Owners Corporation Case Law Update – Restrictive Covenants, External Works and Who Really Has the Final Say

Lot owners wishing to modify the exterior of their property must adhere not only to the owners corporation’s rules but also to any relevant contractual or proprietary restrictions.

General Principles – Rules and Restrictive Covenants

Owners corporations have the statutory authority to create rules tailored to the specific needs and circumstances of their development. These rules must comply with the law, be made in good faith, and avoid unfair prejudice to members. Where an owners corporation does not have registered rules, or where those rules do not address a particular issue already covered by the Model Rules in Schedule 2 of the Owners Corporations Regulations 2018 (Vic), the Model Rules will automatically apply. This ensures a clear and consistent governance framework, preventing ambiguity and supporting effective management of the complex.

In contrast, a restrictive covenant is a private land-use control attached to the title of land, limiting how that land may be used or developed for the benefit of other land. Restrictive covenants are enforceable by the landowner benefiting from the restriction, often including the developer who retains ownership of lots within the subdivision. In Victoria, such covenants bind successive owners unless modified or removed by agreement, through the Planning Scheme or by court order.[1]

Model Rules

In practice, most of the registered rules we encounter concerning changes to the external appearance of lots are variations of the procedure prescribed in Model Rule 5.2.

Model Rule 5.2 provides:

‘External appearance of lots

(1) An owner or occupier of a lot must obtain the written approval of the owners corporation before making any changes to the external appearance of their lot.

(2) An owners corporation cannot unreasonably withhold approval, but may give approval subject to reasonable conditions to protect quiet enjoyment of other lot owners, structural integrity or the value of other lots and/or common property. [emphasis added]’

Model Rule 5.2 does not allow an owners corporation to approve works that would place a lot owner in breach of a restrictive covenant or authorise unauthorised works to common property.[2]

In practice, owners corporations frequently reject applications to alter the external appearance of a private lot.

This raises the question: if an owners corporation ‘cannot unreasonably withhold approval’ for such applications, on what grounds can an application be denied? Further, what constitutes ‘reasonable conditions’ for approval, and at what point does a proposed change interfere with other members’ right to quiet use and enjoyment of the common property?

So, what are the cases?

The cases are:

1. Deeker v Owners Corporation PS 728916M (Owners Corporations) [2025] VCAT 1114 (Deeker v OC); and
2. XPO v Owners Corporation RP000612 (Owners Corporations) [2025] VCAT 956 (XPO)

Approval Requirements in the Context of Restrictive Covenants: Deeker v OC

In Deeker v OC, the applicant sought to repaint her townhouse façade from light grey to dark grey. Although the colour fell within the estate’s Design Guidelines, the developer’s Design Review Committee refused approval.

Acting on advice that the OC committee now had authority, the applicant sought approval under Model Rule 5.2. That request was also refused.

In his decision, Member Sharkie found that exterior painting is a change to the external appearance of a lot and therefore requires OC approval under Model Rule 5.2. However, OC approval could not override the restrictive covenant binding the lot owner. Both developer approval and OC approval were therefore required.

Because the developer had refused consent, any approval by the OC would have exposed the applicant to a breach of the restrictive covenant. The OC’s refusal was therefore objectively reasonable, and the application was dismissed.

Approval for Works Under Model Rule 5.2: XPO v Owners Corporation

In XPO, the applicant sought approval for extensive security works, including replacing doors and windows. While presented as external appearance changes under Model Rule 5.2, the works involved demolition and reconstruction affecting common property, including structural elements. As a result, the owners corporation withheld its approval.

In her decision, Senior Member Johnson ruled that Model Rule 5.2 could not authorise works affecting common property, given the limitations set by section 47A of the Owners Corporations Act 2006 (Vic). The owners corporation’s refusal was deemed objectively reasonable, particularly in light of the applicant’s failure to provide sufficient drawings and specifications to demonstrate that the works would not compromise the structural integrity or future maintenance of the property.[3]

Consequently, the application was dismissed.

Key Takeaways

The decisions in Deeker v OC and XPO highlight several key principles:

1. restrictive covenants bind lot owners and may be enforced by developers who retain ownership of lots;

2. external changes often require approval from multiple parties, including both the developer and the owners corporation;
3. owners corporations cannot approve works that breach a restrictive covenant or affect common property without appropriate legal authority;
4. the concept of reasonableness under Model Rule 5.2 does not allow an owners corporation to override statutory or proprietary restrictions; and
5. misunderstanding approval processes can result in costly and avoidable disputes.

In conclusion, these cases underscore the importance of careful adherence to both legal and procedural requirements when seeking approvals for alterations to property. Proper understanding of the approval process, including the roles of developers, owners corporations, and restrictive covenants, is essential to avoid legal conflicts and ensure effective property management.

Disclaimer

The above does not constitute legal advice, but is information which may be of general interest. Tisher Liner FC Law will not be held liable or responsible for any claim, which is made as a result of any person relying upon the information contained in this publication.

[1] Property Law Act 1958 (Vic), s 84; Prowse v Johnstone [2014] VSC 173 at [38].

[2] XPO v Owners Corporation (VCAT, April 2025) at [173]–[178]; Building Services West Victoria Pty Ltd v OC PS 507524P [2015] VCAT 1289 at [58]–[61].

[3] XPO at [173]–[178].