Funding pathways for remedial works in Victorian owners corporations

Remedial projects in strata are delayed at the funding resolution more often than at the building work. Establishing the available funding pathways before works are scoped improves the scope itself, because it can then be staged to match the manner in which the money can be raised.

Owners corporation tiers

The Owners Corporations Act 2006 (Vic) sorts owners corporations into five tiers by number of occupiable lots, and the tier determines the obligations that apply:

Tier	Occupiable lots	Maintenance plan
One	More than 100	Required
Two	51 to 100	Required
Three	10 to 50	Optional
Four	3 to 9	Optional
Five	Two-lot subdivision, or services only	Optional

A maintenance plan must set out the major capital items expected to need repair or replacement within the next 10 years, their present condition, when they will need work, the estimated cost, and their expected life once repaired. Where a plan is approved, the owners corporation must establish a maintenance fund, and must set the annual contribution at a level adequate to fund the plan rather than at a nominal amount.

The funding pathways

Administrative and maintenance funds. Routine repairs and programmed maintenance are met from ordinary contributions. Tier One and Tier Two owners corporations must have a maintenance plan; any other owners corporation may resolve to adopt one. Provisioning for predictable remedial expenditure through the maintenance fund over successive years is the lowest-cost and least contentious source of funds available in strata, because the contribution is set in advance and spread across owners as an ordinary budget item.

Special levies. Major unplanned works generally require a special levy struck by resolution. The associated friction is substantial: owners face a significant and frequently unanticipated cost, and the resolution requires sufficient support at a general meeting. Levies can usually be structured in instalments across a works programme, which is one reason staged scopes are resolved more readily than single lump sums.

Borrowing. Strata lending against future levy income spreads the cost over time and can enable urgent works where owners cannot fund a levy at short notice. Interest is a genuine cost and should be quantified. So should the cost of deferral, which on a deteriorating element is frequently the larger of the two. A committee comparing the options should obtain the deterioration case in writing, with the projected additional scope identified.

Insurance and warranty recovery. Where defects are attributable to insurable events, builder warranty periods or the acts of third parties, some or all of the cost may be recoverable. Diagnosis is determinative here, because a condition report that attributes cause on a defensible technical basis is the foundation of any recovery position.

Section 53 and the maintenance plan exclusion

Under section 53 of the Act, “upgrading works” require a special resolution — 75% of lot entitlements or votes. Works fall into that category if the estimated cost is more than twice the total current annual fees, or if they require a planning permit or building permit.

Almost every facade, concrete or balcony remediation project engages the building permit limb of that test. The default position for major remedial works is therefore a 75% threshold, which is difficult to achieve in an owners corporation with low meeting attendance and a significant proportion of non-resident owners.

Section 53(2) expressly excludes works provided for in an approved maintenance plan. Works already scoped into the plan may proceed by ordinary resolution and be funded from the maintenance fund, without a special resolution.

Owners corporations planning major works should note the effect of this provision. Incorporating remedial works into an approved maintenance plan in advance changes the applicable threshold from 75% support to a simple majority. The building, the works and the expenditure are identical in each case; the procedural pathway differs according to whether the works were provided for in the plan before they became urgent. This is the strongest procedural argument for preparing a maintenance plan on the basis of a condition survey rather than on an estimate.

The same logic applies to section 52, which requires a special resolution for significant alterations to the appearance of common property unless the work is permitted by the maintenance plan, or an immediate alteration is necessary for safety or to prevent significant loss.

There are also limited grounds under section 45 to pay out of the maintenance fund for matters outside the plan, where immediate expenditure is necessary to ensure safety or prevent significant loss or damage, or for repairs that could not reasonably have been foreseen when the plan was prepared. Those grounds are safety valves for genuinely unforeseen circumstances rather than a general alternative to planning, and they carry an obligation to report the expenditure to lot owners.

Factors associated with successful resolutions

Across projects supported through this process, the following factors recur:

• Documented evidence in place of characterisation. Photographs indexed to a numbered defect schedule are more persuasive than a summary of an engineer’s opinion, because owners can assess the condition of their own building directly.
• Options with costed trade-offs. A do-minimum option, a recommended scope, and the quantified cost of deferral. A single figure presented without alternatives gives a meeting no basis on which to test it.
• Staging aligned to funding capacity. Critical works in the current period, programmed works across following budget cycles. Staging converts a levy that cannot be raised into a sequence that can.
• Direct attendance by the contractor. Technical questions answered at the meeting by the party who will perform the work address the concerns that most often defeat funding resolutions.

Duty of care and deferred defects

Deferring known safety-relevant defects, such as failing balustrades or facade material at risk of falling, is not a neutral decision. Committees carry duty-of-care obligations, and a documented decision to defer an identified risk becomes evidence in any subsequent proceeding. A condition report that ranks defects by risk assists the committee in both directions: it supports expenditure on items that are urgent and provides a defensible basis for deferring items that are not.

General information only — not legal or financial advice. Funding rules depend on the circumstances of the individual owners corporation and current Victorian legislation; confirm specifics with the owners corporation manager or a lawyer.