Understanding the Owners Corporation Tier System in Victoria

 

Owners Corporations (OCs) play a crucial role in managing common property within strata schemes across Victoria. To ensure that governance and regulatory requirements are proportionate to the size and complexity of an Owners Corporation, a tier system has been established under the Owners Corporations Act 2006. The tier system came into effect from December 2021. Understanding these tiers is essential for property owners, committees, developers and managers to comply with legal obligations effectively.


 

The Five Tiers of Owners Corporations:

The Owners Corporation tier system in Victoria categorises strata schemes into five levels based on size and complexity. Each tier has different legal requirements, compliance obligations, and governance expectations.

Tier 1 – Large Owners Corporations:

Tier 1 applies to large Owners Corporations that have more than 100 occupiable lots (excluding car parks, storage lots, or accessory units). Due to their size, these OCs have the most stringent governance and reporting obligations, including:

  •  Independent annual financial audits
  •  Mandatory maintenance plans and funds
  • Election of a Committee at each annual general meeting
  • Appoint an Owners Corporation Manager
  • Limitation on notice to terminate an OC Manager’s Contract of Appointment

Tier 2 – Medium Owners Corporations:

This tier applies to Owners Corporations with 51 to 100 occupiable lots. A Tier 2 OC has similar governance and compliance requirements to a Tier 1 OC, such as:

  • Independent annual financial reviews
  • Mandatory maintenance plans and funds
  • Election of a Committee at each annual general meeting
  • If an Owners Corporation Manager is appointed, there is a limitation on notice to terminate an OC Manager’s Contract of Appointment

Tier 3 – Small to Mid-Sized Owners Corporations:

Tier 3 encompasses Owners Corporations with 10 to 50 occupiable lots. These OCs have more flexibility in their management structure but still have key responsibilities, including:

  • Maintaining common property
  • Keeping financial and meeting records
  • Holding regular meetings and following proper governance procedures
  • Election of a Committee at each annual general meeting
  • If an OC Manager is appointed, there is a limitation on notice to terminate an OC Manager’s Contract of Appointment

Tier 4 – Small Owners Corporations:

Tier 4 is for Owners Corporations with 3 to 9 occupiable lots. These smaller strata schemes typically have simplified governance requirements. However, they are still expected to:

  • Maintain common property
  • Keep financial and meeting records
  • Conduct meetings as necessary
  • If an OC Manager is appointed, there is a limitation on notice to terminate an OC Manager’s Contract of Appointment

Tier 5 – Two-Lot Owners Corporations:

Tier 5 applies to two-lot subdivisions or a services-only OC.

A two-lot subdivision is when there are only two owners responsible for the management of the property.

A services-only OC is where there is no land or building designated as common property however may have common meters, common supply or service that is unmetered and designated as common property. Read more…

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