When you start the process of buying a property, it’s important to be familiar with the fees and requirements that come with it. For first-time buyers, it can be both exciting and overwhelming to be faced with all the new jargon.

An owners corporation is one term that will likely come up for many first-time buyers. The owners corporation (formerly called the ‘body corporate’ before 2007 legislation) is a legal entity created when land is subdivided and registered to establish a community titles scheme. 

A community titles scheme allows people to privately own part of a building or an area of land and share property and facilities with other owners and occupiers. This scheme is made up of two or more lots, so buyers are likely to encounter it when purchasing into a:

• Duplex
• Residential unit block
• Townhouse complex, or
• High-rise accommodation building

Since this community is sharing the use of amenities or other spaces, owners need to have a way to manage areas everyone benefits from. This is where an owners corporation comes in.

What is an owners corporation?

An owners corporation administers common property or areas in multi-unit developments. Owners of flats, apartments or units are usually members of an owners corporation, which is why it’s crucial that first-time buyers understand their role. 

According to Consumer Affairs Victoria, legislation states that common property can refer to gardens, passages, walls, stairwells, pathways, driveways, lifts, foyers and fences. The owners corporation is responsible for the common property; the owners corporation is required to manage, administer, repair and maintain common property among other things.

Owners corporations have five tiers, determined by how many lots are occupiable, and these tiers outline various requirements for committees, financial reporting and maintenance plans, relative to the size and nature of the owners corporation.

Aside from the five tiers, there are also services-only owners corporations, which mean an owners corporation covering a subdivision that has no land or building that is designated as the common property and falls under either of the following conditions: 

• The initial owner of the subdivision arranged for a utility company to install common metres which are designated as the common property; or, 
• The subdivision has a common supply or service that is unmetered.

If one purchases a property in a complex covered by an owners corporation they are ‘lot owners,’ and automatically part of the corporation.

What is a property management company’s job vs. an owners corporation’s responsibility?

While both owners corporations and property management companies deal with the administration of spaces, there are clear differences between the kinds of tasks that one entity handles versus the other.

Both property management and owners corporations function as administrative entities, but they cover different aspects of a single subdivided property. 

Property management companies function as a go-between for the renter and rental provider, so they handle the individual concerns and day-to-day tasks of occupiers. Property managers have various responsibilities that all have to do with the condition and occupancy of each property, so they need to have multiple attributes in order to do this job well:

• Has good communication skills
• Knows how to maintain positive customer relationships
• Is diligent about property upkeep

Property management corporations are focused on specific properties, whereas owners corporations oversee the management of common spaces. 

The owners corporation often employs a strata management company to handle the administration and maintenance of shared spaces within the property. An owners corporation-hired strata manager assists in the administration of the building and ensures the owners’ corporation also fulfils legislative requirements.

A strata manager will adhere to the terms of a service agreement which outlines responsibilities relating to the common property as applicable, like pool facilities, the foyer, hallways and shared gardens. 

The tasks a strata manager may perform include:

• Arranging and coordinating committee meetings and annual general membership meetings (AGMs), as well as preparing and distributing agendas and minutes
• Keeping records of the strata roll, registered plans, by-laws, correspondence and specialist reports
• Sending strata levy notices on behalf of the owners corporation
• Handling insurance claims, the payment of invoices on behalf of the owners corporation, preparation of and managing the annual budget
• Implementing by-laws, promoting legislative compliance for multiple types of necessary certification and work health and safety obligations, and
• Supplying guidance on by‐laws and assisting with by-law breach management, mediation, NCAT orders and appeals.

In practice, property owners are likely to interact with a property manager more often than they would interact with an owners corporation-appointed strategy manager, so it’s important to understand that the distinction lies in what each professional is responsible for. 

3 things to know about your property’s owners corporation

Your owners corporation may not be an entity you deal with on a regular basis, but any first-time property owner needs to keep the following aspects in mind before they purchase.

1. You’re part of one when you buy into an (affected) property

A block of flats or apartments handled by an owners’ corporation automatically considers a buyer a member when they purchase one unit, and this comes with responsibilities. 

Since buyers will end up benefiting from the shared amenities of the property, these come with their own set of responsibilities as part of the owners corporation:

• manage the common property
• repair and maintain the common property, fixtures and services
• maintain required insurance
• secure fees from lot owners to meet financial obligations
• prepare financial statements and keep financial records
• supply owners corporations certificates when requested
• keep an owners corporation register, and
• set up and finalise a grievance procedure.

While these responsibilities seem similar to the strata manager’s tasks, the main difference is the owners corporation handles the development of tasks and regulations such as a grievance procedure, plus final approvals around which supplier to contract for maintenance. 

2. They collect fees for shared space upkeep

Owners corporations utilise funding for the maintenance of common spaces and buyers need to keep this in mind when putting a budget together to buy a unit in an affected property.

Owners corporation fees include costs for everything from building insurance and common area maintenance to shared utilities, building work, and repairs. Examples of services and items the fees are allocated to include:

• Upkeep of common areas, like hiring a gardener to maintain a shared courtyard, or a cleaner to tend to the lobby and lifts.
• Insurance cover for buildings and shared areas, such as for structural damage from a natural event, and payments for public liability insurance.
• Shared utilities, depending on the property. If one metre runs through all lots in the property, then this can be paid through the owners corporation.

First-time buyers need to look into whether or not their prospective property is covered by an owners’ corporation so they can be mindful of the associated costs. Aside from this, other aspects property buyers need to be aware of include the personality of each location, loan options (which exclude owners corporation fees) and factors that will affect property value.

3. When to hire an owners corporation manager

An owners corporation manager is a licensed professional who is authorised by the owners corporation to manage and administer common property. 

Tier 1 owners corporations (properties covering more than 100 occupiable lots) are required to a manager unless it opts out through a special resolution. Owners corporations in the succeeding tiers (2, 3, 4 and 5) can choose not to appoint a licensed corporation manager.

Individual responsibility to the owners’ corporation aside, the lot of owners can decide to delegate the associated tasks to a manager. In spite of this representative’s support, the owners corporation still retains its powers and functions. 

No matter the functions and related responsibilities that come from an owners corporation, buying into a property suited to one’s lifestyle can be rewarding. People connect in communities run by owners corporations. Contact us to find out if the space you’re viewing is supported by one, and how you can level up your owners corporation experience.