As you may be aware the draft Strata Schemes Development Bill 2015and Strata Schemes Management Bill 2015 have recently been released for public consultation.

This follows extensive consultation and consideration by key stakeholders and industry and strata experts which commenced in December 2011.

These Bills outline the Government’s proposed strata law reforms and have been heralded as the first major reform of strata laws in NSW since 1973 when the Strata Title Act was first enacted.

Major changes proposed

Major changes to existing strata laws proposed in the Bills include the following:

  • Modern and flexible strata schemes allowing for modern forms of communication during voting and to facilitate meeting attendance. This is to enable owners’ corporations flexibility to determine when their annual general meetings are held.
  • Transparency and accountability of strata managing agents and building managers, by lifting standards and accountability. 
    • This is proposed to be achieved by giving the Civil and Administrative Tribunal greater powers to make orders and remove strata managing agents where the agent has refused or failed to perform their duties to an acceptable standard in line with their agreement, and by introducing enhanced disclosure of conflicts of interest and third party commissions paid to the agent. 
    • Strata managing agent agreements would be time limited to one year in the first year and three years in following years (with one month rollovers on three year agreements, but owners corporations could terminate at any time while in rollover).
  • Collective sale and renewal reforms would allow owners jointly to end or wind up a strata scheme so the site can be sold or renewed, while protecting elderly and vulnerable owner-occupiers. 
    • The plan will only proceed if it has 75% of owners supporting the plan within 12 months. Any plans for renewal would be referred to the NSW Land and Environment Court for final approval and the court may reject a plan if it has not followed proper processes or been developed in good faith, or the amount to be paid to a dissenting owner was less than the compensation value of the lot, or the terms of the settlement were not just and equitable.
    • Details of how the compensation value will be determined will be set out in the regulations but based on the principles used to determine just terms compensation.
  • Maintaining the building’s condition by introducing changes to maintain developer and building accountability such as:
    • a requirement for the developer to have a qualified person who is not connected with the developer carry out a building inspection within 12 months or the end of the initial period and prepare interim and final reports, the final report due within 18 months to 2 years from the completion of the works;
    • a requirement for the developer to lodge a building bond of 2% of the contracted price of high rise strata buildings prior to the completion of the works which may be held for just over 2 years.

These changes would enhance consumer protection from defective work but impose additional obligations that developers would need to account for in any feasibility for development. A developer may also seek to pass the obligation of any bond arrangements to the builder through its construction contracts.

  • Owner renovation reforms would provide clearer, common-sense approvals for owner renovations including waiving restrictions for minor, cosmetic changes to lots, although renovations with lasting impacts would still require approval by a general resolution, and external or structural renovations would still require a special resolution.
  • Proxy voting reforms would curb proxy farming (where one individual controls the decisions made by the owners corporation by obtaining a majority of votes using the proxy system), by limiting the number of proxy votes able to be held to one proxy vote only for schemes with fewer than 20 lots, or 5% for schemes with more than 20 lots.
  • By-law reforms would include introducing a model by-law dealing with smoke drift, reforming the model by-laws to make it easier to keep pets, introducing measures to help address overcrowding, allowing schemes to take more action against the misuse of visitor parking spaces, helping owners corporations address noise and short-term letting, and introducing increased fines for non-compliance.
  • Improving tenant participation is proposed for schemes where the majority of units are tenanted by allowing tenants to take part in owners’ corporations meetings and have an elected representative on the strata committee, while respecting the final decisions of owners. Tenants are not however entitled to speak or vote at meetings unless authorised to do so.
  • Levies and capital works funds laws would require developers to set realistic levies during the period between when the strata plan is registered, and the developer has sold at least one third of the unit entitlements in the scheme and for the subsequent year after.  Owners’ corporations would be able to more easily recover outstanding levies that are mainly used to pay for the scheme’s day-to-day expenses.
  • Dispute resolution reforms would expand the Civil and Administrative Tribunal’s power to deal exclusively with most strata disputes, including orders to recover outstanding levies.  The reforms would help the Tribunal ensure owners’ corporations are run more smoothly where there is dysfunction in a scheme, by:
    • removing members of the executive committee and the strata managing agent and forcing elections of office holders;
    • limiting the matters committees can make decisions about;
    • requiring votes on certain matters; and
    • issuing orders to comply with the by-laws or imposing higher financial penalties for people who do not abide by the rules of the strata scheme.

The above is a brief summary of the proposed changes, further details of which can be considered by accessing the Department of Fair Trading website at:

http://www.fairtrading.nsw.gov.au/ftw/About_us/Have_your_say/Reform_of_strata_laws.page

What happens next?

The Department is calling for submissions regarding the draft Bills which can be emailed to policy@finance.nsw.gov.au.

The deadline for submissions is Wednesday 12 August 2015. 

NSW Fair Trading will review all submissions prior to finalising the Bills.