What is an Owners Corporation and Why Do They Exist?

Owning property in Australia, particularly in urban areas, often involves becoming part of a strata-titled property. These properties are unique in that they include both privately owned lots—like apartments, townhouses, or even car parks—and shared spaces or assets that no single owner is solely responsible for. Examples of these shared spaces, also known as common property, include corridors, lobbies, communal gardens, and even the building’s roof in some instances. This blend of private and shared ownership is where the concept of an Owners Corporation comes into play.

An Owners Corporation exists to manage these shared spaces fairly and transparently, providing a structured framework that ensures all owners contribute and agree on key decisions. This article explores the purpose of Owners Corporations, how they function, and why they are essential in ensuring every owner’s voice is heard to keep communal property spaces and services well-maintained.

Understanding Owners Corporations

An Owners Corporation, also referred to as a Body Corporate in some regions of Australia, is a legal entity that comes into existence when a property is subdivided into multiple lots under a Plan of Subdivision. This plan clearly defines which parts of the property are privately owned and which are considered common property. For instance, in Victoria, the registration of a Plan of Subdivision officially creates an Owners Corporation, responsible for managing the common property on behalf of all the individual lot owners.

The primary role of an Owners Corporation is to ensure that these common areas are kept in good repair, and that the interests of all owners are represented and protected. Without an Owners Corporation, managing the shared spaces of a strata property could be chaotic and inefficient, leading to disputes and potential neglect of essential communal assets.

Why Do Owners Corporations Exist?

Owners Corporations were established to provide a structured and legal framework for the shared ownership of common property in strata-titled developments. These corporations allow multiple people to own separate, private properties within the same building or piece of land while collectively owning and managing the shared spaces and services that are essential to the overall property’s functionality and value.

For example, when you purchase an apartment on the third floor of a building, you may only own the airspace within your apartment’s walls, floor, and ceiling. However, the corridors leading to your apartment, the elevator, the basement car park, and the roof may all be considered common property. The Owners Corporation is responsible for the strata property management and maintenance of these shared spaces, ensuring they are kept in good condition and that all owners contribute fairly to their upkeep.

The concept of strata title, which forms the basis of Owners Corporations, was developed in Australia during the 1960s and 1970s. It has since evolved to become an integral part of property ownership, especially in densely populated urban areas where apartment living is common. The legislation governing strata title and Owners Corporations varies across different states and territories, but the underlying principles remain the same.

The Functions of an Owners Corporation

The functions of an Owners Corporation are outlined in each Australian state or territories Act, which governs how these entities operate. The primary functions include:

1. Managing and Administering Common Property: The Owners Corporation is responsible for the day-to-day management of common areas, ensuring they are clean, safe, and well-maintained.
2. Repairing and Maintaining Common Property: This includes everything from fixing broken lights in the corridors to repairing the roof and maintaining shared gardens or recreational facilities.
3. Taking Out and Maintaining Insurance: The Owners Corporation must ensure that the common property is adequately insured against risks such as fire, storm damage, and public liability.
4. Keeping an Owners Corporation Register: This register includes important information about the lot owners, the property, and any decisions made by the Owners Corporation.
5. Providing Owners Corporation Certificates: These certificates are essential for property transactions and provide information about the financial status and obligations of the Owners Corporation.
6. Carrying Out Functions Conferred by the Act and Rules: All individual lot owners, residents and their guests must adhere to the rules set out in the respective state’s Act and any additional rules adopted by the body corporate itself.

In practical terms, the Owners Corporation oversees the repairs and maintenance of common property, holds meetings to decide on financial matters (such as determining the annual budget and setting levies), and handles issues that arise from community living. It’s important to note that the authority of the Owners Corporation is limited by the Act, meaning it cannot address issues beyond its legal powers, such as personal disputes between residents.

How Decisions Are Made

Owners Corporations operate democratically, with decisions made through majority voting either by the entire Owners Corporation or by an elected committee. These decisions, known as resolutions, are legally binding on all members of the Owners Corporation. Resolutions can have financial implications, such as increasing levies or approving new building works, and may also affect how common facilities are used.

For example, a resolution might be passed to repaint the building’s exterior, install new security systems, or adjust the usage rules for a communal gym. These decisions are made at meetings, such as the Annual General Meeting (AGM), where lot owners are encouraged to participate and have their say.

Understanding the Boundaries Between Common and Private Property

The boundaries between what is considered common property and what is private property are defined in the Plan of Subdivision. These boundaries determine who is responsible for the maintenance and repair of different parts of the property. For instance, while the Owners Corporation may be responsible for maintaining the entry foyer and shared plumbing, individual lot owners are typically responsible for repairs within their own units.

It’s also important to understand that certain services, such as electricity, water, and gas, may have both private and shared components. For example, the main water supply to the building is common property, but in general, the pipes that lead to individual units are the responsibility of the respective lot owners.

The Importance of Levies / Fees 

To fund the management and maintenance of common property, the Owners Corporation raises levies through fees paid by all lot owners. These fees are essential for covering the costs of insurance, repairs, administration, and other necessary expenses. The amount of the levy is determined annually based on the budget approved by theOwners Corporation at the AGM.

It’s crucial for lot owners to pay their levies on time, as these funds are vital for the continued upkeep of the property. Participation in the AGM allows lot owners to have a say in how their money is spent and ensures transparency in the Owners Corporation’s financial decisions.

Contact Us Today

At ACE, we understand the complexities of managing strata-titled properties and the importance of a well-functioning Owners Corporation. With decades of experience and a commitment to excellence, we provide comprehensive strata property management services tailored to the unique needs of each property.

If you have any questions about your Owners Corporation or need expert assistance with strata property management, don’t hesitate to contact us. Let ACE help you ensure that your property is managed effectively, so you can enjoy peace of mind and a well-maintained living environment.