Major changes to strata laws
New strata laws will start on 30 November 2016.
They have been modernised to fit the reality of living in a strata townhouse or apartment today. The new building defect bond scheme will start on 1 July 2017. Currently more than a quarter of NSW’s population lives in, owns or manages strata. Many new requirements will not impact strata communities immediately. This includes allowing time for pre-appointed strata managing agents, building managers and executive committee members to continue in their roles once the law reforms start.
Some key changes include:
- strengthening the accountability of strata managers
- allowing owners to adopt modern technology to conduct meetings, vote, communicate and administer their scheme
- the need for owners to review by-laws (strata community rules) within 12 months, which can be customised to suit their lifestyle – such as whether to allow owners to keep a pet by giving notice to the owners corporation
- a process for the collective sale and renewal of a strata scheme
- a simpler, clearer process for dealing with disputes
- broadening tenant participation in meetings
- a new option to manage unauthorised parking through a commercial arrangement between a local council and a strata scheme
- a clearer and simpler three-tier renovations process, which waives approval for cosmetic renovations within the strata lot (for example, installing handrails for safety).
There are also measures to reduce red tape, such as simplifying financial statements for owners.
A brief overview of changes is as follows;
Complying with the new laws
Strata schemes will have plenty of time to understand and adjust to new requirements after the reforms start.
Be aware that:
- decisions already made and financial contributions already levied under pre 30 November laws remain valid once new laws start.
- legal proceedings already underway will be dealt with under the former Act that was in place when proceedings began.
Modern and flexible strata schemes
The reforms will allow a strata scheme to adopt social media, video and teleconference to hold meetings. Voting will be able to occur electronically and through secret ballots. It will also be possible to distribute papers by email.
The new laws will also give owners corporations more flexibility around when to hold their AGM.
Stronger accountability for strata managers and caretakers
Strata managing agents will have new requirements to disclose conflicts of interest, including financial interests.
If a strata managing agent or building manager/caretaker is not performing, owners will be able to apply to the Tribunal to vary or terminate the contract, or to be compensated.
Collective sale and renewal
This new process will allow owners to jointly end or wind up a strata scheme so the site can be sold or renewed.
The reforms will ensure that owners receive at least the market value of their lot, plus an extra amount for costs like those associated with moving.
Current laws can make it difficult for owners to carry out minor renovations to their lot. The reforms will provide clearer, common sense approvals for owner renovations. They will waive restrictions for cosmetic changes to lots such as inserting a picture hook. Renovations with a lasting impact, such as installing floorboards, will still require approval but only a general resolution (50% of the vote). Renovations like those that affect the structure or external appearance of the building, or waterproofing, will still require a special resolution (75% of the vote).
Changes to proxy voting will prevent an individual controlling owners’ decisions by obtaining a majority of proxy votes (that is, voting rights delegated to them by other owners).
Proxy votes able to be held by one person will be limited to:
- one proxy vote only for schemes with less than 20 lots, or
- 5% for schemes with more than 20 lots.
Reforms will introduce a model by-law dealing with smoking that intrudes into the common property or another person’s lot. The reforms will also amend the model by-laws to make it easier to keep pets as opposed to automatically prohibiting pet ownership in a scheme. Model by-laws are suggested by-laws that an owners corporation can choose to adopt, or use to amend their current enforceable by-laws if they wish. Model by-laws do not remove a scheme’s ability to make its own rules about smoking and pets. The model by-laws are not the by-laws of a scheme unless they are formally adopted. Reforms will allow schemes to take more action against the misuse of parking spaces and excess noise, as well as introduce increased fines for non-compliance. The changes will introduce measures to help address overcrowding in strata schemes.
Tenants will have a right to attend owners corporation meetings, no matter how many of the lots are tenanted in their scheme. Tenants may vote only if they hold a proxy (giving them voting rights on a lot owner’s behalf). The owners corporation may vote to allow a tenant to speak on a particular matter. Tenants can be excluded from a meeting when financial matters are discussed. If at least half the lots are tenanted, a tenant representative can be nominated as a non-voting member of the strata committee. The representative may still be excluded from meetings when financial issues are discussed, such as the collective sale or renewal process.
Levies and capital works funds
New laws will 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 (the initial period) and for the subsequent year after. Owners corporations will be able to more easily recover outstanding levies that are mainly used to pay for the scheme’s day-to-day expenses.
The reforms will expand the Tribunal’s power to exclusively deal with most strata disputes, including orders to recover outstanding levies. If an outstanding debt is registered with the Local Court, it can order debt recovery (including garnishee orders on the lot owner and, for the first time – if necessary – any rent paid by a tenant to a real estate agent) to recover the debt. The Tribunal’s expanded powers will help it ensure owners corporations can run more smoothly where there is dysfunction in a scheme. These include removing members of the executive committee and the strata managing agent and forcing elections of office holders.
Common property memorandum
Under the reforms, strata schemes will be able to adopt the Common property memorandum into their by-laws by special resolution. The Common property memorandum sets out whether the owners corporation, or an owner of a lot, is responsible for the maintenance, repair or replacement of any part of the common property.
If adopted, the Common property memorandum can only be changed to exclude certain items as ‘common property’. This includes items that are:
- not common property for that particular strata scheme, or
- part of a common property rights by-law or a by-law made under section 108 of the new Strata Schemes Management Act. If there is a conflict between the Common property memorandum and any such by-law, then the by-law applies.
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