Are Owners Corporation Certificates Important? Find Out Why, And 10 Things To Look Out For

If you’re thinking about purchasing a townhouse in 2024 you might have heard the phrase “owners corporation certificate” being thrown around, without really understanding what it is.

Reading the owners corporation certificate carefully may save you thousands and thousands of dollars. Yet, in our experience, when listening to owners who have recently purchased their townhouse they either just glanced over the pages, or didn’t really understand what it was for.

This article will detail what an owners corporation certificate is, why they’re important and key things to review when reading through a certificate. Please note that this article is not intended to be specific advice and cannot be solely relied upon when going through an owners corporation certificate. Any specific questions should be directed to your solicitor or conveyancer.

What is an owners corporation certificate?

A good starting point is to outline what exactly is an owners corporation certificate, and what’s covered in it.

As part of a contract of sale of a property, the seller must provide a Section 32 statement. The Section 32 statement contains various important information about the property. An owners corporation certificate must be included in the Section 32 statement if the property in question is part of a body corporate.

The following information must be included in the owners corporation certificate:

• Payable fees for the lot
• Fees and charges that are either imposed or proposed to be imposed for the lot
• Outstanding fees and charges
• Strata insurance (which may or may not include the building for the lot)
• Upcoming repairs or maintenance
• Funds held by the owners corporation
• Any contracts, leases, licences and agreements that affect common property
• Any liabilities or contingent liabilities
• Notices and orders served on the body corporate
• Legal proceedings to which the owners corporation is a party
• The body corporate manager
• Any appointment of an administrator

The owners corporation certificate must also include:

• The latest annual general meeting minutes
• A copy of the rules affecting the owners corporation

Why is the owners corporation certificate so important to read thoroughly?

The owners corporation certificate provides potential owners what they will responsible for paying in the future. It discloses any upcoming repairs (and importantly whether there will be additional fees that will need to be raised in order to fund those repairs). It also discloses any outstanding fees, interest and additional charges (this will be explained in more detail below).

What should you keep an eye out for when going through an owners corporation certificate?

1. The date of the owners corporation certificate

An owners corporation certificate doesn’t have an ‘expiration date’. The information contained in a certificate is accurate for that particular date. There may be events that occur between the date the certificate is prepared and the date that you, as the potential purchaser, reads the document. Some examples may include an individual who sues the owners corporation the day after the certificate was issued, or unforeseen repairs that occurred after the date of the certificate which required a special levy to be raised.

The older the certificate, the more likely it is that there have been changes that potential owners need to be aware of.

2. Any outstanding fees

It’s important to know that any outstanding fees are attached to the lot, not the individual who was the owner when the fees were issued. What this means is that if you purchase a townhouse with overdue fees and the overdue fees were not included as part of the settlement, you will be responsible for payment of those fees.

3. The upcoming fees and when they are due

It’s a good idea to keep in mind when the next set of fees are due, and how much the fees are – are they due 1 month after settlement, 6 months after settlement?

4. Total funds in the bank account

Is there a surplus of funds in the bank account or are they low on cash? There may be unforeseen repairs or maintenance that is required in the future (that cannot be anticipated and included in the owners corporation certificate), and if there are insufficient funds in the bank account it’s highly likely that the body corporate will need to raise special levies to pay for those repairs.

5. Any upcoming repairs or special levies

Any upcoming repairs may not have already been budgeted by the body corporate manager. If so, it may mean that a special levy may be required to fund the works to be done.

6. Any notices issued upon the body corporate (for example a notice to repair defects issued by council)

Similar to any repairs, a notice may require the owners corporation to pay for works to be done to comply with the notice. Again, if there are insufficient funds the body corporate may strike a special levy.

7. Legal proceedings to which the body corporate is a party

Legal proceedings are likely to involve lawyers, and are often long and drawn out. This unfortunately means that they will usually require ongoing fees to pay for the lawyers. This may not necessarily be specified under any upcoming repairs or special levies but something to keep in mind.

8. The total annual fees

This one is generally straightforward (you want to know how much you need to pay in strata fees this year), however it’s not necessarily clear that the total annual fees are subject to change. The specifics will be covered in another article, however as an overview, the body corporate fees are set by owners each year at the annual general meeting. Depending on the expenses for that year, the budget may change and as a result, the annual fees may also change.

9. Annual general meeting minutes

Reading annual general meeting minutes may or may not be simple, depending on how ‘user-friendly’ the body corporate manager drafts the minutes. However, some quick items to look at are the date of the meeting (if the meeting was held 12 months ago, the discussion points may no longer be relevant and/or new items of note may have arisen) and there may be some matters raised that may not be included in the owners corporation certificate.

As a potential owner, you are unlikely to obtain any further information if you contacted the body corporate manager directly, as the manager can only disclose information to owners or their intermediaries (such as the real estate agent or owner’s conveyancer).

10. The applicable rules that owners and residents must abide by when residing in the body corporate

Again, owners corporation rules is a significant topic worthy of its own article, and it’s coming.

In the meantime, owners and residents are legally bound to abide by the owners corporation rules. Some estates have more onerous rules than others so it’s important to go through them to ensure that you understand before moving in. Some examples of rules may include ‘move in move out’ procedures or the placement of real estate boards.

Some final comments and tips from us

As the owners corporation certificate would have been prepared some time before the date of settlement, we strongly recommend that before settlement you obtain an updated certificate so you have a full picture of the current status of the fees and owners corporation generally.

It’s also important to remember that the owners corporation certificate discloses body corporate fees and matters relevant to the body corporate. It will not disclose any information about a particular townhouse, or any private property that is the responsibility of the owner. As such, potential purchasers always have the option to engage a professional building inspector, surveyor or architect to provide a professional building inspection report. For more information, please review the information provided by Consumer Affairs Victoria here.