In short: An owners corporation is the body that manages the common property of a subdivided building or estate in Victoria, such as an apartment block or townhouse development. Under the Owners Corporations Act 2006 (Vic) it sets and collects fees, insures the building, maintains common areas, makes rules and resolves disputes. Buyers receive an owners corporation certificate in the Section 32 and lenders treat the fees as an ongoing expense.
If you are buying a unit, townhouse or apartment anywhere in Melbourne, you are buying into an owners corporation. Its finances and rules affect your costs, what you can do with the property, and sometimes whether a lender will fund it at all. Here is how the system works and what to check.
What the law says
The Owners Corporations Act 2006 (Vic) governs owners corporations (still called bodies corporate in other states). An owners corporation comes into existence when a plan of subdivision creating common property is registered under the Subdivision Act 1988 (Vic). Every lot owner is automatically a member.
The Act was substantially amended by the Owners Corporations and Other Acts Amendment Act 2021, with most changes commencing in December 2021. The amendments introduced a five-tier system based on the number of lots, with obligations scaled to size:
| Tier | Lots | Key obligations |
|---|---|---|
| Tier 1 | More than 100 | Maintenance plan and fund mandatory; audited financials; professional manager common |
| Tier 2 | 51 to 100 | Maintenance plan and fund mandatory; reviewed financials |
| Tier 3 | 10 to 50 | Maintenance plan optional; fewer reporting requirements |
| Tier 4 | 3 to 9 | Simplified requirements |
| Tier 5 | 2-lot subdivisions and services-only | Minimal obligations; many Act provisions don't apply |
The Act sets out the owners corporation's functions and powers, including to:
- repair and maintain common property, fixtures and services;
- take out reinstatement and replacement insurance for the building and public liability insurance;
- set annual fees to cover the administrative fund and, where required, the maintenance fund;
- levy special fees for unexpected or extraordinary expenses;
- make rules about the use of lots and common property (parking, pets, noise, renovations, short stays), subject to the model rules and the Act;
- keep records, hold an annual general meeting, and appoint a committee and a registered manager.
Managers must be registered with the Business Licensing Authority and comply with conduct rules. Disputes go through the owners corporation's internal process, then Consumer Affairs Victoria conciliation, then VCAT.
The owners corporation certificate
Section 151 of the Act requires the owners corporation to issue a certificate on request, and the Sale of Land Act 1962 (Vic) requires the vendor to include it in the Section 32. The certificate discloses current fees, any special levies, the amounts in the funds, insurance details, any legal proceedings, and outstanding notices or orders. It is the single most important document for assessing a strata purchase.
How fees and levies work, step by step
- Budget. Each year the committee prepares a budget for the administrative fund (insurance, cleaning, gardening, management, utilities for common areas) and, for tiers 1 and 2, the maintenance fund (long-term repairs such as lifts, roofing and painting).
- Fees set at the AGM. Fees are apportioned to lots according to lot liability on the plan of subdivision, and are usually billed quarterly.
- Special levies. If a large expense arises that the funds can't cover, such as cladding rectification or a failed lift, the owners corporation can levy a special fee by resolution. These can run to tens of thousands per lot.
- Unpaid fees. The owners corporation can charge penalty interest and recover fees through VCAT; unpaid fees are adjusted at settlement so the buyer doesn't inherit them, but a levy struck before settlement and payable after can fall on the buyer depending on the contract.
- Insurance. The building insurance excess and any claims history are worth checking; you insure your own contents.
Worked example
You are buying a $450,000 two-bedroom apartment in Epping in a 60-lot building (tier 2). The owners corporation certificate shows annual fees of $3,600 ($900 a quarter), a maintenance fund balance of $180,000 with a 10-year maintenance plan, no current special levies, no litigation, and building insurance with a $1,000 excess.
That is a healthy picture. The same certificate showing a $40,000 special levy per lot for cladding replacement, a maintenance fund of $8,000, and a VCAT dispute with the builder would change both the price you should pay and, potentially, a lender's willingness to fund it.
On a $360,000 loan at an illustrative 6.00% p.a., the fees add about $300 a month to a $2,160 monthly repayment, plus council rates and water. Your lender counts all of it.
What it means for your home loan
- Fees reduce borrowing power. Lenders include owners corporation fees, rates and water in your living expenses. Our borrowing power calculator lets you add them.
- Apartment size. Many lenders restrict lending, or lower the maximum LVR, on apartments below a floor-area threshold (very small studios and units), and on high-density buildings in some postcodes. Check before you bid.
- Special levies and defects. A building with major defects, cladding issues or litigation can be declined or valued lower. Valuers read the certificate.
- Off-the-plan. For a new development the owners corporation doesn't exist until the plan is registered, so fees are estimated; see buying off the plan.
- Investors. Fees are tax-deductible for a rented property but reduce cash flow; model them in the investment property cashflow calculator.
- Settlement adjustment. Fees are adjusted at settlement like rates; see the settlement process.
GNT Finance checks the owners corporation certificate alongside your finances so we can steer you to lenders comfortable with the building and the fees. Our home-loan service is at no cost to you in most cases.
Common mistakes
- Not reading the certificate before auction. A special levy struck after you buy is your problem.
- Judging by the fee level alone. Very low fees in an ageing building often mean a maintenance fund that can't cope.
- Ignoring rules. Pet bans, short-stay restrictions and renovation approvals can affect your plans.
- Assuming insurance covers everything. The owners corporation insures the building; you insure contents and any fixtures the rules allocate to you.
- Skipping AGM minutes. Minutes reveal disputes, planned works and levy discussions that the certificate summarises briefly.
Frequently asked questions
What is an owners corporation in Victoria?
It is the legal entity created when a plan of subdivision with common property is registered, made up of all lot owners, and governed by the Owners Corporations Act 2006 (Vic). It maintains and insures common property, sets and collects fees, makes rules and manages disputes. It is the Victorian equivalent of a body corporate or strata scheme in other states.
How much are owners corporation fees in Melbourne?
Fees vary with the building's size, age and facilities. A small townhouse development with shared driveways might charge a few hundred dollars a year, while a high-rise with lifts, a pool and concierge can charge many thousands. The owners corporation certificate in the Section 32 states the current fees for the lot you are buying and any special levies.
Can I be forced to pay a special levy after I buy?
Yes, if the levy is struck after settlement or falls due after settlement under the contract terms. Levies resolved before settlement are usually adjusted so the vendor pays their share, but check the contract's special conditions. Reading the certificate, the maintenance plan and recent AGM minutes is the best way to spot a levy that's coming.
Do lenders lend on apartments with owners corporations?
Yes, but with conditions. Lenders count the fees in your expenses, may limit the LVR on very small apartments or high-density buildings, and can decline properties with major defects, cladding issues or litigation disclosed in the certificate. A broker can match the building to lenders with suitable policies before you commit.
What happens if I don't pay my owners corporation fees?
The owners corporation can charge penalty interest, issue a final notice, and apply to VCAT for an order to recover the debt plus costs. Unpaid fees can also be noted on the certificate when you sell and adjusted against you at settlement. If you're struggling, contact the manager early, because payment plans are usually available.
Talk to GNT Finance
Buying a unit or apartment in Melbourne means buying into an owners corporation, and the right lender depends on the building as much as on you. GNT Finance can review the certificate and match you with lenders that will fund the property. Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.