In 2019, Victorian Parliament sought to change the Owners Corporations Act 2006 (Vic) (OC Act), with specific amendments that would impact owners corporation arrangements and management rights transactions through the introduction of the Owners Corporations and Other Acts Amendment Bill 2019 (OC Bill).

According to the Explanatory Memorandum, the proposed amendments were directed toward expanding and improving developers’ duties to the owners corporations they create and enhancing protection for owners corporations.

We provide a brief update on the progress the OC Bill has made in Parliament, including its current status, and also discuss/explain a key amendment that was made to the OC Bill.

OC Bill passes both Houses

The OC Bill has now passed both Houses of Victorian Parliament. It passed with two key amendments that were introduced by the Legislative Council on Tuesday, 16 February 2021.

The key amendments are:

• the delay in the commencement date
• a carve out for hotel and resort management contracts.

The final step is for the OC Bill to receive Royal Assent. This is expected shortly.

The provisions will come into force on 1 December 2021, unless proclaimed earlier.

Delay in commencement date

Initially, the proposed commencement date for the OC Bill was 1 January 2021. However, the changes introduced by the Legislative Council have delayed the commencement date to 1 December 2021, unless proclaimed earlier. So, the operation of the OC Bill won’t be retrospective.

Any agreements entered into prior to that revised commencement date will not be governed by the new law, so a window still remains.

Maddocks can provide advice on structuring management rights transactions entered into prior to commencement so as to navigate the changes in the most efficient manner, and to seek to preserve longevity of existing contractual arrangements.

Carve out for hotel and resort management contracts

Initially, the OC Bill proposed to limit the term of certain contracts to three years. These were contracts that:

• were entered into by the applicant for registration of the plan of subdivision
• relate to the owners corporation
• benefit the applicant.

The changes that have passed both houses of Parliament provide a carve out for hotel and resort management contracts relating to hotels, resorts and serviced apartment complexes.

The types of management contracts include letting agreements, leases and licences of common property for purposes of providing an onsite letting and caretaking service, and certain building maintenance and facility management agreements. This means that these hotel and resort management contracts will be able to exceed three years.

The amendments also contemplate that regulations may be made in order to achieve the underlying policy requirements.

The carve out was welcomed by ResortBrokers, which led the campaign to amend part of the original legislation which proposed restricting developers from entering an owner’s corporation into any management agreements for more than three years.

“This is a great result for the Victorian economy as it provides the security of tenure to short-stay operators required to invest the significant amount of time and capital necessary to establish a successful and professional short-stay operation. It also ensures tourists and travellers staying in Victoria have the option of staying in a wider range professionally run hotels and service apartment buildings,” said ResortBrokers Director Alex Cook.

Maddocks can help you understand which types of complexes are subject to this carve out.

Current status and what happens next?

At the time of writing this update, the OC Bill has passed both houses of Victorian Parliament. Once assented to, the changes made by the OC Bill will become law.