In October 2015 the Strata Schemes Management Bill 2015 and Strata Schemes Development Bill 2015 were passed by the NSW Parliament. Public consultation on draft regulations to accompany the new Acts, including model by-laws, will commence in early 2016
Once the regulations and the finer details are known we’ll comment further to keep our clients up to date before commencement of the legislation on 1 July 2016.
The new legislation contains around 90 changes to the existing laws. Below are our comments on just some of the main changes.
Copies of the Bills as passed by both houses can be accessed from the links below:
Note that we aren’t lawyers and you should read the legislation in full, including the regulations when available.
Download the below in a PDF for easy reading here
The reforms see the introduction of mandatory defect inspection reports and a building bond for the construction of high rise strata buildings (those over 3 stories in height).
Only aimed at those properties that have no Home Owners Warranty Insurance.
The proposed changes will encourage developers and builders to fix defects quickly.
Building Bonds (Sections 207-211)
- Developers will be required to lodge a 2% bond for the contracted price of the building, as a form of security to fix any defective work.
- The developer must give the Secretary a security (building bond) before an occupation certificate is issued.
- Purpose of the building bond is to secure funding for the payment (up to the amount of the bond) of the cost to rectify defective work identified in the final report.
Inspection Reports (Section 199)
- A developer must pay for 2 inspection reports which identifies defects in the building works and how the works can be rectified.
- The first report is to be completed within 12 to 18 months of completion and the second and final inspection report is to be carried out within 18 months to 2 years of completion.
- If the defects are not rectified the building bond will be used to carry out the repairs and if there are no defects or they are rectified, the bond will be returned to the developer.
Initial maintenance schedule (Section 115)
The developer will need to prepare a maintenance schedule, to be tabled at the first annual general meeting to inform owners about their maintenance obligations.
The purpose of the initial maintenance schedule is to provide information to the owners corporation about obligations and costs relating to the maintenance of common property.
The initial maintenance schedule may be considered in any proceedings for the purpose of determining whether or not a defect could have been avoided by the taking of specified action.
A 3 tier model for lot owner renovations has been introduced
Cosmetic renovations (Section 109)
Cosmetic changes to an owner’s lot such as laying carpet, installing built-in wardrobes or changing internal blinds and curtains will not require approval from the owners corporation.
Minor Renovations (Section 110)
Minor renovations within an owner’s lot – such as renovating a kitchen, replacing wiring or replacing hardwood floors will be allowed with an ordinary resolution (50% of the vote).
Previously, a special resolution may have been required to carry out such works.
Major renovations (Section 111)
Renovations that affect the structure or external appearance of the building will still require a special resolution (75% of the vote) and possibly a by-law.
Capital works Fund
The sinking fund will be known as the Capital works fund.
Developer to set realistic levies (Sections 79 & 115)
Developers must set realistic levies during the initial period and must take into account the Initial maintenance schedule.
The executive committee will be known as the Strata committee
Tenants representative to the strata committee (Section 33)
Tenants can attend meetings and elect a non-voting representative to speak at strata committee meetings to represent their interests (where more than half a scheme is tenanted)
The tenant representative is not entitled to vote on decisions of the committee and may be excluded from the meeting to discuss items such as financial matters.
Attendance at meetings
The reforms will accommodate meeting attendance through social media, video and teleconference such as Skype.
Annual general meeting dates (Section 18)
Owners corporations will also have flexibility to determine when their annual general meetings are held.
Annual general meetings can be held once in each financial year of the corporation instead of 1 month either side of the first annual general meeting anniversary.
Quorums for general meetings (Schedule 1, Section 17)
If a quorum is not present for a general meeting after 30 minutes the Chairperson can declare that the persons present constitute the quorum and the meeting can be held.
Limits on proxies (Schedule 1, Section 26)
The reforms limit the number of proxy votes able to be held by one person to:
One proxy vote only for schemes with less than 20 lots, or 5% for schemes with more than 20 lots.
Pet-friendly units will be encouraged, but not mandated, by reversing the default pet ban in model by-laws.. Details to be announced in the Regulations.
Councils patrolling car spaces (Section 112, Schedule 4 Section 650 (6))
If a scheme enters into such an agreement, an authorised council officer will be allowed to enter the scheme’s property to erect parking signs and issue fines. However these arrangements would be voluntary both for schemes and councils and would need to be developed on commercial terms.
COLLECTIVE SALE & RENEWAL
Strata Schemes Development Bill 2015
- 75% of owners can elect to terminate a strata scheme
- The new process recognises the rights of owners to jointly end or wind up a strata scheme so the site can be sold or renewed.
- Similar models already operate in New Zealand, most states of North America, and the United Kingdom.
- No restriction concerning the age or condition of the strata scheme.
- First cases would likely go to appeal.
- Protections will be in place for elderly and vulnerable owner-occupiers.
- Owners will receive at least the market value of their lot plus an extra amount to cover costs like those associated with moving, as required by the Land Acquisition (Just Terms Compensation) Act 1991.
- Any plans for renewal will be referred to the Land and Environment Court for final consideration and possible rejection if:
- the renewal plan has not followed the proper processes or not been developed in ‘good faith’; or
- the amount to be paid to a dissenting owner is less than the compensation value of the lot; or
- the terms of settlement are not just and equitable