Different Financial Contributions
The content - including publications - on this website is intended only to provide a summary and general overview on matters of interest. It is not intended to be comprehensive nor does it constitute legal advice. We attempt to ensure that the content is current but we do not guarantee its currency or accuracy. We are not lawyers and any communications between the OCN and its members do not constitute legal advice and must not be relied on as legal advice. You should seek legal or other professional tailored advice to your circumstances. You should seek legal advice before acting or relying on any of the content in this website and any communications from the OCN. OCN will not be liable to you or anyone else for any loss suffered in connection with the use of this website or any of the content.
The basic concept under the Unit Titles (Management) Act is that owners contribute to the financial upkeep of the owners corporation in accordance with their unit entitlements, which are an indication of the value of each unit relative to every other unit. So, roughly, the bigger the unit the more the owner is required to contribute financially.
As we have moved into mixed use, commercial and residential buildings, OCs have discovered that unit entitlement apportionment of the levies may no longer be fair. Restaurants, cafes, gyms, hairdressers and so on use considerably utilities than residential units. Disputes arose and seemed to be insoluble when the only way to charge levies that better reflected user pays principles was by unopposed resolutions. The affected owner/s voted against resolutions and the only recourse was to ACAT.
There is now a simpler process for owners corporations to agree that some owners should make a financial contribution to the management of the owners corporation in excess of their unit entitlement. Now the OC can do this by a special resolution, which means that no more than ¼ of the votes are cast against the resolution.
Section 78 of the UT(M)A deals with differential contributions to the Administrative Fund and Section 89 with differential contributions to the Sinking Fund.
To pass valid differential levies an OC must be able to demonstrate that some units impose disproportionate running or maintenance costs on other units and therefore that charging different levies meets the tests of S78 (3) or S89(3).
The tests are that the differential levies must be fair, taking into account
the structure of the unit plan; and
the nature of the buildings that form part of the units or common property of the unit plan, including the features and character of the units and common property; and
the purposes for which units are used, including the likely impact of that use on the common property; and
the extent to which the change imposes a burden on a unit that is commensurate with the use of that unit.
When the EC is satisfied that those tests are met it can ask the OC to pass a special resolution that sets out a method under which only stated unit owners, or unit owners in a stated class, are required to pay a particular contribution, or a contribution of a particular kind. The passage of the resolution creates a Rule of the OC.
The new rule can only be amended or revoked by a special resolution and is subject to challenge at ACAT.
Owners can ask ACAT under S127 for an order declaring that the alternative rule is invalid because it is unfair or is no longer fair due to a change in circumstances related to the use of the unit or the common property.
It should also be noted that S39A requires that the make up of Executive Committees must if feasible now include at least one owner of a residential and one owner of a commercial unit. If that fails to occur at the AGM an owner may apply to ACAT for an order requiring a new election to be held to satisfy the requirement of S39A.