Wednesday, 19 February 2020

Owners Corporations and Other Acts Amendment Bill 2019

Second reading

Debate resumed on motion of Ms KAIROUZ:

That this bill be now read a second time.

Mr ANGUS (Forest Hill) (16:59): I am pleased to rise this evening to make a contribution in relation to the Owners Corporations and Other Acts Amendment Bill 2019. I note that this bill was introduced last year into the Parliament and went into abeyance for quite some months. It has now resurfaced, and here we are in the chamber. At the outset can I thank the Minister for Consumer Affairs, Gaming and Liquor Regulation, who is also at the table, and her staff for the briefing that we did receive last year. That was most helpful.

It has been a long time coming, this reform. The history in relation to the process goes back quite some way. It goes back to August 2015, when there was a review announced in relation to this. In December 2015 issues paper 1 was issued; in March 2016, issue 2. In November 2016 there was an options paper, and then some years later, in April 2019, there was an exposure draft. Subsequent to that there were also further opportunities to have input into it. So it has been a long time coming.

I suppose as an introduction I can say that owners corporations matters are very often a contentious area of the law. They can often be very problematic, given that there are people joined together through their ownership of a particular property or their involvement in a particular property—people that probably would never really encounter each other any other time. As a result of that there are all kinds of different personalities, and there are all kinds of different competing interests and all kinds of issues that have to be resolved.

I note too that there are more than 85 000 active owners corporations in Victoria, so it is a very large number. It covers more than 770 000-odd individual lots, and it is estimated that approximately 1.5 million Victorians either live in or own a property in an owners corporation. I think those numbers are very significant, and they indeed show the reach of owners corporations. That reach shows the obvious significant consequences of any changes to this particular legislation. That is why it is important that there is extensive consultation and, most important of course, that the bill gets things right.

If we turn to the bill, we can see that obviously clause 1 under part 1 deals with the purposes of the bill, and it goes through quite a range of provisions. In relation to the Owners Corporations Act 2006, there are 11 areas identified there. In relation to the Retirement Villages Act 1986, there is one area there. In relation to the Subdivision Act 1988, there are three areas outlined there. I will just go through and touch on some of those.

Probably one of the most significant changes I think is regarding clause 3, and that changes the definitions, particularly of what will be new section 7 of the act. It introduces the five tiers of an owners corporation, and they are outlined under that section. It talks about the five tiers: tier 1 is an owners corporation that consists of more than 100 occupiable lots; tier 2 is 51 to 100 occupiable lots, tier 3 is 10 to 50; tier 4 is three to nine; and tier 5 is two:

(a) an owners corporation for a 2-lot subdivision; or

(b) a services only owners corporation.

So that is a significant change. As a result of that, there are a whole lot of things that flow from that and the requirements in relation to those particular new demarcations.

In relation to the financial statements, if I turn to clause 17, there is a new section 34 headed ‘Financial statements’. It talks about the requirements for annual financial statements for presentation at the annual general meeting. It goes through the various requirements of those. I note from the outset that in relation to some of the requirements about preparation of financial statements and subsequent audits and whatnot there has been some concern expressed to me and to the opposition in relation to the requirements around them. I will come back to that in more detail later on, but I do note it at this early stage. I also note in fact that at the bottom of page 13 of the bill it does say, and I quote:

Annual financial statements prepared under this section may be either General Purpose Financial Reports or Special Purpose Financial Reports as defined by the Australian Accounting Standards Board.

So there is some scope there as to what level of accounts need to be prepared in relation to that, and I think that is a good thing. But there still remain some concerns.

I also note that in relation to this whole process the regulations are being revised in the first half of this year. I have been advised that there will be a public consultation process on this. I certainly look forward to that, and I would encourage people that have got an interest in this particular issue—in owners corporations generally or specifically—to keep an eye open for that. I trust that will be broadly communicated so that everyone can indeed have their say on it.

In relation to the review, I note too on page 70 of the bill, under section 210, subsection (2), that it talks about a review being made in relation to the act. It says, and I quote:

The review must commence at least 2 years after the commencement day and no later than 5 years after the commencement day.

So at least we know that there will be further attention given to these amendments to the act, and it will give people further opportunity. I encourage the government to perhaps conduct that review closer to the two-year mark than the five-year mark because I think, like all these things, once the outworkings of the bill as proposed flow through the system we will need to then consider that and also those involved in owners corporations will have had a chance to digest that after a couple of years and to see what the consequences are. Inevitably, I would say, there will be unintended consequences, and I trust that the government will be open to fixing those up. As I said before, with so many people caught up in this and just the huge volume of owners corporations here in Victoria, it would be incumbent upon them to be responsive and to deal with any potential problems that may have been unforeseen within this particular bill.

Coming back to the main provisions of the bill, basically they can be divided up into five areas, effectively, and within those five areas there are many, many changes. I certainly will not have time and will not go into all of those, but the first area is the proposal to rationalise the regulation of owners corporations—and there is a whole raft of ways. I have talked about the introduction of the five-tiered system for owners corporations, and that deals with that very important aspect. There are others. In relation to regulating requirements for committees, professional managers, external audits and so on, I touched on some of those. So that deals with that.

There is another requirement which is contained in here in relation to the increases required for public liability insurance from $10 million to $20 million, under clause 30. I note that even with that there have been some comments made to me regarding that. It is on page 21 of the bill. That perhaps should have been reconsidered. Perhaps there should be more of a tiering structure within that as well, given that that is an enormous increase—a 100 per cent increase, from $10 million to $20 million, for coverage—whether that is in fact is appropriate for the various tiers of owners corporations. Perhaps more thought should have been put into that. There could have been some other scope for some tiering to be conducted within those thresholds. So I think there is some more work and consideration to be made there.

Further, under that first section of rationalisation there are requirements for the contributions by owners in a maintenance fund to achieve a maintenance plan. Well, that sort of goes without saying, but it is good that that has been put in there in clauses 20 and 22. There are a whole range of other changes in relation to various things such as, for example, the removal under clause 10 on page 9 of the bill of the requirement not to have or use a common seal anymore. Again, I suppose that is a reflection of modernising the requirements here, and it goes on and talks about that because that is a fairly common situation these days as opposed to how it used to be in former days.

The second overall area is for proposals to improve the quality of owners corporations and managers and to enhance protections for owners corporations. There are a lot of items there; that is really contained on page 41, where the bill talks about the duties of the manager. It goes on and deals with a range of issues, but the one I want to particularly touch on is the one of the bottom of page 41, new section 122(2)(b), and I quote:

… if subsection (3) applies, must account separately for the money held by the manager for each owners corporation on the plan of subdivision …

What that means is that there cannot be pooling of funds from various owners corporations. If someone is managing more than one and they have got separate funds, they cannot pool them. I think that is an appropriate improvement there. It harks back to the old trust account systems that we are so familiar with in certain other professions and other areas of enterprise, so I think that is a good improvement.

The third area is the proposal to expand and improve developers’ duties to the owners corporation that the developers create and to enhance protection for owners corporations. Again there are a range of issues there, and they are basically contained on pages 23 and 24 of the bill. They talk about what needs to be disclosed at the first meeting, various other things in relation to maintenance plans and other aspects in relation to that. That is again a very important area, because one of the often contentious areas of a body corporate can be maintenance issues and the funding of the maintenance issues. If that is not clear—and in many cases it is not as clear as it should be—it can lead to problems, so is very important that that is clarified.

I can think of someone that I know that is dealing with this on a firsthand basis at the moment. They have got six lots in their body corporate, and some of the owners want to contribute to certain things and some of them do not, and they are just having all kinds of issues trying to get that resolved. They are having trouble getting someone to chair the meeting. There are a number of tenants in there, and the owners have not got a particular interest in the property that they have got tenanted. Obviously the tenants cannot be involved, and the owners are not interested. There are a couple of owner-occupiers in the block, and it is has resulted in various contentious issues. Hopefully reforms like this will clarify things, just as a very small example, for this one that I know about which is a current issue out in the eastern suburbs. They should make it somewhat easier for those people managing that relatively small body corporate situation.

In relation to other areas, there are proposals to improve the governance and financial administration of internal relations in owners corporations. That is an area where there is just a huge number of changes. There are 22 changes that I have seen on a list in relation to that area. One of the areas is what is so-called proxy farming. That is a quite contentious issue, and I will be coming back that to that in a bit more detail, because I think that is an area that needs to be looked at more and that can be quite problematic.

It also talks about abandoned goods and other dispute resolution procedures. Abandoned goods are dealt with in clause 29 under the new section 53A, and it brings some clarity in relation to that because that is again one of the problems that can arise—if someone abandons some property there is the issue of what you do with it. There is often a very, very long and complex process to get to a situation where that can be tidied up, and often it is at considerable inconvenience to other occupiers when there is some rubbish or some abandoned goods left lying around. That particular section, section 53A, and the subsequent sections go through the process in relation to that. Section 53D talks about the disposal of goods and the circumstances that can be the case as well. There are a range of improvements there, and as I said, some of that will be certainly welcome.

