Ordinary vs Special Resolutions: Why the Difference Matters Under the Owners Corporation Act

Resolutions are the mechanism through which an owners corporation makes decisions, but not all resolutions carry the same legal weight. One of the most common sources of governance error under the Owners Corporations Act 2006 (Vic) (OC Act) is confusion between ordinary resolutions and special resolutions, and when each is required.

At first glance, the distinction may appear procedural. In practice, using the wrong type of resolution can invalidate decisions, delay action and expose the owners corporation to legal risk and dispute. Understanding the difference is essential for committees, managers and lot owners alike.

What is an Ordinary Resolution?

An ordinary resolution is the default decision making tool for most routine matters. It is passed by a simple majority of votes cast at a general meeting, calculated by lot entitlement.

Ordinary resolutions are typically used for day to day operational decisions, including:

1. approving annual budgets and financial statements;

2. appointing committee members;

3. authorising routine maintenance and repairs; and

4. engaging service providers within approved budgets.

As the threshold is relatively low, ordinary resolutions allow owners corporations to function efficiently without requiring overwhelming consensus.

What is a Special Resolution?

A special resolution requires a significantly higher level of support. Broadly speaking, it requires approval from at least 75 per cent of the total lot entitlements, either at a general meeting or through a ballot process conducted in accordance with the OC Act.

The higher threshold reflects the seriousness of the decisions involved. Special resolutions are reserved for matters that materially affect owners’ rights, financial obligations, or the long term governance of the scheme.

The OC Act mandates special resolutions for a defined category of decisions, including:

1. amending the owners corporation rules;

2. approving certain types of legal action;

3. setting fees above prescribed limits;

4. making significant decisions about common property; and

5. entering into particular long term or high value arrangements.

These decisions carry consequences beyond ordinary administration and therefore require broader owner support.

Why the Distinction is Often Missed

In practice, the line between ordinary and special resolutions is frequently blurred. Committees and managers may focus on what needs to be done rather than how approval must be obtained.

Urgency, budget pressure, or a desire to avoid delay can lead to reliance on ordinary resolutions where a special resolution is legally required. Sometimes this occurs through misunderstanding, other times through the mistaken belief that strong support from those present is sufficient.

Unfortunately, good intentions do not cure defective authority.

The Consequences of Using the Wrong Resolution

If a decision requiring a special resolution is made by ordinary resolution, that decision may be invalid. This can have real world consequences, including:

1. refusal by lot owners to comply with the decision;

2. difficulty enforcing levies or contractual obligations;

3. challenges to the owners corporation’s authority; and

4. increased exposure in disputes or proceedings.

In some cases, owners corporations are forced to revisit decisions months later, often after money has been spent or commitments made.

Voting Thresholds and Practical Pitfalls

Another common issue lies in how votes are counted. Special resolutions are based on total lot entitlement, not simply the number of owners voting. Abstentions, non-attendance, and proxy arrangements can all affect whether the required threshold is met.

Where meeting notices do not clearly identify that a special resolution is proposed, owners may unknowingly participate in a flawed process. Poorly drafted motions or incomplete records further increase vulnerability to challenge.

Can an Invalid Resolution be Fixed After the Event?

Owners corporations sometimes attempt to retrospectively ratify decisions by passing a special resolution after the fact. While this may resolve some issues, it is not always effective, particularly where third party rights or disputes have already arisen.

Relying on retrospective approval is risky and often far more costly than ensuring the correct resolution is obtained from the outset.

Getting it Right in Practice

Avoiding resolution related disputes requires careful attention to the following:

1. identifying whether the OC Act requires a special resolution

2. clearly describing the proposed resolution in meeting notices

3. ensuring voting thresholds are properly calculated

4. keeping accurate and detailed records

When uncertainty exists, seeking advice before proceeding is almost always preferable to repairing an invalid decision later.

A Small Distinction With Big Consequences

The difference between an ordinary and a special resolution may seem technical, but its impact is anything but. Using the wrong resolution can undermine otherwise sound decision making and create unnecessary conflict within an owners corporation.

Understanding when a simple majority is enough (and when it is not) remains one of the most important governance disciplines under the OC Act.