NSW strata and community title law is undergoing the most extensive overhaul since the 1973 Strata Titles Act.
The NSW Government has announced the starting date for the Strata Schemes (Management) Act 2015 and the Strata Schemes (Development) Act 2015. Most of the changes will commence on 30 November 2016.
Strata Management in NSW provides practical analysis and comprehensive guidance on the management of Owners Corporations under the new updated laws.
Some of the key changes detailed in the publication include:
THE EXECUTIVE COMMITTEE
- New Name: The “executive committee” will be known as the “strata committee”.
- Limits on Committee Appointments: A building manager, a leasing agent or a person with an undisclosed connection to the original owner of a strata scheme (unless they disclose that connection) will not be able to be appointed or elected to the strata committee unless they are an owner in the strata scheme.
- Tenant’s Participation: If at least half the lots in the scheme are tenanted, tenants will be able to elect a non-voting member of the committee (who may be excluded during certain financial discussions).
STRATA MANAGERS AND BUILDING MANAGERS
- Limits on Appointment: The developer of a strata scheme, or a person connected to the developer, will not be permitted to be appointed as the strata managing agent within 10 years from registration of the strata scheme. However, this provision will not apply to a strata managing agent appointed before the commencement of the relevant section. Further, the maximum term of a strata managing agent’s appointment is to be limited to:
– 12 months (for an agent appointed at the first annual general meeting); or
– 3 years in any other case (including any option term). However the agreement may be allowed to roll-over on a month-to-month basis for a period of up to 3 months after it would otherwise expire pending a decision as to reappointment.
- Limits on Receipt of Gifts etc: It will be an offence for a strata managing agent to request or accept a gift or other benefit in connection with the provision of services as a strata managing agent (except their remuneration, commissions included in the terms of appointment or approved by the owners corporation, a training course or service, and anything below a threshold to be prescribed by the regulations). Further, a strata managing agent must report to the annual general meeting on commissions received in the preceding 12 months and expected to be received in the following 12 months, and must disclose any variations to the owners corporation as soon as practicable after becoming aware of them. The Tribunal will be empowered to order a strata managing agent to pay over commissions to the owners corporation if they were not disclosed or not disclosed in good faith.
- New Name for Caretakers: Caretakers will be known as building managers. The current requirement that a caretaker own or be entitled to exclusive possession of a lot or an area of common property in the strata scheme has not been carried over.
- Removal of Underperforming Strata Managing Agents: The NSW Civil and Administrative Tribunal will be given greater powers to make orders and remove strata managing agents where the agent has refused/ failed to perform their duties to an acceptable standard in accordance with their agency contract.
GENERAL MEETING PROCEDURES
- Financial Statements on Request Only: The notice of an annual general meeting will not need to be accompanied by the last financial statements. Instead these must be provided on request.
- Procedure if no Quorum: After half-an-hour without a quorum, the chairperson will be able to declare that those present and entitled to vote constitute a quorum, without the need to adjourn the meeting.
- Tenant Involvement: Tenants who have been notified of general meetings will be able to attend them but may not vote (unless they are a proxy-holder) and may only speak if a resolution is passed approving it. The owners corporation may determine that tenants who are not proxy-holders are not entitled to be present when certain financial matters are discussed.
- Limit on Number of Proxies: A person will not be able to hold more than 1 proxy (if the scheme has 20 lots or fewer) or not more than 5% of the total number of lots in any other case.
- Voting by Secret Ballot: In certain circumstances, votes will be able to be carried out by secret ballot or via electronic means (in addition to the current voting in person and via mail).
- Calling a Meeting: Annual general meetings will need to be held once in each financial year (rather than within 1 month of the anniversary of the first annual general meeting as is the current practice).
RECOVERY OF UNPAID CONTRIBUTIONS
- Payment Plans: The owners corporation will be able to enter into payment plans for unpaid contributions.
- Tribunal’s Powers: The Tribunal will be given a limited power to review interest charged on unpaid contributions.
DUTY OF REPAIR AND MAINTENANCE
- Compliance with Repair/ Maintenance Duty may be Deferred: If an owners corporation has taken action against an owner or other person in respect of damage to the common property, it will be able to defer compliance with its duty to repair and maintain that common property until the completion of the action. This power does not apply if the failure to comply will affect the safety of any building, structure or common property in the strata scheme.
- Damages for Breach of Statutory Duty: A statutory cause of action for lot owners to recover damages from the owners corporation for a breach of statutory duty will be created. This provision can be expected to revert the law to the position which applied prior to the Court of Appeal’s decision in The Owners Strata Plan 50276 v Thoo  NSWCA 270, where it was held that no such cause of action arose. The loss claimed must be “reasonably foreseeable”.
- New Regime: In the legislation regarding approval of building works.
- Two New Categories of Work: dealing with “cosmetic work” and “minor renovations”.
Cosmetic Work by Owners: Cosmetic work to common property in connection with the owner’s lot will not require approval from the owners corporation. The meaning of cosmetic work is defined in the legislation, and certain exceptions are provided. Key exceptions include minor renovations, structural work, work involving plumbing and waterproofing, work that changes the external appearance of a lot, and work that requires consent under other legislation (for example, development consent). The by-laws can specify additional kinds of cosmetic work. The legislation gives the example of inserting a picture hook as cosmetic work.