The final area is in relation to proposals to improve and to rationalise the regulation of owners corporations in retirement villages. That talks about bringing in a clearer separation between owners corporation meetings, retirement village meetings and village resident committees. The reference in relation to that is on page 73 of the bill, and it talks about those matters there. Again that remains an area of contention. There are all kinds of issues in the Retirement Villages Act 1986, which we are not dealing with in this particular bill, but that is an area where I hope the government can bring some reforms as well because there are just ongoing issues in that area that we probably all as local members regularly hear about from constituents.

As I said, there are a number of areas of concern. Let me just run through those. I touched on the issue of proxies, which is found in clause 42 on page 33. That says in new section 89D, under the heading ‘Restriction on number of lot owners on behalf of whom a proxy may vote on a resolution’:

A person must not vote as a proxy on a resolution at a meeting of the owners corporation—

(a) on behalf of more than one lot owner—if there are 20 or less occupiable lots on the plan of subdivision; or …

(b) on behalf of more than 5% of the lot owners—if there are more than 20 occupiable lots on the plan of subdivision.

Some of the discussion we have had around this particular issue is that it unfairly limits the number of proxies that can be held by a single person—for example, an owners corporation manager—and it will significantly impede an owners corporation’s ability to achieve a quorum and to make decisions.

One of the people we consulted with in relation to this bill came up with a matter. This particular person dealt with about 250 meetings in a year and he said in relation to quorums that they got a quorum at 25 per cent of those meetings and at 25 per cent of them there were only proxies—there was no-one present. So I think the fact that someone cannot hold a significant number of proxies is a deficiency in this bill. I think that is a significant problem and will work against the effective management of such a corporation. I am sure there are many people in this room that are investors and that have probably never ever been and probably have no intention of ever going to a body corporate meeting for an investment property they hold that is part of a body corporate. That is not unusual; that is very typical, especially if it is interstate or in another jurisdiction far away. So I think that is a problem, and that definitely needs to be looked at.

Other people we consulted mentioned the fact that the bill does not introduce minimum professional standards of education and training or ongoing compulsory professional development for owners corporation managers. As a result of that, it is not going to be improving the professionalism of owners corporation managers. I think that is a very valid point as well, because if you are trying to lift the bar in relation to the management of such organisations—and as I said right at the start, with so many of them in Victoria and so many people affected by the consequences of their operations—I think it is important to have professional body corporate manager standards so that the cowboys, if you like, are driven out. We want people managing other people’s affairs, whether it is in this area of property or finance or any other area, to be competent, to be trained, to be experienced and to be subject to ongoing professional development, because, as we all know, nothing stays the same. That is certainly an area that I would encourage the government to look at and consider what could be some appropriate remedy in relation to that.

I talked before about financial statements and the concerns that have been raised with me in relation to the preparation of financial statements and the fact that if there is a requirement to comply with the Australian accounting standards, which there is, that could be using a sledgehammer to smash a walnut, to coin a phrase. An owners corporation’s financial statements at the low end would not be that complex, but at the higher end it might be. Nevertheless if you have got proper systems and internal controls, you may not need to comply with all that. I think there needs to be some caution in relation to that as to whether it is one size fits all or whether there can be some significant flexibility in relation to that. One of the things you can be sure of is that if you make it too complicated, it will just incur more costs, and that is the last thing the owners need—additional costs to tick the boxes, so to speak, and to prepare those financial statements. So that needs to be looked at in relation to not putting additional compliance and other costs on owners in relation to that particular aspect.

Another area of significant concern is the area under clause 35, which is on page 24 of the bill. That talks about contracts under proposed section 67B(2), which says at the conclusion that ‘any term of that contract must not exceed three years in duration’. This has been raised as a concern because that is too short a time frame for someone to be entering into a contract with a body corporate. There has been provided to me some comparisons with other states in relation to the three-year maximum term included in proposed section 67B. In relation to, for example, letting agreements, Victoria has proposed three years, in New South Wales the current situation is no limit and in Queensland it is 25 years. In relation to the building management agreement, in Victoria that is proposed to be three years, in New South Wales the current situation is 10 years and in Queensland it is 25 years. There are some issues there because that is going to be quite restrictive. On whether that will be a big impediment to people getting involved in managing larger owners corporations, I think that could very much be the situation, whether it is letting agreements, key operational areas or other aspects of the operations of those. There is no definition regarding the agreement and what the government’s intention is. I think that is an area that does need to be looked at. Industry has said to me that that is an area of concern, and the government needs to consider looking at that again.

Just in conclusion, as I said, a number of concerns have been put to the opposition in relation to the four matters I have touched on but also in other areas. This is a big piece of work, but there is always room for improvement. I trust that the government would be open to some further input from the industry and from the professionals involved in this area, because it is a very significant contributor to the economy. It is a very significant sector, if you like, within the Victorian community, given that, as I said before, we have got 1.5 million Victorians either living in or owning a property in an owners corporation. So it is a very, very significant matter.

As a result of those concerns and those matters that I have raised, the opposition will be reserving its position in the Legislative Council. We will not be opposing the bill here, but we will be reserving our position in the Legislative Council with a view to seeking some amendments there.

Mr HAMER (Box Hill) (17:24): I too rise to speak on the Owners Corporations and Other Acts Amendment Bill 2019. I would like to thank the Minister for Consumer Affairs, Gaming and Liquor Regulation for bringing this bill to the house. I know it has been quite a long process, which I will discuss shortly, but the objective of this bill is really to amend the Owners Corporations Act 2006 and a number of other pieces of legislation to make owners corporation buildings better governed, more financially responsible and sustainable and generally more livable.

As I said, it has taken some time to get to this point. I thank the minister, her staff and the staff of Consumer Affairs Victoria for all the work that they have done. It was back in August 2015 that the then minister announced a review of four major pieces of consumer property legislation, and in particular in relation to owners corporations an initial issues paper was released in December 2015 and a second one in March 2016, with a final options paper, Options for Reform of the Owners Corporation Act 2006, later that year. Drafting of this bill has been informed by stakeholder feedback on that options paper. The introduction of this bill honours an election commitment, which was to release an exposure draft of the bill for discussion in the first half of 2019, which was done, and I am very pleased that now finally we have brought this bill to the house.

The bill includes a package of 36 important reforms that will: rationalise the regulation of owners corporations; improve the quality of owners corporation managers and enhance protection for owners corporations; expand and improve developers’ duties; improve the governance and financial administration of owners corporations; and improve and rationalise the regulation of owners corporations in retirement villages.

The particular area that I would like to focus on is the change in definitions of owners corporations to a more tiered approach, creating five different tiers of owners corporations based on the size of the lots that they manage. This will regulate owners corporations in a more rational and responsible way, with larger owners corporations subject to a greater number of requirements than smaller ones. Currently there are over 166 000 owners corporations in the state, registered in respect of over 72 000 plans of subdivision. But approximately three-quarters of Victorian owners corporations are small, with three lots or fewer. In actual fact the number of owners corporations that will qualify for tier 1, which is 100 or more lots, is only estimated to be about 0.5 per cent of the entire number of owners corporations.

Under the existing legislation there are only really two distinctions. There is a distinction for a two-lot owners corporation and what is called a prescribed owners corporation under the existing act. A prescribed owners corporation does apply to owners corporations that currently manage 100 lots or more, but there is no definition for anything that falls within that boundary. Under the current legislation it is only these prescribed owners corporations that must prepare financial statements in accordance with the standards required, have their financial statements audited, prepare a maintenance plan and obtain a valuation of all buildings that they are liable to insure. There are a lot of buildings and developments, particularly in my area, where there will be new apartments being developed—maybe 50 units, 70 units, 80 units. They would not qualify under the existing legislation to have any of these requirements. Under this bill there will be increased accountability for mid-sized owners corporations with tier 1, tier 2 and tier 3 owners corporations—so that is any owners corporation managing 10 or more lots. Those owners corporations will be required to prepare financial statements in accordance with the Australian accounting standards, so setting a much clearer standard for these owners corporations to meet from a financial responsibility.

Tier 1 and tier 2 owners corporations—that is owners corporations managing 50 or more lots—will now be required to prepare and approve a maintenance plan, and all owners corporations that are managing more than two lots will be required to obtain a valuation of all buildings that are its responsibility to ensure. One of the reasons why this is important is I managed to have a look at the census data for 2006 to 2016 and how that has actually changed, particularly in my area but also within the City of Melbourne—how our landscape has changed. The seat of Box Hill is within the local government areas of Whitehorse and Boroondara. In 2006 the number of dwellings that were a flat or unit in a four-or-more-storey block was just 66. That was 66 in 2006. In 2016 that number had increased to 1162, so almost a 20-fold increase in the number of dwellings in a four-or-more-storey block. They are now likely to be classified as a tier 1 or tier 2 owners corporation and be covered by that size corporation. There is an enormous number of units that have come online that would currently fall below the threshold of a prescribed owners corporation that will now be captured with this legislation. I know we have only started some of the development, particularly in Box Hill. There are a lot more plans for development, particularly in the Box Hill CBD, which will no doubt then benefit from a stronger owners corporation regime.

