By Nicole Wilde

30 November 2016

The legislation governing Owners Corporations in Victoria (the Owners Corporations Act 2006) provides clear procedures giving Owners Corporations the power to raise money from their members. The first category of funds that can be raised from a member is their contribution to the Owners Corporation’s annual fees. The second category is the member’s contribution to an extraordinary fee raised by the Owners Corporation.

If Owners Corporations wish to recover money from lot owners that fall outside of these two categories, they cannot charge the lot owner for the money as if it were a levy. Rather, Owners Corporations need to go through proper recovery proceedings to obtain a monetary order from a Court or Tribunal of competent jurisdiction before asserting a legal entitlement to payment from the lot owner.
The Victorian Civil and Administrative Tribunal has recently highlighted “…a number of questionable practices…” by an Owners Corporation Manager which involve, amongst other things, charging numerous and significant sums for administration charges and legal costs to a lot owner’s account. This included a $6,000 loan obtained by the Owners Corporation to pay legal fees, a $600 loan approval fee, a $99 valuable fee and loan interest at about $50 per month.

The principles from this VCAT case confirm:
“…The only legitimate way an owners corporation may charge legal fees to a defaulting lot owners account is as follows;
(a) Where VCAT or a Court has ordered legal costs in a fee recovery proceeding:
(b) Where the Courts have allowed scale costs in enforcement proceedings.
(c) Where the lot owner has agreed to pay legal costs in settlement of a fee recovery or enforcement proceeding. It is to be noted that in securing the agreement of the lot owner to pay legal fees, the manager must not mislead the lot owner as to the proper amount of legal fees to be paid.
Apart from these costs, the lot owner is not directly liable to pay the legal costs incurred by the Owners Corporation in any fee recovery or enforcement application. The legal costs over and above the costs allowed by VCAT and the Courts must be recovered from lot owners on a lot liability basis…”

The Owners Corporation was ordered to repay the lot owner over $9,696.37 in direct-charges (including legal fees) and the case was referred to the Director of Consumer Affairs, Compliance and Enforcement Policy Section.

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