Australia: Recent amendments to the Local Government Act and Owners Corporations Act

In brief - Victoria attempts to tackle dangerous cladding on residential buildings, as well as unruly and destructive behaviour in short-stay accommodation

Late last year, two Acts were passed by the Victorian Parliament in an attempt to address recent issues facing the community: combustible cladding on residential buildings and bad behaviour in short-stay apartments (such as Airbnb).

The Building Amendment (Registration of Building Trades and Other Matters) Act 2018 allows owners and owners corporations to enter into loan agreements in order to fund the removal of combustible cladding and pay off the cost via council rates.

The Owners Corporations Amendment (Short-Stay Accommodation) Act 2018 allows owners or occupiers of lots or owners corporation managers to make complaints about unruly tenants in properties affected by an owners corporation, and provides a process for lot owners to be held liable for disruption or destruction to common property caused by their short-stay guests. 

What Cladding Rectification Agreements mean for councils, owners and owners corporations 

The Building Amendment (Registration of Building Trades and Other Matters) Act inserts a new Part 8B into the Local Government Act 1989, to provide a mechanism for the removal of cladding that is combustible and dangerous from residential buildings. The Act aims to reduce the cost of cladding rectification works by implementing the recommendations of the Victorian Cladding Taskforce in this respect.

The introduction of Cladding Rectification Agreements (CRAs) will allow owners and owners corporations to enter loan agreements with lenders and local councils to finance cladding rectification works, and to repay the loan for a minimum period of ten years. Owners and owners corporations will be able to repay the cost of removing the offending cladding from their building gradually through their council rates. The CRA will be transferred to any subsequent owners if the property is sold during the loan period.

Councils are able to secure the loan by placing a cladding rectification charge over the property. Importantly, councils are not required to enter into CRAs and will not be permitted to enter into a CRA if the total amount of taxes, rates, charges and mortgages on the property will exceed the value of the property, when taking into account the proposed cladding rectification charge. This means that an owner or owners corporation will have to provide sufficient information to the council about all taxes, rates, charges and mortgages owing on the land before it will be able to enter into a CRA.

For owners corporations wanting to enter into a CRA, the written consent of at least 75 per cent of owners is required. These changes came into operation on 30 October 2018. 

What short-stay accommodation amendments mean for apartment owners and owners corporations

The Owners Corporations Amendment (Short-Stay Accommodation) Act amends the Owners Corporations Act 2006 in an attempt to regulate short-stay accommodation and provides avenues for those affected by destructive or unruly behaviour of occupants. Under the new rules, apartment owners can be liable for any damage, noise or other disruption caused by their short-term guests. Short-term means a stay of seven days and six nights or less.

Neighbours and owners of other lots will now be able to make complaints to the relevant owners corporation about short-stay occupants who engage in certain disruptive behaviour. Such behaviour includes:

  • creating unreasonable noise or behaving badly
  • causing a health, safety or security hazard
  • damaging common property, and
  • obstructing a resident from using their property 

The owners corporation has discretion to take action, and if it chooses to do so must give notice to the lot owner of the alleged breach. If the owner does not rectify the breach and the disruptive behaviour continues, the owners corporation may apply to VCAT to resolve the dispute.

VCAT has been given new powers under the Act to make any order it considers fair, including:

  • to ban the use of a lot for short-stay accommodation if the lot owner has received not less than three notices from the owners corporation in the previous 24 months
  • to fine guests up to $1,100 for engaging in the above behaviour, and
  • to award compensation of up to $2,000 to each affected neighbour

Lot owners should be aware of their potential liability under this new legislation, as they may be ordered to pay compensation or damages to their neighbours for loss of amenity caused by their short-stay guests.

Developers and owners corporations should be aware that the laws do not allow owners corporations to ban short-stay accommodation in their developments and buildings, but they do improve owners corporations' powers to deal with unreasonable behaviour of short-stay occupants.

Time will tell whether the changes will be sufficient to balance the interests of owners using their lots for short-stay accommodation and other lot owners and occupants. 

Nathan Rhimes Jessica Fletcher
Property development
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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