This is happening in other areas as well. In Boroondara, the other area that the electorate of Box Hill covers, in 2006 there were 768 flats, units or apartments in a four-or-more-storey block. By 2016 this had increased fivefold to 3530. We can really see the importance of having a much more robust owners corporations scheme that covers the different types of dwellings and developments that are out there and that is more attuned to the times. I know there have been discussions particularly focused on Docklands and CBD development and the move to apartment living, but it is happening across Melbourne suburbs, across Melbourne and into regional Victoria as well.

I just want to also touch on a couple of the other key points within the bill and what it will enable owners corporations to do. One of the important ones is that it will be able to separately levy lot owners for a range of costs which are associated with the use of their lot. One of the issues that has been flagged is particularly in relation to the uptake of Airbnb or short-stay accommodation. There might be certain owners within the body corporate that may be using their property for different purposes, and it allows the owners corporation to make that decision more based on the particular use of the individual property. So it gives that flexibility. I do not remember Airbnb being around back in 2006, so the bill is really a bill for modern times, and it recognises some of the changes that have occurred in the way that we live, the way that we are using apartments in and around Melbourne.

Just finally there are a number of clauses in the bill which, as I mentioned at the outset, strengthen the fiduciary duties of the owners corporations and the other governance arrangements, and I think this is a really important part. Owners corporations, as we have seen with the statistics, have more and more responsibility in terms of the properties under their management. There are more and more people who will rely on the owners corporation, so it is really important that we get the governance right. I commend the bill to the house.

Mr McCURDY (Ovens Valley) (17:34): I am pleased to follow the member for Box Hill on the Owners Corporations and Other Acts Amendment Bill 2019. As you have heard from other members on this bill, the purpose is to amend the Owners Corporations Act 2006, the Retirement Villages Act 1986 and the Subdivision Act 1988. It will do so in various ways across five areas.

Firstly, it proposes to improve the quality of owners corporation managers and enhance protection for owners corporations. So there will be various administrative amendments, and they are primarily for safeguards in the system, like prohibiting owners corporation managers from pooling funds from various owners corporations they manage into one bank account. The second part of that will be to rationalise the regulation of owners corporations in four instances. Firstly, it will introduce a five-tiered system for owners corporations, regulating requirements for committees, professional managers and external audits, and they will be allocated depending on size obviously. Part of that component will increase required public liability insurance from $10 million to $20 million, which personally I think is a good outcome. It will also require a contribution by owners into maintenance funds to achieve the maintenance plan, and various other changes, which will include removal of common seal requirements, which again is another practical outcome as far as I am concerned.

Other changes include expanding and improving developers duties to the owners corporation. That will create enhanced protection for owners corporations. Within that section it will expand the obligations of developers to owners corporations and enhance equity between lot owners. This bill proposes to improve the governance and financial administration of internal relations in the owners corporation, and as was mentioned by the member for Forest Hill, there are 22 changes in this area, including restriction of so-called proxy farming, disposal of abandoned goods and improving dispute resolution procedures.

The bill will improve and rationalise the regulation of owners corporations in retirement villages, which provides for a clearer separation between owners corporation meetings, retirement village meetings and village resident committees. This issue is close to my heart, as two communities in my electorate at the moment are in the process of building new retirement villages—they are under construction.

Bentley Wood, who currently provide residential aged care in Yarrawonga and Myrtleford, are seeking to expand to Cobram. That will be the next location, with a 100-bed facility. Work has already begun there, and at Bright they are also seeking a 100-bed proposal. In chatting to a few locals last week, we were a little concerned as to whether that one will get off the ground in Bright. There were just a few concerns when the block was originally purchased. There was a 30-metre setback from the plantations. Now that has changed since the purchase to a 60-metre setback, obviously reducing the size of the block, and that will reduce the available space for the 100-bed centre.

My concern in that area is that for every business there is a threshold or a break-even point about what will be viable, and making the sums add up in aged care is no different. So if this 100-bed facility drops back to a 60, well, clearly that is not viable, so it is important that we work with the Alpine shire and the Minister for Planning, if necessary, to see what we can do, if anything, to ensure that the new setbacks do not put the entire facility at risk, because beautiful Bright is an outstanding community, and it is going ahead from a tourism perspective, but also Hawthorn Village, a current aged-care provider, simply cannot cater for the future retirement options alone in Bright.

So as people get older they are beginning to evaluate moving to Myrtleford and Wangaratta, because that might be more suitable further down the valley, closer to other services, but this should not be the case. Bright certainly has something to offer for all ages, and we should be promoting and assisting where possible those who retire in Bright and ensure that their retirement is not short-lived, not just a five- or 10-year retirement before they need to look elsewhere for retirement services. So legislative changes that support better aged care are beneficial to communities like Bright and Myrtleford and of course to Cobram and Yarrawonga on the mighty Murray River. They are also honey pots for older Victorians who relocate out of Melbourne to a more relaxed environment.

In our role as MPs we continue to advocate, whether it is for sporting facilities, better schools or greater opportunities for young people, which we are all doing in our committees, but at the same time health providers and aged-care facilities in our smaller communities continue to slide under the Premier for Melbourne. We seem to be going backwards, and it is important that this changes, because as we continue to say in this place, Victoria is made up of 75 per cent of people who live in Melbourne and 25 per cent who live in regional Victoria, and we just wish that the proportions were similar in terms of the funding allocations across all sectors. From that perspective the Premier and the Treasurer of the state are simply being unfair, which will require a change of government if Victoria wants or expects a fair carving up of the financial pie, particularly as we look at the aged-care sector.

Other concerns I have on the bill include minimum professional standards of education and training and ongoing compulsory professional development for owners corporation managers, and therefore it is not improving the professionalism of owners corporation managers. Clause 42 would introduce new section 89D, which limits the number of proxies for all tiers of owners corporations. The concern here is that it unfairly limits the number of proxies that can be held by a single person—for example, an owners corporation manager—and will significantly impede an owners corporation’s ability to achieve a quorum, to say the least, and to make decisions, which is a restriction on a person’s fundamental right to appoint someone to act on their behalf.

Another concern I have is that clause 17 requires the financial statements of an owners corporation to be prepared in accordance with the Australian accounting standards. My worry is that if they have to comply with the Australian accounting standards, that could result in excessive compliance costs to business and a significant financial burden on owners corporations to comply with the preparation of those financial statements.

My understanding is that there has been a lot of consultation. This has been on the table for some time now. There have been various issues papers. There have been options papers, and there was an exposure draft back in April last year. Also the Real Estate Institute of Victoria have been consulted and various strata associations have certainly been consulted throughout the course of this bill. I wish the bill a speedy passage.

Ms CONNOLLY (Tarneit) (17:42): I am very excited to rise this afternoon to speak on the Owners Corporations and Other Acts Amendment Bill 2019. That is because this bill builds upon previous governments’ work to go ahead and regulate owners corporations and, most importantly, protect the people that live in them. Owners corporations are a significant part of our property system in Victoria. There are more than 85 000 owners corporations covering 772 000—that is a big number—individual lots of property. There are 1.5 million Victorians who live in or own property in an owners corporation. That is almost a quarter of us. These are property owners, these are renters and these are families who struggle to put food on the table and pay their bills. There are even retirees living in retirement villages.

I can tell you I love getting out and visiting seniors at the retirement villages across the electorate of Tarneit. In fact I remember being contacted early last year by a resident from Tarneit, a wonderful woman living in an owners corporation, and in one year her fees had nearly doubled for the purposes of maintaining nothing other than the community gym. According to her, it felt like she was paying the equivalent of another council rate. By the time she got to my office she had experienced long periods of anxiety about paying this bill and had nowhere else to turn. This is entirely unsatisfactory, and this bill is looking to better protect women like the one I met early last year in Tarneit from these sorts of situations.

When you go ahead and you buy into an owners corp as a home owner, you probably have a mortgage to pay off. Like everyone else you have bills to pay, you buy the groceries and you might even look after the kids or the grandkids. When you are paying nearly $750 in yearly fees, it makes a big difference to families trying to do their best to make ends meet, especially in communities like Tarneit. We know that a big reason for sudden spikes in fees is a sudden need for owners corporations to pay for maintenance on shared facilities, which is exactly why this bill is going to require them to deposit some of their fee revenue into a maintenance fund.

Another great change that this bill introduces is the creation of a five-tier system to categorise owners corporations based on their size. Not all owners corporations are the same, and what we do know is that one size does not always fit all. These thresholds are consistent with the way in which we distinguish between small, medium and large businesses and the standards of reporting and accountability that they are subject to.

