VIC: Q&A Signing a Contract on Behalf of the Owners Corporation

This video and article is about signing an agreement or contract on behalf of the owners corporation in Victoria.

• QUESTION: Can an owner seek an order from VCAT on behalf of the owners corporation to arbitrate for changes to the 25-year building management contract?
• QUESTION: Our new building settled a few years ago. At the IGM, the developer wanted to lease the solar to a third party, but these contracts still need to be signed. How long does the notice of intent at the IGM remain in place?
• QUESTION: I am an owner occupier on the owners corporation committee of an apartment complex in Victoria. What are the committee’s rights regarding the building manager’s contract? Can the building manager on-sell their contract to another vendor without committee approval?
• QUESTION: We changed waste collection services. The new collection company does not empty every bin, every time even though we’ve signed a contract with them stating they do. How can we ensure they do what the contract states?

Question: Can an owner seek an order from VCAT on behalf of the owners corporation to arbitrate for changes to the 25-year building management contract?

In 2019, the developer sold the 25-year contract to our Building Managing company. The contract commenced at $200,000 annually with an annual 5% increase. Cost projections show that in 2044, we will be paying $600,000 a year. Owners are worried they may be unable to continue living at our property.

Can we remove the 25-year contract term and negotiate the fees? Our chair has promised owners that they would negotiate, but nothing has happened over the past 6 years.

Can an owner use Section 169I and 169J of the Owners Corporation Act 2006 to seek an order from VCAT on behalf of the owners corporation to arbitrate for changes to the 25-year building management contract?

Answer: Is there a chance that the original contract can be deemed to be void because the developer did not act in accordance with their initial owner obligations?

The real question here is whether or not there is a chance that the original contract can be deemed to be void because the developer did not act in accordance with their initial owner obligations. Once that is decided, the owners corporation can see whether legal proceedings should be issued or not (or whether other action should be taken).

The committee can make decisions in some matters, and in other matters, a special resolution will be required to issue legal proceedings. It is only if a resolution cannot be passed that a lot owner can go to VCAT to launch litigation in the owners corporations’ name. VCAT are very reluctant to make such orders unless there is a compelling reason to do so (i.e. if the developer owns the majority of lots still).

It is important the owners corporation obtain legal advice as to their options, and if you are not on the committee, it might be that you should seek to try and get on the committee so these costs and actions can be taken by the owners corporation rather than an individual lot owner on the OC’s behalf.

Phillip Leaman
Tisher Liner FC Law
E: ocenquiry@tlfc.com.au
P: 03 8600 9370

This post appears in the February 2025 edition of The VIC Strata Magazine.

Question: Our new building settled a few years ago. At the IGM, the developer wanted to lease the solar to a third party, but these contracts still need to be signed. How long does the notice of intent at the IGM remain in place?

I am on the management committee of an owners corporation (OC). The new property was settled in June 2022. The developers and builder are still finalising construction contracts and completing defects.

At the IGM in May 2022, the developer mentioned they were considering entering into an agreement to lease the solar to a third party, and the OC would agree to sign the contracts. These contracts still need to be signed.

Given settlement was over a year ago, does this IGM item still carry weight?

Presumably, the OC owns the solar, and the developer no longer has the right to lease it out on our behalf.

Is there precedent for how long the notice of intent at the IGM remains in place? Surely, it can’t be open-ended.

Answer: Is the solar part of common property and owned by the OC?

From a strata perspective, I see the OC may need to consider:

• Is the solar part of common property and owned by the OC?
• Is the solar owned by the third party wanting to lease the common property?
• Does the developer have any ongoing ownership relationship in the development, i.e. is the solar owned by the property developer?
• Will the OC get any benefits from the leased common property?
• What is the leasing term?
• Can the lease be terminated?

From an energy perspective, I see the OC may need to consider:

• In addition to the ownership of the asset queries above and leasing benefits:
  
  • Who owns the solar generation and benefits from that?
  • Is the solar generation being fed into the common area energy needs?
  • If the OC is not benefiting, is the solar generation being exported to the grid?
  • Who is receiving the revenue for solar exports?

