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Owners’ Corporation Law - October 2016

27 Sep 2016

Being on the owners’ corporation committee is no picnic

Being a chairperson, secretary or committee member of an owners’ corporation (OC) can sometimes be a thankless task.

After a long day at work, and after attending to domestic duties, these voluntary members must then meet at unsociable hours to discuss and manage the affairs of the residential buildings they live in and to ultimately make binding decisions with important repercussions for all residents.

The functions and duties of committee members are contained within the Owners Corporation Act 2006 and include core concepts such as maintaining and repairing common property, keeping the building insured, ensuring that the rules of the owners’ corporation are enforced and ensuring that the OC has sufficient funds in its accounts to pay its bills.

Stepping outside those core functions and duties is permissible, as most owners’ corporations will delegate all functions and powers to the committee at the annual general meeting. However, committee members need to be extra careful when stepping outside the bounds of their core functions and duties.

A code of conduct applies to committee members under the Owners Corporation Act 2006, requiring members to act honestly and in good faith in performing their functions and to exercise due care, skill and diligence in every decision they make (or do not make as the case may be).

The insurance industry offers protection and cover for committee members that make bad decisions – but only if it can be proven that the committee made the bad decision in reasonable belief that the decision was in the best interests of the OC.

Committee members should not feel comforted by the protection offered by insurers. Any lot owner may file proceedings in VCAT if they believe that a decision made by a committee was made in bad faith and without due care.

The key lesson for all committees when considering potentially contentious issues are to seek advice early and often, from their OC managers and from appropriately-qualified and insured service providers.

Whether it be legal advice, engineering advice or advice from financial services professionals, reliance on that advice would help to shield committees from shouldering the blame for decision making over contentious issues gone wrong.

Moreover, if individual committee members feel uncomfortable or pressured about a certain proposed course of action, they should ask that the decision be deferred so that appropriate advice can be sought.  

In “strata land”, there are no prizes for making hasty decisions.

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