But at its core this bill is simply about protecting people living in owners corporations from potential abuses committed by their managers. People should not be disadvantaged due to poor management or indeed criminal activity on the part of the manager, so under changes in this bill managers cannot be registered if they have criminal convictions. It is also extremely important that they are held to the same professional standards as any corporate director in Victoria, and that is exactly why they will be required to hold professional indemnity insurance. This bill also protects people from unfair contract terms, such as those that restrict the ability for owners corporations to remove a manager. To do this VCAT will be empowered to declare unfair contract terms in owners corporation agreements.

The relationship between managers and developers is also something that this bill heavily regulates, and I have to say on record it is quite distressing that we do have to go ahead and regulate these types of relationships. That is because we have seen a disturbing pattern of collusive behaviour between developers and owners corporation managers. The only way to prevent this type of behaviour is by tightening up our regulations. That is why this bill is going to ban developers from appointing themselves or their associates as manager of the owners corporation and from voting on any resolution relating to building defects. This lines up our legislation with that of New South Wales, and it makes it perfectly clear that owners corporations must act in the best interests of the lot owners, not the developers. The bill also requires developers to disclose beneficial relationships with managers and to provide documents relating to maintenance plans for buildings. Developers are going to be banned from engaging in dodgy practices such as enticing buyers by setting unreasonably low initial budgets or designating common property lots as private lots to increase their voting power. All of these changes will work to protect the good people in our communities from dodgy developers and corrupt managers.

Retirement villages that are owned by owners corporations will also be protected by this bill with up-to-date regulations that separate owners corporation meetings from retirement village meetings as well as going ahead and aligning their managers’ powers with those of the Retirement Villages Act 1986. As I said earlier, there are a lot of great retirement villages across the Tarneit electorate, and I do love going to visit them and their residents. They are home to a lot of great people in the west. I have been fortunate enough to listen to many of the people there share their stories as well as their experiences of living in retirement villages. Some of these experiences have been fantastic and some of them have not.

But when I think of the great stories and all of the retirees I have met along the way in Tarneit, I think of people like Noel and Margaret Canning. Noel and Margaret decided not so long ago to sell up their family home. They sold the family home. It was an excruciating decision for them. They decided to go ahead and downsize. A couple of months later after moving into a local retirement village I bumped into Noel and Margaret, and they felt like they had a new lease on life. They had never been happier. They had never been fitter in their 70s, which was wonderful to see, and they had made so many new friends.

Retirement villages create strong, tight-knit communities. I have seen it in action. They provide retirees like the Cannings the opportunity to contribute to our wider community. Last year I had the pleasure of joining them for the day as they hosted a fundraiser for Cancer Council Victoria. We shared some great tea and scones, and I was more than happy to sit for very long periods of time getting great advice and tips on how to cook a really great roast and the fluffiest scones. It was certainly something that was much debated across the table as to which ingredients would prepare the best scones in the west. My community knows that I am not the greatest cook as their local MP, and I am more than willing to share their cooking tips, which I greatly appreciate.

So when I saw the changes introduced by this bill, these changes to retirement villages really stuck out to me. They are really important. They seem like a small change, but it could mean that wonderful people like Noel and Margaret, along with thousands of retirees across Victoria living in our communities, are not going to be exploited by dodgy developers or selfish managers who exploit their owners corporations and retirement villages.

Owners corporations do form a big section of our property system and they encompass a rapidly growing number of residents. My own electorate of Tarneit has seen several owners corps move into the local community. The reforms that this bill seeks to implement will make them more accountable to lot owners—to people like Noel and Margaret Canning—and better regulate their financial and administrative governance. As a result, not only will owners corporations benefit but so will the communities who live in them. I commend the bill to the house.

Ms SANDELL (Melbourne) (17:50): I am tempted to share my own scone recipe, but maybe the member for Tarneit can give me some tips later on—

Ms Connolly: Lemonade.

Ms SANDELL: Lemonade, yes, I have tried that one; it is a good one. But instead I might speak on the Owners Corporations and Other Acts Amendment Bill 2019, and as others have talked about, it is about reforming the way that the owners corporation system operates in Victoria. Owners corporations, previously known as body corporates, are the legal entities that manage the common property of a multi-unit dwelling. Comprising the owners of the apartments or units in a development, they have got the power to set rules regarding the use of common property. They are becoming an increasingly important part of our housing system, given that so many Victorians are now covered by one. There are over 166 000 owners corporations in Victoria in fact, and about a quarter of us are either covered by a body corporate or are owners in one. That number continues to grow of course, especially as more and more Melburnians, in particular, are embracing apartment living.

I have spoken in this place many times about the benefits of apartment living. For those in my electorate it means that you are able to leave home and step straight out into a thriving city street, maybe with the CBD or the Docklands or another thriving inner-city suburb right at your doorstep. It means you can be close to work, close to transport, close to so many of the things that Melbourne city life offers. It also means being part of a community where you can get to know your neighbours, given that they are so close to you.

Unfortunately the way that we have regulated owners corporations has not kept up to speed with the growth in apartment living or the needs of the people who live in apartments. I often have constituents—it is one of the things that comes across my desk most often, in fact—coming to me frustrated with how developers have limited the quality of life in their apartment building. They are things like cutting corners on materials to create poorly made or even unsafe apartments—just look at flammable cladding for an example—locking apartments into unfair service contracts such as for electricity, or effectively handing over their buildings to the short-stay industry so they feel like they no longer live in a community but essentially now live in an unregulated hotel with few long-term neighbours. There are a lot of issues that are related to apartment living and the unregulated nature of apartment living that come across my desk, so I am really pleased to see the government tackle some of these issues to reform the owners corporation system and bring this bill before the house.

But of course I would not be standing here if I did not want to call out some of the things that are missing. Some of the biggest issues that come across my desk are things that this bill is not addressing. This bill is the culmination of a review of the Owners Corporations Act 2006 that has been going for the last four years, since 2015. I know that many owners and owner-occupiers have been waiting for some time for these reforms to come into this place. After such extensive consultation, after such a long time, it is really a shame that the bill still does have some really major gaps and flaws. It fails to address some of the biggest loopholes in our current body corporate system.

Some of the good things that the bill does: one of the major changes in the bill is the creation of new tiers of owners corporations separated by the size of the development. Of course, in the old act no distinction was made between towers of 99 units or blocks of three units, for example, with the same regulations applying to all developments regardless of size. This bill replaces that one-size-fits-all model with a five-tiered system with different requirements around financial statements, maintenance plans and maintenance contracts, for example, depending on the size of the development. That is a really sensible approach that means that those larger apartment blocks need to comply with more stringent regulations and the small ones with, of course, less stringent regulations.

There is also a new provision in the bill that prevents an owners corporation from making rules that unreasonably prohibit the installation of sustainability items on the exterior of a lot, which of course we welcome. This is something people come to me with a lot—wanting to put solar panels on their building and not being able to because of quite stringent rules—so it will be great to see. Those constituents will be really happy that now they are able to introduce some sustainability measures into their homes. Of course we need to be making it as easy as possible for people to make their homes greener, but it has been a challenge living in apartments, whether people wanted to get solar panels or they did not have compost bins readily available. These are issues that I often hear about, so I am pleased that the bill will stop owners corporations from unreasonably refusing to allow sustainability infrastructure like solar panels installed on properties.

There are also some really welcome restrictions on proxy voting. The bill places limits on how many owners you can act as a proxy for. You cannot be a proxy for more than one lot owner in a development of 20 or fewer units or more than 5 per cent of owners if there are more than 20 lots. Currently of course there are no such limits, which has allowed proxy farming to run rampant in owners corporations, and I have had many examples of proxy farming come across my desk from the CBD and the Docklands. I have heard from constituents who have essentially had their owners corporations taken over, with one person or group simply gathering as many proxies as they can, buying their way to a majority and making decisions that are not actually to the benefit of most of the people who live in the apartments, so this is a really good restriction to be introduced in this bill.

One of the biggest omissions in the bill is the fact that it does not deal with the issue that comes across my desk the most, which is the issue of short-stay apartments and their effect on people who live in apartments. Of course this is something I have spoken about many, many times before in Parliament. I have been pushing for change on this issue since 2014, before I was even elected. The issue is that we have seen such an expansion of the short-stay industry that it is having a real impact on people’s day-to-day lives and also the quality and flavour of our city.

It is turning what were supposed to be thriving residential communities essentially into unregulated hotels in a lot of cases. People feel like they have really lost their sense of community and the quality of life that they were expecting when they bought into an apartment. They bought into an apartment for all those reasons I mentioned—being close to other people, being close to the city, being close to amenities, having a good quality of life—and they are finding that that is being eroded because of the proliferation of short-stays. They are also essentially paying for extra maintenance and paying for extra security—things that were never factored in because these buildings were not designed as quasi-hotels. They were not designed to a hotel level of building standards. They were designed as residential buildings because that is what they are supposed to be, but then they are not used as long-term residential buildings. So we have got all the issues that that creates.

