This is an article repost. The original article was posted on 2019-02-06 and can be accessed via this link
If you are receiving multiple levy invoices for the same property, it is probably because your property is affected by multiple Owners Corporations.
Multiple Owners Corporations are often used within the one development to help owners share costs and responsibilities and are particularly common in buildings with a mix of residential and commercial lots, or developments with multiple buildings or a mix of townhouses and apartments.
In this post, we help you to understand why multiple Owners Corporations are used, how they can work and why they can actually save you money in the long term.
HOW DO MULTIPLE OWNERS CORPORATIONS WORK?
When multiple Owners Corporations are created as part of a Plan of Subdivision, it’s important to understand that every Owners Corporation is subject to the same laws, responsibilities and regulations, regardless of whether it is a limited or unlimited Owners Corporation.
Each Owners Corporation will have its own legal name, will be subject to model rules and potentially additional rules, and will make decisions around how the common property that Owners Corporation is responsible for is managed and administered.
So if a property has multiple Owners Corporations, the unlimited Owners Corporation (typically OC1) will be named PS12345-1 and subsequent limited Owners Corporations will be named PS12345-2, PS12345-3 etc.
Importantly, each Owners Corporation has its own budget, decided upon by the members of that Owners Corporation at an Annual General Meeting.
This is important because it will decide how much each member of those secondary, or limited, Owners Corporations will pay in levies to that Owners Corporation.
At Strata Plan we’re often asked by customers who are part of multiple Owners Corporations why they can’t just receive one levy invoice instead of separate ones.
This is because, although related, each Owners Corporation is a separate entity and as such has separate bank accounts for the collection of levies and for the payment of contractors and service providers.
This also means that each Owners Corporation will need to have its own Annual General Meeting. These are often held concurrently with the unlimited Owners Corporation, however, can be held completely separately as well.
WHY DO PROPERTIES HAVE MULTIPLE OWNERS CORPORATIONS?
The implementation of multiple Owners Corporations within developments is an increasingly common occurrence.
Their use helps to create a more equitable sharing of lot owners responsibilities and costs.
This can be for more complex developments which may include a mix of apartments, townhouses and commercial lots, right down to a three-lot subdivision where one unit has its own driveway with the other two units sharing a common driveway.
In the former example, a separate Owners Corporation for the commercial lots would separate them from having to contribute to items such as the lifts used by the apartment owners, while an Owners Corporation for the townhouses might mean that the commercial lot owners and apartment owners don’t have to contribute to the landscaping along a common driveway exclusively used by the townhouses.
In the latter example, multiple Owners Corporations would allow the lot owner with their own driveway to be excluded from any costs pertaining to the driveway shared by the other two units.
Of course, that’s not to say that every property that fits these descriptions will have multiple Owners Corporations, nor is it to say that without multiple Owners Corporations that such an arrangement can’t be made amongst the lot owners themselves by way of a resolution at a general meeting or other mechanisms.
However, as multiple Owners Corporations form a part of the Plan of Subdivision, this separation of responsibilities, liabilities and entitlements is far stronger than those that are simply arranged by lot owners who are subject to change during the lifetime of the development.
UNLIMITED OWNERS CORPORATIONS VS. LIMITED OWNERS CORPORATIONS
It is worth noting in every instance of multiple Owners Corporations, one of those Owners Corporations (usually Owners Corporation 1) will be what’s called an “unlimited Owners Corporation”.
The unlimited Owners Corporation includes all lot owners within the plan of subdivision and will be responsible for items and services which benefit all lot owners.
This will usually include things like building insurance, caretaking or building management and other common services such as gardening, however, every instance of multiple Owners Corporations can differ from these norms.
Limited Owners Corporations are set up to help isolate certain sections of common property to a certain group of owners or might be set up to isolate certain elements of the development to certain owners.
For example, an Owners Corporation may be set up for commercial lots in a mixed-use building to better identify the common property which is only accessible to those lots and their customers.
Another one may be set up to ensure that only lot owners who have access to a car park or a car stacker are responsible for the maintenance and repair of those areas and/or systems.
WHEN ARE MULTIPLE OWNERS CORPORATIONS IMPLEMENTED AND HOW DO YOU IDENTIFY THEM?
Typically, the decision to create multiple Owners Corporations occurs at the planning stage.
When a plan of subdivision is created and registered it will specify if there are multiple Owners Corporation affecting the plan, as well as what each Owners Corporation is responsible for.
On a Plan of Subdivision, these are usually referred to as Common Property 1, Common Property 2 and so on.
The most effective way to determine how common property is assigned to the different Owners Corporations is to check the Plan of Subdivision.
In the example below, we will see a snippet of a Plan of Subdivision which demonstrates how the different areas of the common property are allocated.
This property is a mixed-use development, with commercial lots on the ground floor and apartments on all the other levels.
The common areas on the ground floor include a lobby, which includes mailboxes and provides access to the lift for the apartment residents, as well as a common bathroom which is made available to the customers of the commercial lot.
The area marked Common Property 2 is the bathroom which belongs to Owners Corporation 2 and is accessible by all of that Owners Corporation’s members, staff and customers.
That also means that any cleaning, repairs and/or maintenance of this area on this Plan of Subdivision, is the responsibility of Owners Corporation 2 and its members.
This means that all the other members of Owners Corporation 1, who are not members of Owners Corporation 2 (ie: the apartment owners) do not have to contribute to costs associated with this area of the common property.
Without the creation of the limited Owners Corporation, all owners would share liability for and entitlement to this common property, even though it is exclusively used by the commercial lots.
In this way, whilst multiple Owners Corporations are often viewed as a pain by many of those affected by them, they can, in fact, help owners save money by ensuring members of a limited Owners Corporation are not paying for assets or common property which is only used by members of another limited Owners Corporation.
If you have any questions or queries with respect to how your property’s Owners Corporation is set up, please get in touch with us using the general enquiries form.