Financial

Financial Management ⏱ 7 min read  ·  Committee members, lot owners & buyers In this article What a maintenance fund (sinking fund) is and why it matters When a maintenance fund is legally required What a 10-year maintenance plan must include Signs that your maintenance fund may be underfunded Best practice for Tier 3, 4 or 5 OCs ℹ️ The best way to avoid special levies A well-funded maintenance plan is the most effective way to avoid the financial shock of large, unplanned special levies. Regular contributions spread the cost of major works over many years. A maintenance fund — formerly known as a sinking fund — is a dedicated reserve of money set aside by an owners corporation to fund future major repairs, replacements, and maintenance of common property. When is a Maintenance Fund Required? ⚖️ Tier 1 and 2 OC requirement — OC Act 2006 Tier 1 and 2 owners corporations (more than 50 occupiable lots) are legally required to establish and maintain a maintenance fund with an accompanying 10-year maintenance plan. Tiers 3, 4 and 5 owners corporations (2-50Lots) are not legally required to have a maintenance fund, but it is strongly recommended as a matter of best practice. Without one, unexpected major repairs must be funded through special levies — which can place significant financial strain on lot owners. The 10-Year Maintenance Plan Tier 1 and 2 owners corporations must prepare a maintenance plan covering at least 10 years that identifies: All items of common property requiring maintenance, repair, or replacement over the period Estimated costs for each item Expected timing for each item The annual contribution required to adequately fund the plan Common items in a 10-year plan Roof replacement, external painting, lift modernisation, fire safety upgrades, plumbing and drainage, car park waterproof membrane, pool equipment replacement, intercom systems, pathway resurfacing, and hot water system replacement. ⚠️ Signs your maintenance fund may be underfunded The balance is significantly below the accumulated liability in the maintenance plan The OC has needed to raise multiple special levies for items that should have been anticipated Visible deterioration of common property because repairs are being deferred The annual contribution has not increased in line with building costs over recent years 💡 For Tier 3, 4 and 5 OCs Even without a legal obligation, a simplified maintenance plan identifying major items likely to require attention over the next 10 years (with estimated costs) is a practical starting point. Reviewed annually, it protects all lot owners from financial shocks. Frequently Asked Questions 💰 What is the difference between a maintenance fund and a sinking fund? They are the same thing. ‘Sinking fund’ is the term used in other states. ‘Maintenance fund’ is the current terminology under the Owners Corporations Act 2006. 🔒 Can the OC spend maintenance fund money on other things? The maintenance fund should be used for the purposes identified in the maintenance plan. Using it for operational expenses or unrelated costs may breach the committee’s obligations and could be challenged by lot owners. 📋 Is the maintenance fund balance shown on the OC certificate? Yes. The OC certificate typically includes information about the maintenance fund balance — important for prospective purchasers assessing the building’s financial health. 📊 How is the annual contribution to the maintenance fund determined? It is determined based on the 10-year maintenance plan and the current fund balance. It should be sufficient to cover anticipated costs as they arise over the plan period. 📋 Key takeaways Tier 1 and 2 OCs (50+ lots) are legally required to have a maintenance fund and 10-year plan. Tier 3, 4 and 5 OCs (2-50 lots) are not legally required to have one, but it is strongly recommended best practice. An underfunded maintenance fund is one of the biggest drivers of unexpected special levies. The maintenance fund balance appears on the OC certificate — important for prospective buyers. Review and update the maintenance plan at least annually, and ensure contributions match anticipated costs. Maintenance fundSinking fund10-year planFinancial ManagementPrescribed OCSpecial levies OC OC Resource Centre Victoria’s independent educational resource for lot owners, committee members, and tenants. General information only — not legal advice. Last updated: March 2026.

Financial Management ⏱ 7 min read  ·  Lot owners & committee members In this article When special levies are raised and what they fund The double-levy threshold and when a 75% vote is required How special levies are calculated and distributed Notice requirements for a general meeting to approve a levy How to challenge a special levy if it has been improperly raised ℹ️ Not all special levies are avoidable A well-funded maintenance plan minimises the need for special levies. But unexpected events — storm damage, building defects, urgent compliance works — can make them necessary even in well-run buildings. A special levy is a one-off financial contribution raised by an owners corporation to fund expenditure not covered by the regular annual budget. Understanding your rights and obligations when a special levy is proposed is essential. When Are Special Levies Raised? Major repair or replacement works (roof, lifts, replumbing, façade restoration) Emergency repairs following storm damage, flooding, or fire Building defect rectification Compliance works required by regulators or building surveyors Legal costs for VCAT proceedings or litigation Capital improvements approved by the owners corporation ⚖️ Special levy threshold — OC Act 2006 If the special levy is equal to or less than twice the annual fee → ordinary resolution (simple majority). If it is more than twice the annual fee → special resolution (at least 75% of votes cast). Calculation and Distribution Special levies are calculated using the same lot liability formula as annual levies, unless the benefit principle under Section 49 applies. Where works benefit some lots more than others, costs must be allocated proportionately based on relative benefit. Notice Requirements Lot owners must receive proper notice of the general meeting at which the special levy will be considered — including details of the proposed expenditure, the total amount, each lot owner’s share, and at least 14 days’ written notice. ⚠️ Can you refuse to pay? No. Once a special levy has been properly approved by the correct type of resolution, all lot owners are legally obligated to pay their share. Non-payment can result in penalty interest and legal action through VCAT or the Magistrates’ Court. Challenging a Special Levy A lot owner who believes a special levy was raised improperly has several options: If the wrong resolution type was used (e.g. ordinary resolution where a special was required), the levy may be invalid and challengeable at VCAT If the expenditure is unreasonable or not in accordance with OC functions, apply to VCAT for review If the benefit principle was not correctly applied, affected lot owners can dispute the allocation Always raise concerns with the committee first before escalating to VCAT Tips for Committees Raising Special Levies 💡 Transparency builds trust Obtain multiple competitive quotes, present clear and detailed information to lot owners before the meeting, and consider offering payment plans for large levies to ease financial hardship on affected lot owners. Frequently Asked Questions 🚫 Can the committee raise a special levy without a meeting? Yes and No. Special levies must be approved at a general meeting (or by postal/electronic ballot if the rules permit) if the amount to be raised is more than twice the annual budget. The committee can impose a special levy if the amount to be raised is less than this amount. 💸 What if I can’t afford to pay a special levy? Speak with your OC manager or committee about the possibility of a payment plan. Many OCs will arrange instalment payments for large special levies. However, the obligation to pay remains regardless of personal financial circumstances. 📊 How is a special levy different from an increase in annual levies? Annual levies are ongoing regular contributions that fund the annual budget. A special levy is a one-off charge for a specific purpose — separate from the regular annual levy. 📋 Key takeaways Special levies fund expenditure not covered by the annual budget — major repairs, emergency works, legal costs. Levies up to twice the annual levy require an ordinary resolution; above that, a special resolution (75%). Lot owners must receive at least 14 days’ notice of the meeting at which the levy will be considered (for a General Meeting or ballot) if the amount to be raised is more than twice the annual budget. All lot owners are legally obligated to pay a properly approved special levy — refusal can result in legal action. If you believe a special levy was improperly raised, raise it with the committee first, then escalate to VCAT. Special leviesFinancial ManagementOC Act 2006Special resolutionLot liabilityVCAT OC OC Resource Centre Victoria’s independent educational resource for lot owners, committee members, and tenants. General information only — not legal advice. Last updated: March 2026.