Changes to the Owners Corporation Act 2006 clarifying the basis for levying annual and special fees came into effect from 18 December.
The changes are in response to a recent Supreme Court decision and clarify that:
- annual fees are levied only according to lot liability
- special fees are levied according to lot liability, unless they are for works that benefit one or some (but not all) lots.
Special fees are charged when unexpected works need to be undertaken or when the owners corporation incurs extraordinary expenses, such as those arising from legal action.
In the case of special fees for works that benefit one or some (but not all) lots, the changes clarify that the fees must be levied according to the ‘benefit principle’. This simply means that lot owners who will benefit more from the works should pay more.
The Supreme Court found the benefit principle did not need to be applied in an exact way if it was not practical to do so. The assessment only needs to be considered reasonable.
In some cases, applying the benefit principle may not result in a lot owner paying other than according to their lot liability.
- when the work is being funded partly from annual fees and partly from special fees and the benefits of the work to certain lots is offset by their having paid higher annual fees (because of their higher lot liabilities) or
- when works being done on certain lots will indirectly benefit the other lots; for example, by raising the value of the entire building or by reducing the possibility of legal actions against the owners corporation.