Minor Renovations by Owners: Minor renovations to common property in connection with the owner’s lot may be carried out with the approval of an ordinary resolution at a general meeting. Some kinds of work are excluded from the definition of minor renovations, importantly including structural work, waterproofing work, work which changes the external appearance of a lot, and work that requires approval under other legislation (such as development consent). The legislation gives the example of laying timber floors as minor renovations. Approval cannot be unreasonably withheld, and can be granted subject to reasonable conditions. The by-laws can add to the category of minor renovations, and can delegate the owners corporation’s functions under the relevant section to the strata committee (meaning strata committee approval would be sufficient if the by-laws permitted it).
- Owners Corporation’s Duty in Regard to Repairing and Maintaining the Common Property: Importantly, there is no procedure under the new legislation for the owners corporation to pass on its duty to repair and maintain common property. The imposition of reasonable conditions is permissible, but it is unclear whether this would extend to a condition requiring payment of the owners corporation’s costs expended to maintain the affected common property.
In practice the exclusions in the legislation, and the lack of a procedure to pass on the obligation for repair and maintenance of affected common property, is likely to result in the practice of owners corporations requiring exclusive use and special privilege by-laws (to be renamed as “common property rights by-laws”) to be made for most renovations.
- Licence to Use Common Property: an owners corporation will be entitled to grant a licence to use common property to an occupier of a lot or any other person (as well as to owners of lots as is currently permitted).
- By-Laws to Limit the Number of Occupants of a Lot: By-laws will be permitted to be made that limit the number of occupants of a lot (but not to less than 2 adults per bedroom). However such a by-law will have no effect to the extent to which it is inconsistent with any planning approval or other law applicable to the lot.
- Procedure for Changes to By-Laws: Changes of by-laws will be required to be registered within 6 months from the date of the resolution to adopt them and the secretary of the owners corporation will be required to keep “a consolidated up to date copy of the by-laws for the strata scheme”.
- Increase in Civil Penalty for Breach of By-Laws: The civil penalty for breach of an owners corporation’s notice to comply with a by-law will increase to a maximum 10 penalty units ($1,100) from 5 ($550).
- In the case of a second breach within 12 months of a fine being imposed, the Tribunal will be able to impose a penalty of up to 20 penalty units ($2,200). This power did not previously exist.
- In the case of a by-law limiting the number of occupants of a lot, the penalty will be increased to a maximum 50 penalty units ($5,500) for the initial breach and up to 100 penalty units ($11,000) for a further breach within 12 months of an initial fine being issued.
- Changes to Model By-Laws: The allowance of pets unless they are excluded will be the default under changes to the model by-laws. A lot owner’s request to keep a pet will not be able to be unreasonably refused if the scheme adopts the model by-laws. The reforms however, will not remove a scheme’s ability to make its own rules about pets.
The model by-laws will also stipulate that a resident cannot allow smoke to drift into another person’s lot. The owners corporation will be able to then enforce the by-law against a smoker by issuing a notice to comply and/or seeking an order in the Tribunal.
The legislation includes an amendment of the Local Government Act 1993 to create “strata parking areas” by agreement with the local council approved by a special resolution. If created, a “strata parking area” would be subjected to parking restrictions and council enforcement.
Part 11 of the Strata Schemes (Management) Act 2015 makes provision with respect to building defects. The part applies to the original construction of the strata scheme, and only to residential building work (or work on mixed use schemes that include residential uses). The part does not apply where there is insurance under the Home Building Compensation Fund (previously known as Home Warranty Insurance). Importantly, a transitional provision (cl 16 of Schedule 3) provides that Part 11 does not apply to building work if the contract for carrying out that work was entered into before the commencement of that provision.
Building Inspection Reports
When Part 11 applies, the developer will be required to appoint a building inspector not later than 12 months after the building work is completed. The building inspector must be approved by the owners corporation (by general meeting resolution) and the owners corporation can refuse “on any grounds”. The building inspector must not have been connected with the developer within the preceding 2 years.
The inspector will be required to inspect and provide an interim report not earlier than 15 months and not later than 18 months after the completion of the building work. Not later than 18 months after the work was completed, the developer must arrange for the building inspector to carry out a final inspection to provide a final report.
The final report will be required to be provided not earlier than 21 months and not later than 2 years after the completion of the work. The final report cannot contain new items that were not in the interim report.
The original builder (or their employees, agents or contractors) will have a right to access parts of a strata property “for the purpose of or in connection with” rectifying defects. In exercising that right the builder is not bound by the inspection report. If the original builder is unavailable, the developer will be able to appoint a substitute.
The developer of certain strata schemes where the strata building is over 3 stories high, will be required to give the NSW Government a bond of 2% for the final contract price of the building prior to the work being completed and an occupation certificate being issued. The bond is to cover any defects that may be detected within the first 2 years of the building’s life. However, this obligation will not commence until 1 July 2017.
The new legislation will empower an owners corporation to establish a voluntary dispute resolution process for internal disputes which will operate without prejudice to any other rights or remedies. Otherwise the current strata mediation procedures are retained.
Under the new legislation, the existing role of strata adjudicators is dissolved and instead all dispute resolution powers are granted to the Tribunal. It remains to be seen what procedures the Tribunal would adopt for such matters, which are currently dealt with by adjudicators predominantly “on the papers” only.
COLLECTIVE SALE AND RENEWAL REFORMS
Under the reforms, a strata scheme will be able to be ended with the agreement of 75% of the owners. Previously unanimous support from all the owners was required.
Lot owners will receive at least the market value of their lot in addition to other costs (for example, those associated with moving).
Strata Management in NSW written by strata title expert Gary Bugden, will provide practical analysis and comprehensive guidance on the changes addressed above.