Rule or Be Ruled: Why Your OC Rules Need a Refresh

Rule or Be Ruled: Why Your OC Rules Need a Refresh

This article was authored by VIC Solicitor Justine Nguyen and peer-reviewed by Senior Associate Eve Whitmore.

Owners corporation (OC) rules play a vital role in the effective governance and harmonious management of residential, retail, commercial and mixed-use developments. Despite this, many OCs continue to operate under outdated, and in some cases, unenforceable rules.

Rule-Making Powers Under the OCA

Section 138 of the Owners Corporations Act 2006 (Vic) (OCA) empowers an OC to make, amend, or revoke rules governing matters set out in Schedule 1 of the Act. These matters include the control, management, administration, use, and enjoyment of common property and private lots.

Any amendment to the rules must be approved by special resolution, which requires a 75% majority of votes. This formal requirement often discourages OCs from adopting bespoke rules tailored to their particular development, or amending their rules. As a result, many rely on the standardised Model Rules.

Registered Rules versus Model Rules

The Model Rules, set out in Schedule 2 of the Owners Corporations Regulations 2018 (Vic), apply automatically where an OC has not registered its own rules. While convenient, these rules are often too generic to manage the complexities of modern buildings effectively, particularly where there are shared amenities such as pools, gyms, or rooftop terraces.

In such cases, custom rules can offer greater clarity regarding matters such as hours of use, guest access, and maintenance responsibilities. OCs may either:

• supplement the Model Rules with additional provisions, or
• replace them entirely with a bespoke rule set that reflects the development’s specific needs.

In both cases, the rules must comply with Schedule 1 of the OCA and be properly registered to be legally enforceable.

Legal Validity and Enforceability

It is important to note that not all registered rules are valid or enforceable. Under section 140 of the OCA, a rule will have no effect if it:

• is oppressive, unfairly prejudicial, or discriminatory towards a lot owner or occupier, or
• is inconsistent with, or attempts to limit a right, or avoid an obligation under the OCA or any general law or legislative principle.

Failure to regularly review and update rules may expose an OC to legal challenges, disputes between residents, or governance issues.

Why Regular Reviews Are Essential

Some OCs have never reviewed their rules since registration. In these cases, the OC may be relying on outdated or invalid provisions. This is particularly common among OCs established under earlier legislation, including the Subdivision (Body Corporate) Regulations 2001 (Vic) or the Owners Corporations Regulations 2007 (Vic).

Common issues include:

• rules that no longer align with current legislation;
• provisions that are unenforceable under the OCA; and
• gaps in regulation, particularly concerning shared facilities or evolving uses of common property.

Regular reviews ensure that the rules remain compliant, enforceable, and relevant to the current operations and needs of the OC.

Are Registered Rules Suitable for Your Development?

Whether registered rules are appropriate depends on the size and complexity of the development.

Tier 1, 2, or 3 OCs, such as larger residential or mixed-use developments, or those with commercial tenants and shared facilities, typically require bespoke rules to manage their needs effectively. On the other hand, Tier 4 or 5 OCs, including small residential subdivisions or service-only OCs, may find that the Model Rules are sufficient.

If your building includes short-stay accommodation, retail premises, or shared amenities, tailored rules will generally provide better outcomes for long-term governance and compliance.

How We Can Assist

If your OC is still operating under outdated or generic rules, now is an ideal time to review them. A well-drafted, compliant set of rules promotes good governance, reduces the risk of disputes, and safeguards the interests of lot owners and residents.

Our team of specialist OC lawyers can:

• review your current rules, whether Model or registered;
• advise on compliance issues, legal risks, and improvement areas;
• draft new or supplementary rules specific to your property; and/or
• manage all procedural requirements, including preparing special resolution ballots and registering rules with Land Use Victoria.

Ensure your rules are compliant, enforceable, and reflective of your OC’s current needs before issues arise.

© Bugden Allen Group Legal Pty Ltd. This is general information only and not legal advice. You should not rely on this information without seeking legal advice tailored to your specific circumstances.