Melbourne, of course, is not the only place grappling with these issues, but it is the place where the government seems to be turning a pretty wilful blind eye to the situation. There are solutions that have been implemented in many other places—even in Sydney—that mean people can still use their residences in the sharing economy. They can still rent out a room or they can rent their apartment if they go away short term, but they put limits on this so that corporations cannot just buy up residential apartments not designed as hotels—with all the extra things that would go along with designing a hotel—and put them full-time on the short-stay market and turn big residential buildings into hotels. So we really should look seriously at these solutions so that people living in apartments in our wonderful, livable city have a good quality of life and we do not lose that standing as a livable city and we do not see our inner city turned into just a series of hotels with no community life whatsoever.

I understand the government has an interest in tourism and making sure that tourists can come to Melbourne. We all want that. We all want tourists to have an excellent experience when they come to Melbourne, but we need to balance that with the needs of the people who live in the city. People come to Melbourne to visit or to live because of its community. We do not have the Sydney Harbour or the Sydney Opera House. What we do have is a wonderful, vibrant life in our inner city. It was not always like that, but now we do have that. That is what we trade on and that is what people love about Melbourne, but we are losing it because of some of these issues that I have mentioned. We need a government that has got the vision to look at that and actually figure out how we can deal with those issues.

Now, there is one provision in the bill, new section 141A, which states that the occupier of a lot—which includes owners or renters—must ensure that any guest to the lot complies with the rules of the owners corporation and that if a guest breaches these rules then both the guest and the occupier of the lot are liable for any penalties and consequences arising from the breach. It sounds good; however, the occupier will be able to avoid liability if they provide the guest simply with a copy of the rules. A number of owners have approached me and said they are concerned that this just allows a short-stay operator to avoid liability by simply displaying a copy of the rules in the flat but not actually having to enforce compliance.

I know that recent additions to the act that relate to short-stays and party houses, as they are called, were introduced in 2018 and are due for review next year. At the time that that bill was introduced we raised serious concerns with the bill and sent it off to an inquiry because it did really little to address the problems that residents were actually bringing up with the government and it also made it virtually impossible to enforce. So it seemed like something that the government just wanted to do—to tick the box but not actually to fix the problem. We will be watching this review very closely, as will the community. It is a growing constituency out there of people who want this issue fixed. We will continue to advocate for proper regulation in the short-stay system and ensure that buildings remain homes, not just de facto hotels.

Now turning to management of owners corporations, the bill has a number of provisions designed to strengthen the obligations on managers of owners corporations. It reduces the power of developers to control owners corporations by appointing themselves or their associates as managers of the owners corporation for their property and from voting on any resolution relating to building defects. Developers will also not be allowed to receive a payment from any owners corporation in relation to a management contract. These are all good things that are fixing a problem that comes up with me again and again.

But there are many types of contracts that owners corporations enter into, including for building managers, facilities managers, concierges, cleaners and energy suppliers, for example. So while this bill restricts the ability for the developer to control owners corporations themselves, it still seems to allow them to lock an owners corporation into lengthy service contracts. Perhaps one of the worst examples that we have seen a lot of across my desk but also in the media is embedded networks, where developers sell the rights to electricity for an entire building just to one electricity company. They lock residents into one provider and they lock them into really high prices, often very much above market rates. Some people I have heard of are paying $500 more a year than if they had the ability to choose their own retailer or switch retailers. We do not believe that developers and managers should be able to lock residents into unfair contracts that reduce the livability and amenity of their home or make them pay more, so we will be looking to address some of these flaws in the bill in the other place.

Lastly, all of us should be able to trust that our homes are safe and, where they are not, that we can take action to make them safe. The Greens heavily campaigned for government intervention into our cladding crisis, and we were pleased to see funding allocated for removing cladding from some affected buildings. However, that fund of course—the one that we called for that the government has now implemented—will only go so far, and there are many buildings that are now affected by cladding that are not able to access this funding or will not be able to access the funding for rectification.

One of the new changes in the bill is to make it a little easier for owners corporations to commence legal proceedings by doing this through an ordinary resolution if the matter falls within the civil jurisdiction of the Magistrates Court. So that is another good change. But this limit is $100 000, and many issues that an owners corp might be progressing to legal action—such as chasing a builder for defects—will exceed that limit, meaning that a special resolution will still be needed. I understand that no other state or territory in Australia uses this threshold, so our system is likely to act as a barrier to justice.

To conclude, this bill is a long-overdue reform of our owners corporation system. Many of these reforms are very welcomed by owners, and many of my constituents are very happy that this has happened. They are also very frustrated that the government has not taken the opportunity to close some of the bigger loopholes, the ones that are really affecting their lives day to day and affecting the whole livability of our city in fact—things that we might not feel the full impact of for a few years but when we do our city is really going to take a hit. People are already taking a hit in their everyday lives. There are some things that really the government should have addressed many years ago when they came to their attention, but now is the next best time. So we will be supporting this bill but looking at some of the other flaws very closely in the other place.

Ms SPENCE (Yuroke) (18:05): I am very pleased to add my contribution to the Owners Corporations and Other Acts Amendment Bill 2019. This bill implements the outcomes of the review of legislation governing the operation of owners corporations in Victoria undertaken as part of the consumer property law review. I will talk more about that review shortly, because that was a very comprehensive review process and it warrants further discussion. But to commence, I will go over what the bill will do. I will say at the outset that this will just be a bit of a shopping list, a bit of a summary of what the bill does.

A member interjected.

Ms SPENCE: Not terribly exciting but a good idea. Time will not really permit me to go into detail of what it does do because there is a huge amount of changes to the Owners Corporations Act 2006 and other acts within this bill. I do find it quite bemusing that the member for Melbourne in her contribution made the comment that the government was just doing a tick and flick rather than trying to solve problems. I think she must not have had a look at either the detail of the review process, which was so comprehensive that it started back in 2015 and has culminated in this bill, or the detail of the amendments that are contained in it. Anyhow, I will get to the detail of the review process shortly.

Firstly, the changes that are included in this bill: the Owners Corporations and Other Acts Amendment Bill 2019 will amend legislation to rationalise the regulation of owners corporations. In doing so, owners corporations will be regulated according to their size, with a five-tiered system that has thresholds whereby larger owners corporations will be subject to a greater number of requirements with regard to committees, professional managers, external audits or reviews of annual financial statements, building insurance, maintenance plans and funds and annual financial statements, whereas smaller owners corporations will be subject to less stringent regulation. It is quite a sensible change which goes from a rather flat structure to a sensible tiered structure.

Secondly, the bill will improve the quality of owners corporation managers and enhance protection for owners corporations. It will do this by strengthening the disqualification and insurance provisions of current registration schemes for professional owners corporation managers, by prohibiting certain terms in owners corporation contracts and by giving VCAT the power to rule generally as to whether other terms in management contracts are unfair.

The bill will expand and improve developers duties to owners corporations that they create and enhance protection for owners corporations. The bill will improve the governance and financial administration of and internal relations in owners corporations. It will do this in a number of ways. It will do so by improving decision-making within inactive owners corporations and by giving owners corporation managers authority to make interim decisions in certain circumstances. It will align the provisions of the act governing the validity of owners corporation resolutions and those governing the validity of owners corporation rules by requiring that both resolutions and rules not be oppressive or unfairly prejudicial to a lot owner or resident or unfairly discriminate against a lot owner or resident.

It supports the owners corporations duty to repair and maintain common property by permitting them to enter private lots on reasonable notice where necessary to enable repairs to common property. It expands the duties of owners corporation committee members to include a duty to act in the owners corporation’s best interest. It permits owners corporations to collect and use water falling on common property to deal with water rights. It restricts proxy farming and committee proxies and prohibits contractual limitations on lot owners’ voting rights. It improves decision-making in owners corporations, particularly inactive owners corporations, by providing for special resolutions that do not obtain the required voting threshold but which are unopposed to be treated as interim special resolutions.

It reduces the maximum size of owners corporation committees from 12 to seven members and allows the chair or secretary of the committee to arrange committee ballots. It exempts owners corporations from the need to engage the internal dispute resolution process for matters they initiate. It improves dispute resolution in owners corporations by enhancing the internal dispute resolution process set out in the model rules, including the provision for a grievance subcommittee. It enhances the compliance with owners corporations rules by increasing the maximum penalty for a breach to $1100 and allows owners corporations to retain penalties. It enhances an owners corporation’s ability to initiate legal actions by applying different voting thresholds for actions in different courts. It reduces inequities for non-defaulting lot owners by permitting owners corporations to recover reasonable prelitigation costs from defaulting lot owners and to adopt payment plans in hardship cases. It reduces insurance and other inequities between lot owners by permitting owners corporations to separately levy lot owners in certain circumstances. It introduces a range of measures to clarify relationships and reduce disputes in owners corporations. It improves safety for residents by developing model rules for the provision of fire safety advice by lot owners to tenants—and much more.

The bill will also improve and rationalise the regulation of owners corporations in retirement villages by providing for a clearer separation between owners corporations meetings, retirement village meetings and village resident committee meetings and by aligning the powers of village operators who control owners corporations in retirement villages with the aims of the Retirement Villages Act 1986. The bill also makes a number of minor and technical drafting improvements to the legislation.