• Is the solar associated with a Power Purchase Agreement for the OC or other parties?
• Is the solar part of an embedded network.
  
  • If yes, who is the operator?
  • What is their contractual arrangement?
  • What is the contractual term?
  • Will the OC ever own the solar assets & generation?
  • Is the solar being fed into the Parent Meter of the Common Area Child Meter/s?

Regarding the question, “Is there precedent for how long the notice of intent at the IGM remains in place?”

• One would need to unpick the agreements behind the solar assets, ownership, leasing arrangements and solar generation benefits.
• A strata lawyer/specialist may be best suited to answer the query about the precedent for how long the notice of intent can be in place.
• Regarding the energy aspects (solar asset, energy generation and ownership), we could assist with that.

Joseph Arena
Embedded Network Arena
E: joseph@embeddednetworkarena.com.au
P: 0431 925 908

This post appears in the May 2024 edition of The VIC Strata Magazine.

Question: I am an owner occupier on the owners corporation committee of an apartment complex in Victoria. What are the committee’s rights regarding the building manager’s contract? Can the building manager on-sell their contract to another vendor without committee approval?

Answer: The committee should obtain a copy of the building manager’s contract from the facility management company.

The committee should obtain a copy of the building manager’s contract from the facility management company. The committee should review the contract/service agreement to confirm if a clause exists setting out whether an assignment of the agreement requires consent from the committee/owners corporation.

Novation involves a full transfer of the service agreement from the current facility management company to another party/company. The new party or company takes on the building manager’s role but under a new agreement. Typically, this means from the date of novation, the incoming party or company will assume both:

• rights and benefits; and
• obligations and liabilities.

To novate a contract/agreement, all parties to the original contract and the new contract must consent. Parties can typically achieve this by signing a deed of novation.

An accredited owners corporation manager can assist you in obtaining a copy of the current contract/agreement and reviewing the document for the relevant clauses. The committee may wish to engage a lawyer that specialises in owners corporation and/or contract law to assist in reviewing the contract/agreement to assist the committee in understanding their rights and obligations.

Ben Quirk
OccamStrata
E: ben.quirk@OccamStrata.com
P: 03 7045 3371

This post appears in Strata News #658.

Question: We changed waste collection services. The new collection company does not empty every bin, every time even though we’ve signed a contract with them stating they do. How can we ensure they do what the contract states?

My owners corporation recently changed waste collection companies. During the process, we did our due diligence and made sure we were comparing like for like with companies and the submitted scopes of work. 

We chose a company and, once engaged, discovered they refuse to empty half-full bins. This has led to our bins regularly overflowing, especially on weekends when there is no collection.

This was not mentioned in their quote, only the number of bins they would empty. If we want them to pick up every bin, every time, they will increase their price, even though we’ve signed a contract based on the initial scope. Is there anything we can do to prevent having to pay more?

Answer: Arrange the meeting as soon as practicable.

The ideal situation is to arrange a meeting between the waste removal company and a delegate of the owners corporation or two, usually the chairperson and treasurer. Ensure the committee agrees to a scope of work and have your needs written clearly in the contract. One of those needs would be to have all bins that have been placed out for collection emptied, regardless of how much waste is in them. Should there be a limit to the number of bins being collected by the service provider, this also should be made clear. You may also consider the number of recycled waste bins and electronic waste (e-waste) bins, if they provide them.

There is no reason for bins to have any amount of rubbish in them after collection so long as they are placed in the agreed location for collection and are in the agreement. Arrange the meeting as soon as practicable.

Matt Osborne
Elite BMA
E: matt@elitebma.com
P: 0420 520 976

This post appears in the February 2023 edition of The VIC Strata Magazine.

Have a question about signing a contract on behalf of the owners corporation in Victoria or something to add to the article? Leave a comment below.

Read next:

• VIC: Q&A Setting Up a Maintenance Plan and Deciding on a Budget
• VIC: How Can An Owners Corporation Survive a Cash Flow Crisis? [Step-By-Step]
• NAT: Q&A Non Payment of Levies: Financial Options to Survive COVID-19

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