Developers' obligations to owners corporations

While the initial owner (this may be the developer) is in control of the majority of the owners corporation (formerly body corporate), for five years, from the registration of the plan of subdivision, the initial owner must: 

  • act honestly, in good faith and with due care and diligence in the interests of the owners corporation 
  • take all reasonable steps to enforce any domestic building contract that affects the owners corporation.

If the initial owner fails to do so: 

  • the owners corporation can make a special resolution to authorise legal proceedings, for example, under the domestic building contract implied warranties 
  • independently of the owners corporation, individual lot owners can apply to the Victorian Civil and Administrative Tribunal (VCAT) for an order to make the developer meet the legal obligations. 

A developer is obliged to meet the requirements of other laws, as well as the Owners Corporation Act 2006

This means owners corporations can rely on legal protections from other legislation; for example: 

  • The Domestic Building Contracts Act 1995 implies warranties into all domestic building work contracts. A developer cannot avoid these warranties, which apply to the building work for 10 years. 
  • Some contracts include a ‘defect liability period’, which seeks to limit claims to between three and 12 months. Despite this, an owners corporation’s can still rely on the implied warranties of the Domestic Building Contracts Act 1995 or the Australian Consumer Law and Fair Trading Act 2012.

For more information about implied warranties, view our Building warranties, insurance and insolvency page.

Last updated: 27/03/2014

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