Strata Information

Overview

In Victoria, a Tier 4 Owners Corporation (OC) refers to schemes with 3 to 9 occupiable lots. Because they are small, they are subject to simplified governance and administrative requirements compared to larger high-density complexes, though they must still comply with the Owners Corporations Act 2006.

These smaller strata schemes have fewer administrative hurdles but are still required to maintain common property and ensure adequate building insurance.

Obligations for Tier 4 Owners Corporations:

1. Annual General Meeting (AGM)

Requirement: An AGM is mandatory, but only if the owners corporation receives or pays out money in a financial year.

Frequency: Meetings must be held at least once every 15 months.

Notice: At least 14 days' written notice must be given for a general meeting.

What must be covered: Financial statements, setting the budget, insurance renewal, and appointing a manager (if needed).

2. Quorum and Decisions

Quorum: The quorum for a meeting is at least 50% of the total votes, or if that is not available, 50% of the lot entitlements.

Interim Decisions: If a quorum is not met, the meeting can proceed, but decisions are "interim." These become final after 29 days unless a petition representing 25% of lot entitlements calls for another meeting.

Proxies: A person cannot act as a proxy for more than one lot.

3. Committees

Not Mandatory: Tier 4 owners corporations are not required to elect a committee.

Optional: They may choose to elect a committee of 3 to 7 members (or up to 12 if passed by ordinary resolution).

Without a Committee: In the absence of a committee, all decisions are made by the members of the OC in a general meeting.

4. Key Financial and Technical Obligations

Financial Statements: A Tier 4 OC must prepare annual financial statements for any financial year in which it levies annual fees.

Auditing: Auditing is optional. Tier 4 owners corporations may choose to have their financial statements audited or reviewed, but it is not mandatory.

Maintenance Plans: Preparing a maintenance plan is optional. It is not compulsory for Tier 4, though recommended.

Insurance: A full insurance valuation must be obtained every five years.

Common Seal: There is no longer a requirement to have a common seal. Documents can be signed by two authorized lot owners.

5. Other Key Requirements

Manager: Appointing an OC Manager is not compulsory.

Disputes: If a dispute arises, the parties must meet and discuss the matter within 28 days.

Extract from Consumer Affairs Victoria
(https://www.consumer.vic.gov.au/housing/owners-corporations/tiers-of-owners-corporations)

Under changes to the Owners Corporations Act 2006, which came into effect on 1 December 2021, a five-tiered system replaced prescribed owners corporations - ones that levy fees of more than $200,000 in a financial year or consist of more than 100 lots.

Under the tiered system, larger owners corporations will be subject to more stringent regulations than smaller owners corporations.

A services only owners corporation means an owners corporation for a subdivision that has no land or building that is designated as the common property and either—

the initial owner of the subdivision has arranged for a utility company to install common meters that are designated as the common property; or the subdivision has a common supply or common service that is unmetered;

How the tier system works

The tiered system establishes different requirements for committees, financial reporting and maintenances plans, depending on the size and nature of the owners corporation.

Committees

Tier 1, 2 and 3 owners corporations must elect a committee at the annual general meeting.

Tier 4 and 5 owners corporations may choose to elect a committee.

Owners corporation committees must have at least three, but not more than seven members, unless the owners corporation resolves to increase the committee to a maximum of 12 members, through an ordinary resolution.

Members of committees and sub-committees also have new duties to:

act honestly and in good faith
exercise due care and diligence
act in the interests of the owners corporations when performing their function
not make improper use of their position to gain a direct or indirect advantage for themselves or anyone else.

Owners corporation manager

Tier 1 owners corporations must appoint a manager, unless it opts out by special resolution.

Tier 2, 3, 4 and 5 owners corporations may choose to have a manager, but it is not compulsory.

Financial statements

Tier 1, 2 and 3 owners corporations must prepare annual financial statements in accordance with the Australian Accounting Standards and present them at their annual general meeting.

Tier 4 owners corporations must prepare annual financial statements for any financial year in which they levy annual fees.

Annual financial statements prepared under this section may be either general purpose financial reports or special purpose financial reports as defined by the Australian Accounting Standards Board.

Audits of financial statements

At the end of each financial year:

tier 1 owners corporations must have their financial statements audited by a registered or authorised auditor, or an accredited accountant.
tier 2 owners corporations must have their financial statements reviewed by an independent person who is a member of CPA Australia, the Institute of Public Accountants or Chartered Accountants Australia and New Zealand.

Tier 3, 4 and 5 owners corporations may choose to have their financial statements audited by either method.

A written report of the audit or review must be provided to the owners corporations. A review or audit cannot be conducted by someone with a direct or indirect personal or financial interest in the owners corporation.

Maintenance plans and funds

Tier 1 and tier 2 owners corporations must prepare and approve a maintenance plan.

Tier 1 owners corporations must prepare and approve a plan by 1 December 2022, while tier 2 owners corporations have until 1 December 2023.

Tier 3,4 and 5 owners corporations may choose to prepare and approve a maintenance plan, but it is not compulsory.

Maintenance plans can be amended by the owners corporations by an ordinary resolution.

Last updated: 25 July 2023
https://www.consumer.vic.gov.au/housing/owners-corporations/tiers-of-owners-corporations

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