Powers of an Owners Corporation’s Administrator – How Far Do They Go?

Deb Andronaco

Special CounselAitken PartnersView Profile

Joel Parsons

LawyerAitken PartnersView Profile

When an owners corporation administrator is appointed, they are often required to make difficult decisions to address urgent issues affecting a building and its owners.

A recent VCAT decision provides valuable guidance on the extent of an administrator’s powers, confirming that, in certain circumstances, an administrator may exercise powers that would ordinarily require approval from lot owners, including borrowing money and raising significant special levies to fund essential works.

The Victorian Civil and Administrative Tribunal’s recent decision in Moffatt v Twiselton (Owners Corporations) [2025] VCAT 370 provides important clarification on the scope of powers held by administrators appointed to owners corporations (OCs).

In this article, Special Counsel, Deborah Andronaco and Lawyer, Joel Parsons, provide valuable guidance for OCs, administrators appointed to OCs, OC managers, and lot owners, in line with the above case’s decisions.

Background

Thirteen lot owners (the Applicants) commenced proceedings and sought damages from a former administrator appointed to their OC (the Respondent) for alleged breaches of his duties as administrator.

The administrator had taken out a loan for $2.2 million to rectify building defects and consequently issued special levies of over $70,000 per lot to each applicant in order to repay the loan.

Of the 31 lots in the OC, the majority were owned by investors with minimal owner occupiers. However, the thirteenth applicant was a related entity to the builder and owned 12 of the lots.

The purpose of the administrator’s appointment was to deal with significant building defects. Accordingly, the administrator arranged for rectification works, however, the thirteenth applicant and 4 other lot owners refused to pay.

To fund the rectification works, the administrator entered into the loan agreement, claiming that this was the only viable method of funding the works given there were lot owners who were refusing to pay for same.

Subsequently, the administrator commenced proceedings against the builder for defects, claiming in excess of $1 million. The administrator both intended and expected for the proceeds from such claim to substantially reduce the loan, however, the claim was delayed and resulted in the administrator having to levy the lot owners over $70,000 each to repay the loan.

What were the lot owners claiming?

The Applicants sought to recover the special levies by alleging that the Respondent:

• acted beyond his power as administrator by entering into a loan and raising special levies without a special resolution;
• failed in his duties as administrator to act honestly and in good faith with due care and diligence by taking out the loan without regard to the financial circumstances of the lot owners and how it would be paid; and
• signed documents purporting a special resolution was passed by the OC when entering into the loan, which is misleading or deceptive and contrary to the Australian Consumer Law (ACL).

Before addressing the Applicants’ claims, Member Rowland noted that the absence of certain allegations by the Applicants was more telling than the allegations themselves. These included that the Applicants did not allege that the Respondent:

• carried out unnecessary or excessive works;
• wasted or misused OC funds; or
• could and should have done something different.

Can an administrator make a decision typically requiring a special resolution?

Section 176 of the Owners Corporations Act 2006 (Vic) (OC Act) empowers an administrator to do anything the OC or its committee can do, subject to any judicial order. VCAT’s order of appointment conferred power on the Respondent to do anything that the OC could do.

The Applicants argued that administrators had limits imposed on their powers, such that loans and special levies could only be entered into and imposed if they were twice the value of annual fees and a special resolution had been passed. Further, it was argued that administrators were only able to borrow money via ordinary resolution, provided the amount borrowed did not exceed the amount of the current annual fees of the OC.

Member Rowland held that if the Applicants’ contention surrounding the limits imposed on the Respondent’s powers were correct, the Respondent would not have had the power to levy special fees, borrow money, or commence legal proceedings at all.

Historically, VCAT has appointed administrators for one of two reasons:

1. A building has major defects and a special resolution cannot be passed to raise the necessary funds needed to rectify such defects; or

1. The composition and dysfunction of lot owners makes it essentially impossible to carry out the day-to-day administration of the OC.

Member Rowland’s reading of the OC Act, by giving it full meaning, meant that “anything the OC can do” refers to anything the OC can do, whether or not the decision ordinarily requires the OC to pass an ordinary, special, or unanimous resolution.

VCAT also has the option to limit the power conferred on an administrator by only granting the powers of a committee. However, in the case of an OC required to pass special resolutions to rectify significant building defects, it was held that the full power of the OC should be conferred “as a matter of common sense and practicality”.

Ultimately, Member Rowland held that the Respondent did have the power to raise special levies and borrow money under sections 24 and 25 of the OC Act.

Did the administrator fail to act honestly, in good faith, or with due care and diligence?

The Applicants’ central argument was that the Respondent should not have been able to take out the loan in any event, considering the OC had no means to repay it, and the lot owners could not afford it.

As was held in Kondo v Owners Corporation 33218101 [2016] VCAT 909, both an OC and its administrator do not have a duty to take into account the financial circumstances of lot owners when carrying out their obligations under the OC Act.

The Respondent was required to comply with the building notices and orders issued and their statutory duty to repair and maintain common property, which he did. These obligations do not require an administrator to consider whether a lot owner can afford essential repairs and maintenance.

At paragraph 34 of the judgment, Member Rowland stated:

“The timely way in which the administrator worked to remediate the building defects most likely saved the lot owners money, as building costs have since escalated. There was simply no option not to remediate the building. The building having now been remediated, it is safe to live in, can be insured and lot owners are now able to sell their lots. Failure to remediate the building would likely have caused the owners corporation to incur further costs, penalties and an order to evacuate the building. The cost of more than $70,000 per lot, although substantial in the context of the modest value of the lots, is still preferable to a lot which cannot be lived in and of no value.”

Member Rowland also rejected this argument from the Applicants.

Misleading or Deceptive Conduct

Finally, the Applicants relied on 2 certification documents signed by the Respondent and provided to the lender to allege misleading or deceptive conduct.

It was obvious that the documents were pro-forma documents, requiring the OC to certify that a special resolution had been obtained. However, it was abundantly clear that the documents were not prepared for circumstances where an administrator had been appointed.

In signing the documents, the Respondent crossed out “Secretary” and wrote “Administrator”. On one of the documents, the Respondent wrote “Meeting not required”.

Ultimately, Member Rowland was not satisfied that the execution of the documents was misleading or deceptive. Execution of the documents by the Respondent in the course of his appointment and capacity as administrator was not in trade or commerce, thus meaning that section 18 of the ACL did not apply (Owners Corporation No 1 PS401009W v Anderton (Owners Corporation) [2023] VCAT 426).

Order

Although VCAT is typically a ‘no‑costs jurisdiction’, costs may be awarded where, amongst other things, a claim lacks substance. Member Rowland determined that the Applicants’ claims had no substance in fact or law and squarely engaged the relevant section of the VCAT Act, fixing costs against the Applicants.

Key Takeaways

• Administrator powers can be broad – Where appointed with full OC powers, an administrator may make decisions ordinarily requiring OC resolutions, including borrowing money and raising special levies.
• Affordability is not the test – An administrator must prioritise statutory repair and maintenance obligations, even where the cost is significant for lot owners.
• Weak claims may attract costs – Unsupported allegations against an administrator may result in adverse costs orders, despite VCAT’s usual no-costs position.

If you require assistance with owners corporations, lot owners, managers, or navigating owners corporations’ law, please reach out to one of our experienced and friendly legal professionals on (03) 8600 6000.