By: Andrew Brennan, James Read and Allana McGrath
Background
Recent amendments to the Subdivision Act 1988 (Vic) (SA) and the Owners Corporations Act 2006 (Vic) (OC Act) have addressed two legislative provisions that had become increasingly difficult to reconcile with the practical realities of Owners Corporation governance.
The reforms follow a number of significant decisions, including Owners Corporation PS738539K v Ka-Po [2024] VCAT 1177 and Owners Corporation 1 PS723350Q v Owners Corporation 2 PS723350Q [2025] VCAT 592, which exposed unintended consequences in the operation of section 34D of the SA and section 18 of the OC Act.
Both provisions sit at the centre of how Owners Corporations make collective decisions and enforce their rights. While each was intended to facilitate practical outcomes, the way they had been interpreted by Courts and Tribunals revealed procedural obstacles that often achieved the opposite result.
The recent legislative amendments are intended to restore clarity and better align the legislation with its original policy objectives.
Section 34D: When overwhelming support is not enough
Section 34D of the SA enables an Owners Corporation, or an administrator of an Owners Corporation, or a person with an interest in the land affected by the relevant Owners Corporation, to apply to VCAT for orders amending a plan of subdivision. Those orders may include:
- altering lot boundaries;
- changing lot entitlement or lot liability; or
- facilitating broader redevelopment or collective sale outcomes.
The provision also allows VCAT to consent on behalf of owners who have not voted or who have refused consent to a proposal. However, that power is subject to a number of statutory preconditions. One of those preconditions was contained in section 34D(3)(c), which following amendments in 2021 required non-consenting owners to hold more than 50% of the total lot entitlement before VCAT could exercise its consent power on their behalf. The practical consequences of that drafting were highlighted in Ka-Po.
In that case, more than 73% of the lot entitlement supported a proposal to alter lot boundaries in order to comply with a building order. Importantly, no owner voted against the proposal, however a small number did not participate in the voting process. Despite overwhelming support, VCAT could not rely on the specific mechanism in section 34D(1)(b) because the non-participating owners did not hold more than 50% of the lot entitlement as required by section 34D(3)(c). Instead, the Tribunal was required to rely upon its broader discretionary power under section 34D(6).
The result created a striking paradox. The stronger the support for a proposal, the less likely it was that the statutory threshold in section 34D(3)(c) would be met. The issue becomes clearer when comparing the provision before and after the 2021 amendments. Prior to 2021, section 34D(3)(c) was directed towards circumstances in which a minority of owners could frustrate the wishes of the majority. Following the amendments, the provision could operate in the reverse manner, potentially preventing VCAT from exercising its consent power even where a proposal had overwhelming support from owners.
Recognising this difficulty, Parliament has now amended section 34D by including section 34D(3)(ba), which restores VCAT’s ability to make an order under section 34D(1)(b) where more than half of the membership of the Owners Corporation has previously consented to the proposal. The amendment is significant because it restores the practical operation of the provision and aligns it more closely with its underlying policy rationale: ensuring that supported proposals are not frustrated by owner inaction or procedural technicalities.
Section 18: Clarifying when legal proceedings can be commenced
The second reform concerns section 18 of the OC Act.
Section 18 regulates the authority required before an Owners Corporation can commence legal proceedings.
Historically, section 18(1) required an Owners Corporation to obtain a special resolution before commencing proceedings, subject to limited exceptions under section 18(2) relating to issuing proceedings to recover unpaid levies. The scope of those exceptions came under scrutiny in Owners Corporation 1 PS723350Q v Owners Corporation 2 PS723350Q [2025] VCAT 592. There, the case did not concern routine levy recovery proceedings but instead involved a claim for a civil penalty under section 166 of the OC Act. VCAT held that a claim for a civil penalty of up to $1,100 payable to the Owners Corporation did not fall within the exception contained in section 18(2). The Tribunal found that such a claim was not of a kind that fell “within the civil jurisdictional limit of the Magistrates’ Court” for the purposes of that provision. The decision highlighted uncertainty regarding the operation of section 18 and raised broader questions about whether the provision was functioning as originally intended.
In response, Parliament introduced section 18(2A) of the OC Act to empower an Owners Corporation to commence proceedings by ordinary resolution if the matter involves non-monetary relief. Importantly, this is no longer limited to proceedings in VCAT or the Magistrates’ Court; the authority now extends to proceedings seeking non-monetary relief in any court or tribunal with jurisdiction to grant the relief sought.
Further amendments, commencing on 9 September 2026, have expanded the provision even further. Owners Corporations may now commence proceedings seeking monetary relief by ordinary resolution where the amount claimed is less than twice the Owners Corporation’s annual fees. A special resolution is only required where the monetary claim exceeds that threshold. These amendments substantially reduce the procedural burden previously associated with commencing enforcement proceedings and provide Owners Corporations with greater flexibility when selecting the most appropriate forum for a dispute.
What does this mean for Owners Corporations?
The recent reforms represent a significant shift towards a more practical and accessible decision-making framework for Owners Corporations.
In the context of plan of subdivision amendments, the changes address the anomaly identified in Ka-Po by restoring VCAT’s ability to act where proposals receive support from the majority of owners.
In the context of legal proceedings, the amendments significantly reduce the circumstances in which a special resolution is required and broaden the ability of Owners Corporations to pursue both monetary and non-monetary claims through the courts and tribunals best suited to the dispute.
For Owners Corporations, managers and advisers, the practical takeaway is that resolution thresholds that may previously have prevented Owners Corporations from progressing subdivision amendments or commencing legal proceedings have now changed. Governance procedures, delegation frameworks, standard resolutions and litigation protocols should be reviewed to ensure they reflect the amended legislative regime. The recent decisions remain important because they explain the problems the legislation created in practice. However, the reforms now in force demonstrate a clear legislative intention to reduce procedural complexity, improve efficiency and better enable Owners Corporations to make collective decisions and enforce their rights.
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