Changes to the Owners Corporations and Other Acts Amendments Act in Victoria will come into effect on 1 December 2021.
Our trusted partner and expert Owners Corporation lawyers, Tisher Liner FC Law, has outlined the changes to the Benefit Principle we can expect this December, compared to the Benefit Principle as it currently stands.
the benefit principle now
The benefit principle applies principally to two sections of the Act.
Firstly, Section 24 of the Owners Corporations Act 2006 provides that an owners corporation may levy special fees and charges designed to cover extraordinary items of expenditure.
Fees for extraordinary items of expenditure relating to repairs, maintenance or other works that are undertaken wholly or substantially for the benefit of some or one, but not all, of the lots affected by the owners corporation must be levied on the basis that the lot owner of the lot that benefits more pays more.
Secondly, Section 49 of the Owners Corporations Act 2006 provides that an owners corporation may recover as a debt the cost of repairs, maintenance or other works undertaken wholly or substantially for the benefit of one or some, but not all, of the lots affected by the owners corporation from the lot owners.
The amount payable by the lot owners is to be calculated on the basis that the lot owner of the lot that benefits more pays more.
The calculation is based on what is called the “benefit principle”. The benefit principle needs to be carefully reviewed and applied by an owners corporation.
There is case law setting out how the benefit principle is to be applied and in particular, the Grundl Assessment must be applied. In some cases, legal advice is required to ensure the owners corporation is correctly applying the assessment.
changes to the benefit principle
The Grundl Assessment does not change nor does the application under Section 24 and 49. However, prior to 1 December 2021 an owners corporation could not apply the benefit principle to annual fees, only those fees attributable under Section 24 and 49.
The amendments add to the range of levies that the benefit principle can now apply to. Annual fees can, as at 1 December 2021, be charged to lot owners on the benefit principle if:
(a) the owners corporation has incurred additional costs arising from the particular use of the lot by the lot owner; and
(b) an annual fee set on the basis of the lot liability of the lot owner would not adequately take account of those additional costs.
This will give greater flexibility for owners corporations where some lot owners may use greater services or costs than other lot owners where there are not already separate limited owners corporations to address the problem.
An example of this is where there is just the one owners corporation and you have some retail space using common property toilets, but residential lots that don’t use the toilets. If you don’t have licence agreements in place to deal with the costs, you can levy the retail lot owners the costs of operating the toilets.
These amendments will ensure that lot owners that benefit from a particular cost more pay for the cost. The Grundl Assessment must still be applied in relation to each separate cost.
Victorian Body Corporate Services (VBCS) Community Managers will continue to work with Owners Corporations in preparation for the implementation of legislative changes in December.