The Law is Like a Rubber Band – If You Stretch it Too Far, it will Break
The Victorian Civil and Administrative Tribunal’s Owners Corporations List has recently determined a case where an Owners Corporation:-
- Attempted to raise $400,000 from its members for legal fees and expert fees to prosecute a defects claim against a builder; and
- Attempted to raise those funds by ordinary resolution purportedly pursuant to its power under section 23 of the Owners Corporations Act 2006 to levy annual fees.
Lot owners who disagreed with the way in which the Owners Corporation had raised the $400,000 for litigation expenses, sued the Owners Corporation for a declaration that the money had not been raised in compliance with the Owners Corporations Act 2006. The Owners Corporation defended the claim through to a full substantive hearing. The Owners Corporation’s defence failed.
The Tribunal found that an Owners Corporation’s power to raise annual fees under section 23, did not permit an Owners Corporation to raise a one-off significant amount for litigation expenses. Rather, the Tribunal stated that if the Owners Corporation wanted to raise money for litigation expenses, it should have done so by raising a special fee under section 24, which in the present case, required a special resolution.
The Tribunal rejected the Owners Corporation’s submission that the $400,000 fee was validly raised under section 23 of the Owners Corporations Act 2006 and appears to have considered the arguments as an artificial interpretation of the law.
For more information please contact a member of the Owners Corporation Team.
