a final fee notice was sent. St Marys refused to pay the fee because it alleged the OC did not have a valid basis under the Act to charge the fee.

The Law

The OC sought to enforce the fees on the basis that the services provided by SLRS were related to the common property and were services which benefitted the land affected by the OC.

St Marys presented an array of arguments as to why the fee was not enforceable.

  • Firstly, it argued that expenses relating to the Sanctuary Lakes Resort at large were not sufficiently related to the OC to fall under the functions of the OC under the Act.
  • Secondly, they claimed that the fees were unenforceable on the basis that some of SLRS’s services were provided to private lots.
  • It also claimed that the OC did not yet own any common property, so could not enforce fees under the act on the basis of a connection to common property.

Judgement

The Tribunal found that the fees were enforceable. Member Powles first noted that a substantial nexus is required for services to be ‘related to’ common property or its enjoyment. However, the connection between services provided by SLRS and the Signature Estate was sufficiently substantial.

This was primarily because the Signature Estate, and all other subdivisions, are not separable from the Sanctuary Lakes Resort as a whole. One must drive through the resort to access the Signature Estate and further, the services provided within the Resort are inherent to the prestigious environment offered within the subdivisions.

The Tribunal also considered that anyone wishing to purchase a home in the Resort would expect resort-type facilities, such as the gym, pool, and tennis court, to form part of the investment. Because these services fall under the basic functions of an owners corporation, they did not need to be established by a special resolution.

Drawing on previous Tribunal decisions, Member Powles further held that the OC could recover fees to maintain private lots, as private lots can be sufficiently related to common property if they provide amenity to the lots and common property. Additionally, even if the OC did not own any common property, they could still recover fees for services related to land affected by the OC, which includes the lots themselves.

Practical Considerations

This decision will provide reassurance to owners corporation managers who manage subdivisions of larger developments. They will be able to provide, and charge fees for, services provided to the wider development – as long as there is sufficient connection to the amenity and enjoyment of the lots and common property within the subdivision.

It also serves as a reminder to Lot Owners to carefully consider the fees that may be payable to an owners corporation before purchasing a lot in a subdivision, as these can extend beyond the maintenance of the subdivision alone.

If you have any questions about this article or owners corporation disputes, please contact Alicia Hill by email alicia.hill@mst.com.au, or by telephone on +61 3 8540 0200