This is an incredibly comprehensive amendment bill that implements the findings of the consumer property law review. As I mentioned earlier, I do want to go into that review process in some detail because this was a massive review process and it went for several years. The review examined both the conduct of owners corporation managers and the functions and management of owners corporations. The review was announced back in August 2015. It covered four major pieces of consumer property legislation for which the Minister for Consumer Affairs, Gaming and Liquor Regulation is responsible, including the Owners Corporation Act 2006.

There was issues paper 1, which was entitled Conduct and Institutional Arrangements: Estate Agents, Conveyancers and Owners Corporation Managers, released in December 2015. Submissions closed on 11 March 2016, and 50 submissions are available to see on the website. This review is all still available on the website, and you can go online and see the issues papers and all the rest. It is all still up there, and it is quite interesting.

Issues paper 2 was entitled Owners Corporations and was released in March 2016. Submissions closed on 29 April 2016. There are 82 submissions available online to have a look at.

An options paper titled Options for Reform of the Owners Corporations Act 2006 was released in November 2016, and this paper responded to the feedback that had been received from issues papers 1 and 2. It examined the issues that had been identified for reform and presented options for consideration. The minister, prior to the election in 2018, committed to bringing out an exposure draft, and in fact did so in April 2019. This bill has come about following that, so as we can see, there was an incredibly extensive consultation process. The bill has got a huge amount of backing when you see how many submissions and how much detail has gone into putting it together. I am very pleased to be able to say that a lot of people have had input into it. It is quite a comprehensive review. It is a very comprehensive act. I am very pleased to say that I fully support the bill. It is certainly not a ‘tick and flick’, as the member for Melbourne has asserted. I commend the bill to the house.

Mr KENNEDY (Hawthorn) (18:15): This bill sees changes to the Owners Corporations Act 2006 and the Retirement Villages Act 1987. I point out that for the past four years I have lived in a retirement village myself; however, these legislative changes will not directly impact me. In due course I will say more about retirement villages.

My electorate of Hawthorn is 19 square kilometres of lively activity, restful beauty, history, many sporting options and great educational opportunities, from primary schools to tertiary level. More and more people are coming to live in my community, and therefore our housing is changing. While we are conscious and respectful of our architectural heritage and are home to many beautiful Victorian-era villas and some mansions, change is apparent, with around 60 per cent of people in my electorate now choosing to live in an apartment, unit or type of townhouse. Over the past 20 years that proportion has increased by over 10 per cent. This bill reflects these changes in housing and will accordingly improve the regulation of owners corporations.

Gone are the days when a major apartment or unit development consisted of four or five dwellings. In fact just down the road from my electorate office in Camberwell Road a development of 345 dwellings is nearing completion. Common sense from a commonsense government will see a new five-tier system of owners corporations based on size, introduced because the needs of a 345-dwelling development and those with four units are vastly different, calling for different provisions. The bill is informed by common sense and will introduce new thresholds relevant for larger owners corporations, subjecting them to more requirements regarding committees and annual financial statements while relaxing regulation on smaller owners corporations.

The decision to require owners corporations to deposit fees into a maintenance fund will ensure equity between past, present and future owners of each property. With many first home buyers purchasing apartments or units, money can be tight. The maintenance fund ensures adequate funds are in place to implement an approved maintenance plan, ensuring new and future owners are not bearing unexpected costs and fee increases. This amendment ensures a fairer system now and into the future.

Meeting with constituents I have often heard complaints regarding owners corporation managers, so changes to improve the quality of owners corporation managers will certainly be well received in my electorate and no doubt in many others. The changes will mandate a requirement for managers to hold professional indemnity insurance. This will ensure that managers are answerable to and always acting on behalf of the owners corporation. Further, the registration scheme will be strengthened to ensure that certain criminal offences will disallow such a person from becoming an owners corporation manager.

Our aim is to ensure that complaints of cowboy managers will be a thing of the past thanks to modernised legislation. Logical changes will also be made to ensure that developers cannot appoint themselves or their associates as owners corporation managers and they cannot vote on any resolution relating to building defects. Simple changes such as this ensure that there are no conflicts of interest and that there is a better system for all.

Under the current legislation, all lot owners are equal, but some lot owners are more equal than others—to quote. These amendments will change this. New requirements for the initial settings of lot liability and entitlement are to be set up according to specific settings. Most importantly though the amendments remove the ability for a majority lot owner to prevent an application to VCAT for changes to settings where all other lot owners have consented, enhancing equity between lot owners.

Changes to proxies will see greater strength given to lot owners. Term limits and new restrictions on what a proxy can vote on give assurances and support to owners corporations. Constituents often bring complaints about proxies, and I believe these changes will alleviate some fears.

There are many other reforms this bill enacts, such as improving the governance through enabling owners corporations to make rules controlling smoke drift from private lots and improving the financial administration of owners corporations by enabling owners corporations to separately levy lot owners for a range of costs directly attributable to the particular user of certain lots.

However, I now turn to speak on a particular and important section of the bill—that relating to retirement villages. The bill proposes to amend the Retirement Villages Act 1986 to enable residents of a retirement village to elect a resident committee to represent the interests of residents who do not own their lots. This has proven invaluable at my own retirement village, and I have had the opportunity to serve on one of these resident committees in one of the years there.

The bill will also improve the regulation of owners corporations in retirement villages by providing for a clearer separation between owners corporations meetings, retirement village meetings and village resident committees. The bill will also align the powers of village operators who control owners corporations in retirement villages with the aims of the Retirement Villages Act 1986, which is currently under review.

These reforms will, amongst other things, ensure the policy objective of the Retirement Villages Act to protect retirement village residents from increases in their cost of living without their consent by preventing retirement village owners or their close associates from voting on fee resolutions where they control a majority of lot entitlements and ensure that control over the rules for use of village facilities is not undermined by village operators who control the owners corporation by preventing them from voting on the making, amendment or revocation of rules.

I will now discuss the suggestions received from the community that will strengthen the bill. In its consultative mode the government has listened to feedback provided by various stakeholders in the retirement village sector, such as Residents of Retirement Villages Victoria, who requested fine-tuning of the various exemptions for owners corporations in retirement villages, and these are contained in the bill. Further adjustments have been made to the retirement village exemptions to address concerns raised by stakeholders, with several provisions either changed or removed. However, it is not appropriate to grant leasehold residents voting rights on financial matters, given they do not have the same property rights and interests as lot owners.

Over the last year or so it has been a privilege of mine to represent the minister at various forums, including one here in Melbourne last November and others as well, because, as you know, there has been a review process. An issues paper was produced, which marked the beginning of public consultation for the review of the Residential Villages Act. It is very obvious that there are still many unresolved issues, particularly in regard to the rights of residents. I was only just speaking to someone today as a matter of fact who was trying to get some clarification on the difference between capital costs and recurrent costs, whose responsibility it is to replace fences and whose responsibility it is to replace a call system. Who should pay for those capital works? It seems that we still have a long way to go, but setting up that issues paper and now this particular bill represents a first step. I am sure we will see lots of other reforms to legislation as time goes on in regard to these residential villages. Accordingly, I commend this bill, and I look forward to future ones.

Mr MAAS (Narre Warren South) (18:25): It gives me great pleasure to rise and speak to the Owners Corporations and Other Acts Amendment Bill 2019. As has been said by many speakers on this bill before me, it is a very important bill. We know it is an important bill as it will affect millions of Victorians—in fact, I am reliably informed, some 1.5 to 1.6 million Victorians. Victorians who are part of owners corporations contribute billions to the economy as well as provide for safeguards to the value of property in the built environment.

Of course as the property market rises, apartment and unit living or units as investment vehicles are becoming increasingly popular options for many Victorians, and that 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, and as has been said, these owners corporations cover more than 772 000 individual lots. The timing of this bill is therefore pretty ripe, as it has been some 12 to 13 years since the introduction of the Owners Corporations Act 2006. Now is the time to take the opportunity to reform and modernise the legislation to ensure risks are appropriately managed and that all stakeholder expectations are met.

Speaking of stakeholders, the government has ensured really wide consultation over an extended period of time with issues papers, options papers and exposure drafts of the bill all released to the public inviting comments, submissions and opinion. The government has carefully considered the extensive feedback that was provided to it through this time and is now in a position to legislate.

The bill itself purports to achieve five key reform areas. These are to rationalise the regulation of owners corporations; to improve the quality of owners corporation managers and enhance protection for owners corporations; to expand and improve developers’ duties to the owners corporations they create and enhance protection for owners corporations; to improve the governance and financial administration of, and internal relations in, owners corporations; and to improve and rationalise the regulation of owners corporations in retirement villages. There are also, finally, a number of minor and technical drafting improvements which the bill seeks to implement.

