A member asked over 7 years ago

Extraordinary expenditure and the benefit principle

What is "extraordinary expenditure" under s 24 of the Owners Corporation Act?

Can an OC levy fees for extraordinary expenditure (unexpected large scale repairs resulting from a prior unexpected event of common property) under s 23?

Can an OC levy fees for extraordinary expenditure (unexpected large scale repairs resulting from a prior unexpected event of common property) under s 23 without a Maintenance Plan/Fund?

Can a Maintenance Fund be used to complete repairs resulting from an event prior to the establishment of the Maintenance Plan/Fund?

Law Advisor Research Team
Researchers at LawAdvisor

Hi there. In Victoria, the Owners Corporations Act 2006 (Vic) regulates the powers of owners corporations, including how fees may be levied from lot owners. Annual fees are set according to lot liability and may cover general administration, maintenance and repairs, insurance and other recurring obligations. If the owners corporation has an approved maintenance plan, the annual fees must include fees for the implementation of that plan.

In addition to annual fees, the owners corporation can levy special fees and charges designed to cover extraordinary items of expenditure. The meaning of ‘extraordinary’ is not provided in the legislation, but can be assumed to refer to items that are not part of the usual expenditure of the owners corporation. Extraordinary items of expenditure would not include costs for items typically covered by annual fees under section 23 of the Act, including items specified in an approved maintenance plan. This means the answer to your second and third questions is most likely ‘no’.

A maintenance plan is designed to plan for future items of expenditure that may be necessary to maintain the property, and a maintenance fund is designed to finance a maintenance plan. A maintenance plan only comes into effect once it is approved by the owners corporation, and only after this approval can a maintenance fund be established. In other words, a maintenance fund cannot precede a maintenance plan. This means the answer to your fourth question is most likely ‘no’.

Importantly, in leveraging extraordinary fees, an owners corporation must obtain the consent of 75% or more of the lot holders (i.e. by passing a special resolution) if the amount involved is more than twice the annual fees. The purpose of this rule is to ensure that most of the lot holders approve of the extraordinary expenditure.

Suggested way forward

It appears that you have quite specific questions about the power of an owners corporation to leverage extraordinary fees. The above information is of a general nature only, and should not be considered legal advice. You would benefit from speaking to a lawyer who can properly advise you of the best course of action. By pressing the “Consult a Lawyer” button, LawAdvisor can help you search for experienced lawyers and obtain fee proposals for their services. Costs for legal advice and representation will vary between providers based on experience and the scope of services.

Answered over 7 years ago   Legal disclaimer

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