The NSW Government has released draft Strata Schemes Bills for public consultation. These represent the most extensive overhaul of the strata laws in NSW since the 1973 Strata Titles Act.

Strata apartment owner-occupiers and investors will find that the new laws will impact mainly on management of strata schemes, but will also deal with building defects in new buildings and redevelopment.

This is a quick guide:

Management of strata schemes

The new laws will have an impact upon:

General Meetings: The first annual general meeting is to have an agenda item that an initial maintenance schedule be obtained; a limit is to apply to ‘proxy farming’ to 5% of the votes if more than 20 lots, and 1 vote if less than 20; annual general meetings may now be held at any time during each financial year rather than within one month of the anniversary of the registration of the strata plan; and the NCAT (Civil and Administrative Tribunal) may deal with dysfunctional schemes by forcing elections, limiting decision making, requiring votes and issuing compliance orders.

Strata Committees: The Executive Committee will change its name to the Strata Committee; a tenant representative may attend strata committee meetings but not vote, nor be present when financial items are discussed; a duty is imposed on the strata committee to carry out their functions for the benefit of the owners corporation, and with due care and diligence.

Strata Managers: A time limit is to apply to the appointment of a strata manager of 1 year only at the first annual general meeting, with new appointments and re-appointments limited to 3 year terms at subsequent annual general meetings; strata managers are to be prohibited from receiving gifts or benefits for their services except commission; strata managers will be required to disclose third party commissions received; be required to disclose if they are connected with the original owner; and be more easily removed by application to NCAT.

Strata funds: Changes are made to the rules for levying and allocation of funds for the administrative fund and the capital works fund (formerly known as the sinking fund); and to give the right to recover levy shortfalls if the original owner has set levies too low to cover expenses.

Maintenance, repairs and renovation: The strata scheme may adopt a common property memorandum which allocates responsibility for the maintenance, repair or replacement of the common property between the owners and the owners corporation; and the by-laws are to allow owners to carry out minor cosmetic work inside the lot without approval; minor renovations and external works will need approval at a general meeting.

Strata By-Laws: These changes may be made to the By-Laws: that a limit be placed on occupancy of 2 adults per bedroom; to allow fines to be imposed for illegal parking on common property (e.g. visitor parking spaces); to allow for service of documents by email; to control smoke drift; to address noise and non-compliance; to make keeping of pets with approval the new default option when registering a new strata scheme; and to increase fines for breaches.

Building Defects in new strata schemes

This is a new process which is intended to identify and address building defects in new buildings, and parts of buildings, contemporaneously with the registration of the strata plan. The process is:

  • The developer must appoint and pay for a building inspector who is approved by the owners corporation to give an interim report identifying any defective work. Time limits will apply: the appointment is to be made within 12 months of work completion, and the report is to be given within 18 months.
  • The builder who carried out the defective work will be entitled to rectify the work, and if so, a final inspection report will be prepared.
  • The developer of a strata high rise building will need to pay a building bond into a Building Bond Account maintained by the NSW Department of Fair Trading. The bond will be 2% of the contract price, and will be paid out to rectify defective building work identified in the final inspection report. After the later of 2 years or 60 days of the report being given to the developer, the building bond will be paid out for the cost of the work, and the surplus will be paid to the developer.

Redevelopment of existing strata schemes

Up until now, any proposal to redevelop an existing strata scheme has required the agreement of all of the lot owners.

The new law will allow a strata renewal proposal to proceed if at least 75% of the owners (by unit entitlement) agree. The Land and Environment Court will be empowered to make the appropriate orders, including orders for compensation.

Conclusion

After 5 years of consultation and gestation, the draft Strata Schemes Development Bill 2015 and Strata Schemes Management Bill 2015 are being circulated for final consultation before being considered by the NSW Parliament perhaps later this year or early in 2016.

The draft Bills are consistent with the proposals which were outlined by the government in its discussion paper Making NSW No. 1 Again – Shaping Future Communities (2012).