The mundane life of large bodies corporate will be shaken up at the start of next year when the Owners Corporations Act 2006 takes effect.
As reported by Wendy Mason in the Herald Sun they will be called Owners Corporations (OCs). The idea is to move away from the ad hoc approach to building maintenance, and prevent lot owners being slugged with considerable levies when maintenance work is needed.
Mason’s article quoted Rob Beck, general manager of the Institute of Body Corporate Managers (Victoria), who believes the upside is a well managed OC with a good maintenance plan. For owners the flow-on effects are greater protection for their investment, and a major selling point for their property if they opt to sell.
Just who will be affected is unclear, Beck believes it will be properties with over 100 units or body corporates with a budget over $200 000. If this is true, it will effect about 50 per cent of units and 10 per cent of all existing owners corporations according to Mason.
The tricky part is the quantum leap in OC responsibilities; they will be required to prepare an annual financial statement and have it audited, and they must have the property valued every five years
OCs will have to find the financial skills required to manage the extra money, and adopt a forward thinking approach to create a ten year plan for major capital works and a fund to pay for it, (aka a sinking fund). Not to mention the annual financial statements, and valuations every five years.
The legislation requires conveyancers and solicitors to include in the Section 32 a certificate detailing proposed repairs, fees and liabilities when they prepare the Contract for an affected property.
Financial viability and management of an OC will become a crucial concern for owners and potential buyers alike. Since the logical outcome is that a poorly managed OC would be an unwise financial investment.
Further implications of the long-term focus are that owners could find themselves paying large fees when no major work is needed before they choose to sell.
According to Stephen Raff, ACE Body Corporate Management chief executive, in Australian Property Investor, the legislation will be in place on or before January 1 2008. Those owners affected can expect a significant rise in their body corporate fees commensurate with the OC’s burgeoning responsibilities.