When major common property works surface, owners corporations often reach the same uncomfortable crossroads, who should pay, and how should those costs be shared?
The benefit principle allows costs to be shared based on who benefits from the works, but applying it incorrectly can lead to disputes, challenges to levies, and difficulties recovering costs.
Getting the structure right from the outset can help avoid those issues.
Key takeaways:
- Owners Corporations should consider how repair costs are to be allocated before raising a special levy, particularly where the works substantially benefit only one or some lots.
- Under section 24 of the Owners Corporations Act 2006 (Vic), special fees for certain works may need to reflect the relative benefit received by different lots.
- Section 49 also allows an Owners Corporation, in certain circumstances, to recover the cost of works carried out wholly or substantially for the benefit of one or some lots.
- Clear advice and early planning can help Committees structure levies appropriately, reduce uncertainty and avoid unnecessary disputes between owners.
When does the benefit principle apply?
Maintaining and repairing common property is one of the core responsibilities of an owners corporation.
For annual fees, section 23 of the Owners Corporations Act 2006 (Vic) generally provides for fees to be levied according to lot liability.
Different considerations can arise where the Owners Corporation needs to raise special fees for extraordinary expenditure.
Under section 24, special fees are generally also based on lot liability. However, section 24(2A) provides an important exception where the expenditure relates to repairs, maintenance or other works carried out wholly or substantially for the benefit of one or some, but not all, of the lots.
In those circumstances, the fees must be levied on the basis that the owner of the lot that benefits more pays more.
For example, if particular building works substantially benefit only a specific group of lots, the Owners Corporation may need to consider whether simply allocating the entire cost according to ordinary lot liability properly reflects the requirements of section 24.
The question is therefore not simply whether every owner receives the same benefit.
The more important question is:
Are the works being carried out wholly or substantially for the benefit of only one or some lots rather than all lots?
That assessment should be made carefully before a special levy is raised.
Why timing still matters when applying the benefit principle
Although the current legislation provides more than one mechanism relevant to benefit-based cost allocation, timing remains important.
Where an Owners Corporation is proposing to raise a special levy under section 24, it should determine how the levy needs to be allocated when the special fees are being considered and raised.
Waiting until owners dispute the allocation can make the situation more complicated and increase the risk of disagreement or Tribunal proceedings.
There is also a separate mechanism under section 49.
Section 49 allows an Owners Corporation to recover, as a debt, the cost of repairs, maintenance or other works carried out wholly or substantially for the benefit of one or some lots. The amount recoverable is calculated so that the owner of the lot benefiting more pays more.
This means it is too broad to say that an Owners Corporation automatically loses every opportunity to apply the benefit principle simply because works have already been undertaken.
However, that does not make early planning any less important.
The most practical approach is to consider the benefit issue before the Owners Corporation commits to a particular levy or funding structure, rather than attempting to resolve questions about allocation after a dispute has already arisen.
Mashane and the benefit principle: what Committees should know
An important case in the development of the benefit principle is Mashane Pty Ltd v Owners Corporation RN328577 [2013] VSC 417.
The case involved an apartment building where balcony repair works were undertaken, and the Owners Corporation raised fees based on lot liability.
The applicant owned a lot without a balcony and disputed its contribution towards those works.
On appeal from VCAT, the Victorian Supreme Court considered how the benefit principle operated under the legislation as it stood at that time.
The Court found that, under those provisions, the benefit principle operated when money was being levied and collected rather than when money was subsequently paid out of the Owners Corporation’s funds.
The decision highlighted an important problem with leaving questions about benefit until after fees had already been raised.
However, Mashane was decided in 2013, and the legislation was subsequently amended.
The current Act expressly addresses benefit-based allocation in section 24(2A) and contains a separate cost recovery mechanism under section 49.
For Committees today, the practical lesson from Mashane remains useful: consider who substantially benefits from the works before deciding how the costs will be funded and allocated.
