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Under Victorian law, the passage of special resolutions by an Owners Corporation is governed by Section 96 of the Owners Corporations Act 2006 (Vic) (“the Act”). Special resolutions are required for significant decisions, such as initiating legal proceedings for building defects and strict thresholds must be met. However, where a resolution falls short of the special resolution threshold but still secures majority support, it may become an ‘interim special resolution’, with the potential to become a special resolution under certain conditions.

This article discusses how and when an interim special resolution becomes a special resolution in Victoria and outlines the legal and procedural steps that must be followed.

What Is a Special Resolution?

A special resolution of an Owners Corporation is defined in section 96 of the Act as a resolution passed by:

“75% of the total lot entitlements of all the lots affected by the owners corporation (if a ballot or poll is taken).”

This means that, whether via a meeting or written ballot, the resolution must be supported by lot owners holding at least 75% of the total lot entitlements. It is not measured by the number of lot owners but by the aggregate lot entitlement they hold.

What If a Resolution Gains Majority Support, but Not 75%?

Where the resolution receives more than 50% but less than 75% support (by total lot entitlement), it may be deemed an interim special resolution, provided the opposing vote does not exceed a certain threshold.

An interim special resolution occurs only if:

• At least 50% of the total votes (by lot entitlement) are in favour; and
• No more than 25% of the total votes (by lot entitlement) are against the resolution.

In effect, if support falls between 50% and 74.99% and formal objection is minimal (25% or less), the resolution is classified as interim and enters a 29-day provisional period.

When Does an Interim Special Resolution be Taken to be a Special Resolution?

Pursuant to section 97(5) of the Act:

“An interim special resolution becomes a special resolution of the owners corporation on the day that is 29 days after the day the interim special resolution was passed unless lot owners who hold more than 25% of the total votes for all the lots affected by the owners corporation petition the secretary against the resolution.”

Thus, an interim special resolution automatically develops into a special resolution after 29 days, unless aborted by a qualifying petition.

To summarise, the interim resolution becomes fully effective unless:

• A written petition is submitted to the secretary within 29 days, and
• The petitioning lot owners together hold more than 25% of the total lot entitlements.

What Are the Notification Requirements?

The Act also requires the secretary (or the Owners Corporation manager acting in that capacity) to notify all lot owners of the outcome of an interim special resolution within 14 days of the close of the ballot or meeting, in accordance with section 97(2) and (3) of the Act.

Failure to comply with this requirement may cause confusion or even undermine the enforceability of the resolution.

Ensuring timely notice enables affected owners to consider whether they wish to petition against the interim resolution.

Building Defect Litigation and Special Resolutions

Many Owners Corporations in Victoria face the prospect of defective common property, particularly in the context of the 10-year statutory warranty period under the Building Act 1993 (Vic). Where defects are identified and litigation is contemplated, it is common practice to seek a special resolution that authorises:

• Pursuing claims against builders or developers;
• Including other potentially liable parties such as designers, engineers, or certifiers; and
• Delegating authority to the Owners Corporation Committee and its legal representatives to conduct the proceedings.

If the vote to pass such a resolution falls short of 75% but satisfies the conditions for an interim special resolution, the Owners Corporation must follow the statutory steps to allow the interim special resolution to become a special resolution.

What Happens if the Resolution Fails?

If the motion receives less than 50% support, or more than 25% of votes are against, then neither a special nor interim special resolution has passed. In that case:

• The Owners Corporation must still comply with its legal duties under section 46 of the Act, which imposes a strict obligation to repair and maintain the common property.
• Even without a formal resolution, the Owners Corporation may be liable if defects cause further damage or loss to common property or private property (individual lots).

Where there is no resolution to initiate legal proceedings, alternative action, such as urgent repairs or further expert engagement may be necessary to mitigate loss and discharge legal duties.

Key Takeaways

• A special resolution requires 75% of the total lot entitlements to vote in favour.
• A majority vote (over 50%) with minimal objection (under 25%) can result in an interim special resolution.
• If no objection is lodged by owners holding more than 25% of the lot entitlements within 29 days, the interim resolution becomes a special resolution by operation of law.
• The secretary must notify all owners within 14 days of the passing of the interim special resolution.
• Even where a special resolution fails, the Owners Corporation remains under a strict legal duty to maintain and repair common property.

By Tsigereda (Ziggy) Lovegrove
Lawyer and Practice Manager, Lovegrove & Cotton Lawyers Pty Ltd

Disclaimer
This article is for general informational purposes only and does not constitute legal advice. For advice specific to Owners Corporations, building defects, or dispute resolution, please contact Lovegrove & Cotton at enquiries@lclawyers.com.au or call (03) 9600 4077.

Image Acknowledgements:

The digital renders used in this article were developed collaboratively by Lovegrove & Cotton and ChatGPT. The photo images that are not the digital renders are stock images sourced from Shutterstock.