By Phillip Leaman

17 January 2025

Owners Corporations can have unexpected liabilities and expenses. An example is the need to fund major defect remediation work such as a cladding project or a replacement of a roof.

So how does the Owners Corporation fund such works?

  • Maintenance Plans

Hopefully there is a maintenance fund that deals with likely capital works that has been subject to a well thought out maintenance plan. Since December 2021, tier one and tier two Owners Corporations must adopt a maintenance plan. Other Owners Corporations don’t need to but may adopt a maintenance plan. Funds can be used in accordance with the maintenance plan or for extraordinary expenses if a special resolution allows it (see section 44) or in the case of a specified emergency (see section 45).

  • Special levies

Section 24 of the Owners Corporations Act 2006 provides an Owners Corporation can strike a levy for extraordinary expenses. If the amount is more than twice the annual fees a special resolution is required otherwise an ordinary resolution is required. This means a committee can strike the levy (when less than twice the annual fees).

  • Loan

Section 25 of the Owners Corporations Act 2006 provides that by ordinary resolution, if the amount borrowed does not exceed the amount of the current annual fees of the Owners Corporation it can obtain a loan. For amounts in excess of this, a special resolution is required. The Owners Corporation is not able to charge or mortgage common property under section 17 of the Owners Corporations Act 2006. It is important that the loan is carefully drafted, at market value and conflicts of interest are dealt with. There are a number of commercial lenders that specialise in providing loans to Owners Corporations. See our earlier blog on what to look for when entering into a loan available here.

Tips for an Owners Corporation

It is important that any decision is documented properly and provisions concerning notice periods for the meeting are complied with. Whilst some ordinary decisions can be made by a committee, if there is time and the decision is a major one sometimes it is better to let the lot owners make the decision at a special general meeting rather than the committee making the decision. This way lot owners can feel like they have had a say, and there may be less complaints also.

Need assistance?

For expert assistance and advice concerning what Owners Corporations can and cannot do and advice on loan terms, resolutions and meetings contact Phillip Leaman, head of our Owners Corporations team at Tisher Liner FC Law.

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