If I address that first key reform, the bill rationalises the regulation of owners corporations. It seeks to do that in a variety of ways. It looks at regulating owners corporations according to their size in a more rational and responsible way by introducing a five-tiered system, with new thresholds for owners corporations that must have committees, professional managers, external audits or reviews of annual financial statements, building insurance, maintenance plans and funds, and annual financial statements. It will enhance the protection of those injured through negligently maintained common property by increasing the level of public liability insurance required to be taken out by owners corporations from $10 million for any one claim to $20 million. It will also enhance equity between past, present and future lot owners by requiring such owners corporations to deposit fees into a maintenance fund that are adequate to implement the maintenance plan. Finally, it will do relatively simple things like streamlining decision-making in owners corporations by removing quite an antiquated requirement for a common seal.

In terms of the second reform, the bill seeks to improve the quality of owners corporation managers as well as enhance protection for owners corporations. The bill will strengthen the disqualification and insurance provisions of the current registration scheme for professional owners corporation managers. It will prohibit certain terms in owners corporation management contracts and give VCAT the power to rule generally whether other terms in management contracts are unfair. It will expand the fiduciary obligations of owners corporation managers regarding procurement of goods and services on behalf of owners corporations, influencing voting on owners corporation matters, and owners corporations’ access to their financial records.

Thirdly, the bill will expand and improve developers’ duties to the owners corporations they create and thereby enhance protection for owners corporations. In terms of that key reform, the bill will expand the obligations of developers to owners corporations in line with the New South Wales approach but including other obligations and prohibitions, and extend the duration of developers’ obligations from five to 10 years. In terms of that third key reform, it will also enhance equity between lot owners by requiring that the initial settings of lot liability and entitlement be established according to specified criteria and be accompanied by a statement explaining the settings and by removing the ability of a majority lot owner to prevent an application to VCAT for changes to settings where all other lot owners have consented.

Fourthly, as I said, the bill also seeks to improve the governance and financial administration of, and internal relations in, owners corporations. In terms of that key reform the bill will improve decision-making within inactive owners corporations by giving owners corporation managers authority to make interim decisions in certain circumstances. It will align the provisions of the act governing the validity of owners corporation resolutions and those governing the validity of owners corporation rules by requiring that both resolutions and rules not be oppressive or unfairly prejudicial to a lot owner or resident or unfairly discriminate against a lot owner or resident. It will support owners corporations’ duty to repair and maintain common property by permitting them to enter private lots on reasonable notice where necessary to enable repairs to common property. It will permit owners corporations to collect and use water falling on common property and to deal with water rights. Finally, it will restrict proxy farming and committee proxies, and prohibit contractual limitations on lot owners’ voting rights.

The fifth key reform, as I said, is that the bill will seek to improve and rationalise the regulation of owners corporations in retirement villages. It will do that by rationalising and improving 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 by aligning the powers of village operators who control owners corporations in retirement villages with the aims of the Retirement Villages Act 1986.

Finally, as aforementioned, the bill also corrects some minor and technical drafting errors that are inherent in the current legislation.

In conclusion, the bill is an important one. Its passing in this house and in the other place will ensure better governance arrangements and better outcomes for owners corporations in Victoria. The bill will help ensure that owners corporations are better governed and that they can be more financially responsible and sustainable, with greater social cohesion and greater workability. I commend the enormous amount of work that has gone into this bill, the very broad range of consultation that it reflects and the tremendous work of the minister as well. I commend the bill to the house.

Mr BRAYNE (Nepean) (18:35): Thank you, Acting Speaker Bull. It is good to see you in the chair. We do not see it enough. The bill I am speaking on today is the Owners Corporations and Other Acts Amendment Bill 2019. We have had some good contributions from my friend the member for Narre Warren South, who has become a dear friend of mine in this place, and the member for Hawthorn, who is also a good friend of mine, depending on whether or not there is lunch ready to be served. It is good to note that he also lives in a retirement village, as he noted. This bill is very pertinent to him and his constituency, as it is to mine, because we have quite a few retirement villages on the Mornington Peninsula, as you probably all know.

The purpose of this bill is to amend the legislation to rationalise the regulation of owners corporations; improve the quality of owners corporation managers; enhance protection for owners corporations; expand and improve developers duties to the owners corporations they create; enhance protections for owners corporations; improve the governance and financial administration of, and internal relations in, owners corporations; improve and rationalise the regulation of owners corporations—I am just going to call them owners corps—in retirement villages, an important one for my electorate; and make a number of minor and technical draft improvements to the legislation.

The Owners Corporations Act 2006—I have to call it that because it is the total act—commenced in 2007, and we now need to reform and modernise our legislation to ensure risks are appropriately managed and stakeholder expectations are met. Drawing on stakeholder feedback, an options paper was released in November 2016 which outlined a range of potential reforms to the owners corps act. More than 100 submissions were received in response to the options paper from individuals and key institutional bodies. The government has carefully considered stakeholder feedback to develop this bill which is now before the house. I want to thank those who made submissions to this bill. Your contributions have helped identify a number of issues—important issues—and have helped to ensure that the bill before the house today strikes the right balance with all stakeholders.

Now, given the estimated 1.5 million Victorians who are affected by an owners corp, it is critical that these reforms are enacted to ensure the legislation remains fit for purpose. This is especially critical in my electorate of Nepean due to the high number of retirement villages, and I trust that many of the people in this place will likely retire in Nepean—some sooner than others. I do not know who would be sooner, but anyway. In fact I am representing one of the oldest Victorian electorates and one of the oldest electorates in the country, and I will touch on this in more detail shortly—and by shortly I mean in probably 30 seconds or so.

The bill will improve the regulation of owners corps in several ways, including for those retirement villages in Nepean, which you will all occupy soon. A new five-tier system based on owners corps’s size will be introduced. Larger owners corps will be subject to a greater number of requirements while smaller ones will be subject to less stringent regulation. Owners corps will be required to deposit sufficient fees into their maintenance funds to implement the approved maintenance plan. This will reduce the need for significant and unexpected fee increases, which can cause financial hardship. Changes will also improve the quality of owners corps managers. People convicted of certain criminal offences will not be able to be registered as managers and will be required to hold professional indemnity insurance. Developers will be prohibited from appointing themselves or their associates as owners corps managers. Equity between lot owners will also be enhanced. The bill will also implement several reforms to improve the governance and financial administration of owners corps. This includes expanding the duty of committee members to ensure they act in the owners corps’s best interests and prohibiting contractual limitations on the owners’ voting rights, amongst others.

Where the bill is particularly relevant to my community is where the bill will improve the regulation of owners corps in retirement villages by providing for a clearer separation between owners corps meetings, retirement village meetings and village resident committees and aligning the powers of village operators who control owners corps in retirement villages with the aims of the Retirement Villages Act 1986. This change will help clarify for these villages who is responsible for what, modernise the law and improve the relationship between owners corps and village residents. I look forward to visiting Village Glen in Rosebud in a few weeks time to share the news of these changes.

Let me just reiterate the importance of these changes, because it is important to note how important they are to seats like Nepean. This bill is providing clearer separation between owners corps meetings, retirement village meetings and village resident committees. This is important. This bill aligns the powers of village operators who control owners corps in retirement villages with the aims of the act. This bill improves the administration and regulation of owners corps in retirement villages through a range of measures, including enabling the establishment of a separate residents committee to represent the interests of occupants who do not own their lots. Importantly, this bill will help protect retirement village residents from increases in their cost of living without their consent by preventing retirement village owners from voting on fee resolutions where they control a majority of lot entitlements. Finally, this bill will ensure that control over the rules for the use of village facilities is not undermined by village operators who control the owners corps by preventing them from voting on the rules.

I referred to owners corps committees before, and I want to clarify their role under this bill’s structure. Under the new regulatory tier structure, all owners corps with 10 or more lots—tiers one, two and three—will now be required to have a committee. The duties of committee members will be expanded to include a duty to act in the owners corps’s best interests—pretty reasonable if you ask me. The maximum size of a committee will be reduced to seven members. These reforms will help improve overall governance and decision-making in owners corps.

The community and stakeholders will be pleased to know that should this bill make its way through the Parliament—and we fully expect that—a review will be undertaken between two and five years after the commencement of the reforms. This will examine the operation of the amendments made by the bill, including whether further amendments are required, and a written report will be provided to the minister and tabled in Parliament. This review is important because it will provide an opportunity to assess issues which are not addressed in this bill and determine if additional reforms are required.

This bill is an important first step in improving governance and outcomes for owners corps in Victoria. Implementation of these new requirements will be supported by the delivery of a voluntary, ongoing and targeted information and training program for all owners corporation managers in a partnership between Consumer Affairs Victoria and industry. The government will also continue to work with stakeholders on the development of amendments to the regulations.

This bill will help ensure that owners corporations buildings are better governed, more financially responsible and sustainable, with greater social cohesion, making them better places to live. I commend this bill to the house.

Mr CARBINES (Ivanhoe) (18:44): I am pleased to make a contribution to the Owners Corporations and Other Acts Amendment Bill 2019. In particular can I just start by saying there has been much change in the Ivanhoe electorate over the past decades, particularly in relation to high-density developments in Heidelberg. The electorate I represent is some 10 to 12 kilometres from the CBD, and there are development pressures that come with that.