But the case should be read together with the current legislation rather than treated as the complete statement of how the benefit principle operates today.
What does the benefit principle mean in practice?
When significant works are proposed, the Owners Corporation should avoid automatically assuming that every cost must be divided in the usual way.
Instead, the Committee should understand:
- what works are being undertaken
- which lots are affected
- whether the works benefit the Owners Corporation generally or substantially benefit only particular lots
- whether the expenditure is being funded through annual fees, a special levy or another appropriate mechanism
- which provisions of the Act apply to the proposed allocation
For some projects, allocation according to lot liability may remain appropriate.
For others, section 24(2A) may require a different allocation because certain lots receive substantially greater benefit.
Section 49 may also become relevant where the Owners Corporation is seeking to recover the actual cost of qualifying works.
The correct approach depends on the circumstances, which is why Committees should avoid relying on a simple rule that every common property repair must always be divided in the same way.
Common mistakes when dealing with the benefit principle
Most disputes over repair costs do not begin because Committees are deliberately trying to treat owners unfairly.
They often arise because works are urgent, the funding decision is made quickly, or the allocation question is considered too late.
Common problems can include:
- defaulting to lot liability without considering whether section 24(2A) applies
- assuming every common property repair necessarily benefits every lot in the same way
- raising a special levy before properly assessing which lots substantially benefit from the works
- failing to document why a particular allocation was chosen
- confusing the rules governing special fees with the separate recovery mechanism available under section 49
- trying to resolve questions about fairness only after owners have challenged the levy
A better approach is to address the issue at the planning stage.
Before raising funds for substantial works, the Committee should understand what is being funded, who benefits and what legislative mechanism is being relied upon.
Do urgent repairs change the benefit principle?
Urgent works can affect the process an Owners Corporation needs to follow, but they do not mean cost allocation can simply be ignored.
Under section 24(4), a special resolution is generally required where the amount of the special fees exceeds twice the total amount of the current annual fees set under section 23.
Section 24(5), however, provides an exception where immediate expenditure is necessary to ensure safety or to prevent significant loss or damage.
That exception relates to the requirement for a special resolution.
It does not remove the need to consider the other requirements of section 24, including section 24(2A) where the works are carried out wholly or substantially for the benefit of only one or some lots.
Section 49 may also be relevant where the Owners Corporation seeks to recover the cost of qualifying works.
Urgency therefore does not remove the need for careful decision-making. It simply means the Owners Corporation may have a different procedural pathway available where immediate action is genuinely required.
How the right Owners Corporation manager can help reduce levy disputes
Managing major repairs involves more than obtaining quotes and arranging contractors.
A proactive Owners Corporation manager should help the Committee identify important funding and governance questions early enough for them to be properly considered.
This can include helping the Committee:
- identify potential benefit-allocation issues before levies are raised
- understand when further professional or legal advice may be required
- structure the decision-making process clearly
- maintain proper documentation around levy decisions
- communicate the reasoning behind significant costs to owners
- reduce avoidable conflict arising from unclear or poorly explained levies
The manager should not replace legal advice where a legal interpretation is required.
However, an experienced and proactive manager can recognise when an issue needs to be addressed rather than allowing it to emerge only after owners have already received their levy notices.
Do you need a better Owners Corporation manager?
If your owners corporation is facing recurring disputes, unclear levy decisions or advice that feels reactive rather than considered, it may be time to reassess how your building is being managed.
At Change Body Corporate, we support Committees through a smooth transition to management that prioritises:
- clear and timely communication
- proactive advice before important decisions are made
- better planning around major repairs and expenditure
- clearer governance and decision-making
- stronger long-term management of the Owners Corporation
Good management cannot prevent every disagreement.
But identifying issues earlier and giving Committees the information they need before major decisions are made can significantly reduce unnecessary confusion and conflict.
If you are considering changing your Owners Corporation manager, starting the conversation early can help your Committee understand its options.
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