Are you a new unit owner? Make sure you attend the first annual general meeting

For a long time in Victoria, it was a common practice for the developer of residential towers to ensure that they arranged their affairs to benefit them before they settled on the lots and handed over control of the owners’ corporation (OC) to lot owners.

This often involved the appointment of a caretaker/facilities manager for often very long periods of time (10 years plus) as well as long-term essential services contractors (fire inspectors) OC managers, cleaning contractors, embedded networks, high-speed internet services, security contractors, rubbish contractors and the like.

One of the dirty secrets of the OC industry is that some developers would seek a payment for appointing these contractors as a quid pro quo.

However, this messy practice has been overhauled by the Victorian Government as part of its reforms and amendments to the Owners’ Corporation Act 2006.

So, it is now not possible for an OC manager to be appointed for a term beyond the first meeting of the OC. That means that it is up to lot owners to reappoint them once they have taken possession of their units.

The reforms also make it clear that any other service contract that the developer has signed the OC up to will only be valid for a maximum term of three years.

Unfortunately, the reforms can only go so far. What usually happens in practice is that all of these contracts are placed on the agenda for the first annual general meeting (AGM), however no alternatives are proposed on the agenda either.

The developer or OC will tell owners that they have no choice but to reappoint these persons otherwise the building won’t function. They’ll say anything; the power will go out, bills won’t get paid, the rubbish will pile up, the internet will be suspended, etc., etc.

Perhaps naively, the owners present at the first meeting raise their hands to reappoint these entities. And that’s how OC gets stuck with these non-competitive, expensive and long-term contracts.

The case law of the Supreme Court is of no assistance to OCs here, because if an OC independently affirms the contract at these meetings, then they are bound. And it will be no excuse to run an argument that not many owners turned up to the meeting, or that lot owners had no alternate choice.

If you are settling on an apartment in the next few years, make sure to get yourself along to the first AGM, and ask for those contracts to be deferred to the next meeting once the committee of owners has formed, and once independent quotes have been sourced. •