Can I say also, in an owners corporation sense, that so many people, as they look for housing options, find they are limited, particularly in places like the City of Banyule, where I was fortunate to be a member of the local government as a councillor. What we found was hard to provide to people was accommodation options for downsizing. There are not a lot of property changes and transfers in Banyule. People seem to go out with their boots on, and what that means is people are staying in very large homes looking for opportunities to stay in the community in which they grew up, where they are connected, where they have relationships and where their families have grown up, but those opportunities are limited.

I preface my comments in relation to this because as people seek, due to pressures on themselves and their families, to downsize from large dwellings into communal opportunities in terms of residential housing, they find themselves in arrangements where perhaps they are caught up in owners corporations. They have pressures to find accommodation in their local community, and they find themselves subject to, perhaps, arrangements that mean they do not have total autonomy. That can be really difficult, particularly looking into those details and making sure that you understand them in advance. There are differences. There are constraints. There are arrangements with owners corporations that perhaps you did not have when you were in your large dwelling in Ivanhoe, Heidelberg or Eaglemont. You have chosen to stay in the local community, but perhaps you have compromised and instead of finding a dwelling on a title where you have carte blanche in the way in which you want to arrange that, you have gone into an arrangement that you are subject to an owners corporation arrangement. Perhaps in those pressures to stay where you are you have then found yourself subject to arrangements that you do not have full control over.

I meet many people—as I am sure other members do—in my electorate office, working their way through the maze of rights and responsibilities in relation to owners corporations. What this bill does in particular is rationalise the regulation of owners corporations and improve the quality of owners corporation management and enhance the protections for owners corporations. We want to make a number of minor technical and drafting improvements to the legislation and improve the rationalised regulation of owners corporations in retirement villages. We have many retirement villages in the Ivanhoe electorate. They function really well. I am pleased to attend Anzac services at some of those retirement villages. They provide great opportunities for local people to downsize and remain in the community to which they are connected and to which they have provided so many services and made such great contributions.

With owners corporations, though, there are challenges. Some of us who have electorate offices that are subject to owners corporation arrangements would be able to speak with great empathy about how they operate—the positives and the negatives—how they provide great challenges sometimes around accountability and the desire for people who either have a stake in a property because they own it, a stake in a property because they live there or a stake in a property because it is an investment.

What we also know is this legislation will expand and improve developers’ duties through the Owners Corporations Act 2006 and create enhanced protections for owners corporations. What is raised in my electorate, that comes up very often, is the opportunities for redress for people and the accountability issues that relate to those people who want to call their places home but in doing so are subject, I suppose, to so many arrangements over which they do not have control. I want to also touch on the work of the former member for Brunswick—now a member in the other place—and former Minister for Consumer Affairs, Gaming and Liquor Regulation, who started off much of this work. I want to acknowledge her work and of course the current minister for her work in driving so much consultation in relation to particularly the exposure draft that was released on 5 April 2019 and which closed in May. Some 40 submissions were received in relation to that work. In particular I want to touch on what the minister said in her second-reading speech:

The Bill will improve the regulation of owners corporations in a number of important ways.

In particular:

… 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.

As Melbourne becomes a city of greater density, as there become available greater housing options of choice for residents, what we need to understand is that means owners corporations are going to be more relied on and be held to greater accountability in our community in the years ahead. We are going to see much greater density in inner Melbourne in particular. We need to understand that the pressures that people have around where they want to live and the price they are prepared to pay to find something affordable mean that they will often trade off perhaps the capacity to fully control their land title and their responsibility for their plot of land. When you are part of an owners corporation you are subject to other consensus, other arrangements and other accountabilities. What is important is if we want to grow Melbourne, if we want to provide the economic diversity and growth that is provided out of that, we need to make sure that we are also protecting people who have a range of pressures placed upon them in relation to the decisions they are making about the biggest investment in their life around where they are purchasing a property and the accountability to make sure that it is maintained to an appropriate standard.

I notice in the minister’s second-reading speech that she also talked about how the first step in improving some of the governance and outcomes for owners corporations included new requirements to support the delivery of voluntary, ongoing and targeted information and training programs for owners corporation managers in a partnership with Consumer Affairs Victoria and industry bodies. What is really important is the managers of those owners corporations have the capacity, have the opportunity, to arm themselves with an ability to discharge their duties. I must say there have been many occasions when people have made representations to my office concerned about the accountability of managers of owners corporations and the follow-up and other redress schemes that are in place for them. They are particularly important.

What I find particularly important about this bill is the new five-tier system based on owners corporations’ size to be introduced. Larger owners corporations will be subject to a greater number of requirements with regard to committees and annual financial statements, while smaller ones will be subject to less stringent regulation. Have a look around Melbourne. Have a greater understanding of where the density pressures are, where the investment opportunities are, where there is a like-for-like explanation and understanding and empathy for where the legislative practice needs to be applied, because again those come down to costs. Smaller owners corporations hopefully have less residents, less costs and less administration. We need to make sure that it is not one size fits all—that we have a boutique system, a bespoke system, that can apply itself based on the size and density of those owners corporations, and that is really important.

Developers are being prohibited from appointing themselves or their associates as owners corporation managers. It is just not working—terrible. They are also prohibited from voting on resolutions relating to building defects—again terrible. We are dealing with those issues all the time in my electorate office. Effectively they want to be the judge and the jury. It is just not on. We cannot have that, and the Parliament should spell it out very clearly. We need to be in the corner of the people who have made the biggest investment of their lives—who want to stay close to services, who want to be in and amongst it all in their communities, who are making decisions under pressure at times. But what we need to make sure of is that the law reflects practice and reflects and supports their rights and obligations in the biggest investment that they will ever make.

I commend the bill to the house. Owners corporations—we have got a long way to go, but this is a start in the right direction.

Mr STAIKOS (Bentleigh) (18:54): It has fallen to me to take us through to the adjournment on this very, very fascinating bill—perhaps the most fascinating bill in the more than five years of my time as a parliamentarian, but a very important—

Mr Walsh interjected.

Mr STAIKOS: I will tell you what: I nearly fell asleep during your lead speaker’s contribution, but the member for Forest Hill did his best.

Ms Kealy interjected.

Mr STAIKOS: Low blow, member for Lowan. Too soon, as they say.

Ms Kealy interjected.

Mr STAIKOS: Very good.

Mr Walsh: It is unruly to respond to interjections.

Mr STAIKOS: It is, and I am just going to ignore them from now on. I can hear the Zorba going on in my head as well. Excellent.

I am really pleased to speak on the Owners Corporations and Other Acts Amendment Bill 2019 tonight because I think of all of the constituents who have come to see me with various problems over the years. Many of them are older people who are part of owners corporations, and when I read the minister’s second-reading speech I was very interested when she outlined just how many Victorians are in some way associated with owners corporations. Currently there are over 85 000 active owners corporations in Victoria. They cover more than 772 000 individual lots, and around 1.5 million Victorians, which is a quarter of the state’s population, either live in or own property in an owners corporation. So it is no surprise to me that many of the constituents I see come to me with issues they are having, particularly with owners corporation managers. When you consider the growth in Melbourne—and you can drive around my electorate and you can see a lot of apartment development taking place, a lot of new apartments that have sprung up in the last six or seven years—apartments are going to become a bigger part of our housing mix, particularly in Melbourne, the fastest growing capital city in Australia. So it was not before time that this government initiated a review back in 2015 of the legislation covering owners corporations, and that is why we have this bill to debate in the house today.

There have probably been more than 100 constituents who have come to me over the five years with issues with owners corporations, but throughout this contribution, which it looks like I will be continuing tomorrow morning, I will focus on just two who have significant issues. For both those constituents, their issues are actually addressed in this legislation.

The first one I want to refer to is with regard to a lady in her 80s who came to see me a couple of years ago. She is someone who bought into an apartment building of significant size, something for her retirement, and when she came to see me she brought two bags full of documentation that she had received from the owners corporation manager. It was in the form of mainly correspondence but also financial statements. She showed me a number of invoices where the owners of the various lots within that building were invoiced for things that were not part of a maintenance plan. I am going to come to maintenance plans in a moment because that really is a central part of this bill. She was showing me invoices that were in the thousands, some that she would receive multiple times each year for things that she was not forewarned about.

I know with a lot of older people that when they receive a bill, because they do not like to owe money to people, they pay that bill straightaway, but I know when it comes to owners corporations, with the amount of correspondence and the amount of financial statements that older people receive, they really do become somewhat flummoxed by the amount of information they have to process. I spent a couple of hours with this constituent going through all this information, and I have to say, going through it, it did bamboozle me as well because the reasons for the invoices were very, very vague.

Now, this was an apartment building with around, I would say, 100 apartments. It will be covered in the new system outlined in this bill—that is, a five-tier system of owners corporation—

The DEPUTY SPEAKER: Order! I am required under sessional orders to interrupt business now. The member may continue his speech when the matter is next before the house.

Business interrupted under sessional orders.