Hansard debates

Ms KAIROUZ (Kororoit—Minister for Consumer Affairs, Gaming and Liquor Regulation, Minister for Suburban Development) (10:14:45): I move: That this bill be read a second time. I ask that my second-reading speech be incorporated into Hansard. Incorporated speech as follows: This Bill implements the outcomes of the Victorian Government’s sweeping review of legislation governing the operation of owners corporations in Victoria, undertaken as part of the Consumer Property Law Review. This review examined both the conduct of owners corporation managers, and the functions and management of owners corporations. Apartment and unit living is an increasingly popular option for many Victorians and brings together a wide range of people who have diverse goals, interests and expectations. There are currently over 85,000 active owners corporations in Victoria, covering more than 772,000 individual lots. It is estimated that around 1.5 million Victorians—a quarter of the state’s population—either live in, or own property in, an owners corporation. Given the passage of time since the Owners Corporations Act 2006 commenced in December 2007, it is important to take the opportunity to reform and modernise our legislation to ensure risks are appropriately managed and stakeholder expectations are met. The Consumer Property Law Review commenced in August 2015, with issues papers relating to the conduct of licensed real estate agents, conveyancers and owners corporation managers; and the management of owners corporations more broadly, released in December 2015 and March 2016, respectively. Drawing on stakeholder feedback, an Options Paper was released in November 2016 canvassing a range of potential reforms to the Owners Corporations Act and related legislation. More than 100 submissions were received in response to the Options Paper, from both concerned individuals and key institutional bodies. This level of stakeholder interest shows the importance of this Bill. The government carefully considered stakeholder feedback to develop a reform package which addressed the issues they raised. In recognition of the stakeholder-driven nature of the review, the government made an election commitment to release an Exposure Draft of the Bill by 30 June this year, to provide a final opportunity for interested parties to comment on the proposed reforms. The Exposure Draft was released on 5 April, and by the close of consultation on 10 May, more than 40 submissions had been received. I would like to take the opportunity to thank everyone who made a submission during the course of the review. Your contributions have helped identify a number of important technical and policy issues, and have helped ensure that the Bill before the house today strikes the right balance between competing interests. The Bill will improve the regulation of owners corporations in a number of important ways. For example, a new, more logical, five-tier system based on owners corporation size will be introduced, establishing new thresholds for the requirements to have committees, prepare annual financial statements and commission external audits or independent reviews, and have maintenance plans and funds. Larger owners corporations will be subject to a greater number of requirements, whilst smaller ones will be subject to less stringent regulation. Another important reform will require owners corporations to deposit sufficient fees into their maintenance fund to implement the approved maintenance plan. This will enhance equity between past, present and future lot owners and reduce the need for significant and unexpected fee increases, which can cause financial hardship for some lot owners. The Bill will also improve the quality of owners corporation managers and enhance protection for owners corporations in relation to owners corporation managers. This will be done by strengthening the disqualification and insurance provisions of the current registration scheme to ensure persons convicted of certain criminal offences cannot be registered as managers without the consent of the Business Licensing Authority, and requiring managers to hold professional indemnity insurance at all times. Certain unfair terms, such as those which may restrict an owners corporation’s ability to revoke the appointment of a manager, will be prohibited, and the Victorian Civil and Administrative Tribunal will be empowered to rule whether other contract terms are unfair. The fiduciary duties of managers will also be expanded in relation to the procurement of goods and services on behalf of owners corporations, influencing of voting, and owners corporations’ access to their financial records, helping ensure lot owners are aware of any beneficial relationships or other issues. The Bill will also expand and improve developers’ duties to the owners corporations they create and enhance protection for owners corporations in this area. This will be achieved by expanding the obligations of developers in line with the New South Wales model, prohibiting developers from appointing themselves or their associates as owners corporation manager; and from voting on any resolution relating to building defects. These obligations will be extended to apply for 10 years following the registration of the plan of subdivision and while the developer holds the majority of lot entitlements, rather than the majority of lots. At the first meeting of the owners corporation, developers will also be required to disclose any beneficial relationship with the owners corporation manager, as well as provide a broader range of documents than currently required, including a maintenance plan for the building. Developers will be prohibited from setting the initial budget at an unreasonably low level to entice buyers, unreasonably designating common property or common services as private lots to enhance their voting power, and receiving payments from an owners corporation manager in relation to a management contract. Equity between lot owners will also be enhanced by requiring the initial settings of lot entitlement and liability to be established according to specified criteria and be accompanied by a statement explaining the settings. The ability of a majority lot owner to prevent an application to VCAT for changes to these settings will also be removed where all other lot owners have consented to the change. The Bill will also implement a number of proposals to improve the governance and financial administration of, and internal relations in, owners corporations. This includes expanding the duty of committee members to include a duty to act in the owners corporation’s best interests; restricting proxy farming and committee proxies, and prohibiting contractual limitations on lot owners’ voting rights; enabling owners corporations to make rules controlling smoke drift from private lots; and enabling owners corporations to separately levy lot owners for a range of costs directly attributable to the particular use of certain lots. Finally, the Bill will improve the regulation of owners corporations in retirement villages by providing for a clearer separation between owners corporation meetings, retirement village meetings and village resident committees, and aligning the powers of village operators who control owners corporations in retirement villages with the aims of the Retirement Villages Act 1986. The Bill is an important the first step in improving governance and outcomes for owners corporations in Victoria. Implementation of these new requirements will be supported by the delivery of a voluntary, ongoing and targeted information and training program for owners corporation managers in a partnership between Consumer Affairs Victoria and industry bodies, along with a broader information campaign aimed at owners corporations in general. The government will also continue to work with stakeholders on the development of amendments to the Regulations, including new model rules. The Bill also includes a statutory review provision, requiring an assessment of its amendments to be undertaken within two to five years of commencement. This will provide an opportunity to examine the effectiveness of the reform package and identify whether any further amendments may be required. The Bill will help ensure that owners corporations are better governed, more financially responsible and sustainable, with greater social cohesion, making them better places to live. I commend the Bill to the house.