Inactive owners corporations – are they really?

17 January, 2019
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Have you had vendor clients tell you their owners corporation is inactive because they have never had any meetings?

If an owners corporation is ‘inactive’ as defined in section 32F of the Sale of Land Act 1962 (Vic) (SL Act) a vendor must state this in the section 32 statement but doesn’t have to provide any owners corporation information.

‘Inactive’ is defined in section 32F to mean the owners corporation has not, in the previous 15 months:

  1. had an annual general meeting; and
  2. fixed any fees; and
  3. held any insurance.

While many owner’s corporations may fit the definition of ‘inactive’ they should not be inactive because only owners corporations for two lot subdivisions are exempt from the insurance obligations of the Owners Corporations Act 2006 (Vic) (OC Act) (see section 7(1) OC Act). All other owner’s corporations are required to comply with the insurance requirements.

They include reinstatement and replacement insurance (section 59) and public liability insurance (section 60).  Usually with a subdivision of three or more lots at least public liability insurance is required for any shared driveway.

Insurance is not required if there is no common property and the owner’s corporation has resolved by unanimous resolution that each lot owner arrange their own lot insurance (section 63). Such a resolution usually requires a meeting.

In all other circumstances practitioners need to make it clear that insurance needs to be obtained because a purchaser may avoid a sale at any time before the contract is completed if the owner’s corporation does not have insurance in accordance with the OC Act. See section 11 of the SL Act. Once the insurance is obtained the owners corporation can no longer be considered ‘inactive’.