A significant number of owner corporations are well run and harmonious, however, what happens when the management of an owners corporation is so dysfunctional that it is inoperable or even insolvent?
The Owners Corporation Act 2006 enables an owners corporation, lot owner, creditor or any person with an interest in land affected by an owners corporation to apply to the Victorian Civil and Administrative Tribunal (VCAT) for the appointment of an administrator to an owners corporation. VCAT may appoint an administrator and set out such terms and conditions of the appointment as it may think fit. The lot owners must pay the remuneration and expenses of the administrator.
A review of prior cases before the Courts and VCAT suggest that an administrator will be appointed if the owners corporation is incapable or so dysfunctional that the provision of appropriate services to unit owners and the care of the common property is either non-existent or so beset by difficulties that the owners corporation is unable to function. It is not necessary for there to be financial difficulties or even financial impropriety but the difficulties experienced by the owners corporation must be such as to justify a Court’s intervention in the interests of some or all of the unit owners.
VCAT may appoint an administrator on any terms it sees fit including the remuneration and expenses. An administrator can be a real estate agent preferably experienced in owners corporation matters or a property manager.
The appointment will be for the period determined by VCAT who will also decide the terms of the appointment and remuneration.
An administrator will be required to comply with the Owners Corporation Act and Regulations and must act honestly and in good faith and exercise due care and diligence. The appointment may be extended if the circumstances justify the extension by VCAT.
More information
For more information, or if you are a manager or lot owner of an owners corporation that you think is dysfunctional, please contact Anton Block, Principal Lawyer and Head of Owners Corporation, on (03) 8600 8833 or ablock@kcllaw.com.au.
Note: This update is a guide only and is not intended to constitute legal advice.