Strata Reforms

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INTRODUCTION

To modernise strata laws, more than 90 law changes were passed by the NSW Parliament in 2015 and started on the 30th November 2016. This is except for the building defect bond scheme reforms which starts on the 1st January 2018 (previously 1st July 2017).

The strata reforms bring significant changes for instance;

  • Meeting attendance by electronic means
  • Dealing with changes to meeting procedures including tenants
  • Changes to laws concerning the expiry of agency agreements
  • Dealing with urban renewal
  • Dealing with new provisions concerning renovations, removal of goods and dispute resolutions and a long list of other items

Below are our comments on just some of the main changes. We suggest that you should read the Acts and Regulations in full. The information contained in this article is general information only and not legal advice. You may wish to obtain independent legal advice before you take any action or otherwise rely upon its contents in any way.

 

Legislation names

Full copies of the legislation and regulations can be downloaded at legislation.nsw.gov.au

  • Strata Schemes Management Act 2015
  • Strata Schemes Management Regulation 2016
  • Strata Schemes Development Act 2015
  • Strata Schemes Development Regulation 2016

Name changes

  • Sinking fund – Capital works fund
  • Executive committee – Strata committee
  • Section 109 certificate – Strata information certificate

 

BUILDING

Cosmetic work by owners (Section 109 Strata Management Act 2015)

Owners can carry out the following cosmetic renovations without the approval of the owners corporation;

  • Install or replace picture hooks
  • Install or replace handrails
  • Fill cracks in internal walls
  • Laying carpet
  • Install or replace built in wardrobes
  • Install or replace internal blinds and curtains

Owners corporations can change their by-laws to specify additional items that are deemed cosmetic work.

 

Minor renovations by owners (Section 110, Strata Management Act 2015)

An owner may carry out work for the purposes of minor renovations to common property in connection with the owner’s lot with approval by general resolution at a general meeting.

Minor renovations include;

  • Renovating a kitchen
  • Changing recessed light fittings
  • Installing hardwood floors
  • Installing power points
  • Reconfiguring walls
  • Removing carpet to expose wooden floors
  • Installing a rainwater tank
  • Installing an air conditioner
  • Installing double or triple glazed windows
  • Installing a heat pump
  • Installing ceiling insulation

Minor renovations does not apply to the following work;

  • Work involving structural changes
  • Work changing the external appearance of a lot
  • Work involving waterproofing

Owners corporations can change their by-laws to specify additional items that are deemed minor renovations or to delegate the approval process to the executive committee.

 

Changes to common property (Section 108, Strata Management Act 2015)

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. An owners corporation or an owner of a lot in a strata scheme may add to the common property, alter the common property or erect a new structure on common property for the purpose of improving or enhancing the common property. If the owners corporation intend to make the lot owner responsible for the ongoing maintenance of the alteration a by-law must be registered stating this.

 

Building defect bond scheme (Sections 193-211, Strata Management Act 2015)

The building defect bond scheme will start on the 1st July 2017. This is so the new Australian Standard for group title building inspections can be finalised first.For new residential and mixed use strata buildings of 4 storeys or more constructed after the 1st July 2017 developers will be required to lodge a building bond of 2% of the final contract price of the building.

The bond will be used as a form of security to fix any defective work and will encourage developers and builders to fix defects quickly. Developers will need to pay to engage an independent building inspector to provide defect inspection reports.

  • A first report is due between 15 and 18 months after the completion of the building.
  • The final report must be provided between 21 months and no later than 2 years after the building work is completed.

If the defects are not rectified, the building bond will be used to carry out the repairs. If there are no defects or they are rectified, the bond will be returned to the developer.

 

Initial maintenance schedule (Section 115 Strata Management Act 2015)

The developer will need to prepare a maintenance schedule and present to the owners corporation at the first annual general meeting. The purpose of the schedule is to provide information to the owners corporation about obligations and costs relating to the maintenance of common property. The strata manager will use the estimates to prepare the initial budget for the first annual general meeting.

  • Items in the schedule may include;
  • Exterior walls, guttering, downpipes and roof
  • Pools and surrounds
  • Air conditioning, heating and ventilation systems
  • Fire protection equipment
  • Security systems

 

FINANCIAL

 

Strata information certificate (Schedule 1 Form 4, Strata Schemes Management Regulation 2016)

Section 109 certificates are now known as Strata information certificates. The certificate provides essentially the same information with the addition of the following points;

  • Section 1 – Has a strata renewal committee been established? If the owners corporation has established a committee to consider a strata renewal proposal a brief statement must be provided.
  • Section 7 – Proposals for funding matters set out in the 10 year capital works plan. The intention of this item appears to be to disclose the current actual balance of the Capital works fund and how it relates to the projected balance in the 10 year Capital works fund plan, thereby showing whether the Capital works fund is running ahead of or behind its long term budget.

 

Developed to set realistic levies (Section 89, Strata Management Act 2015)

Developers are required to set realistic levies and estimates of future levies during the initial period of a strata scheme and for the year after. Owners corporations can apply to the tribunal for an order that the original owner compensate the scheme if the original levies were inadequate.

 

PEOPLE

 

What by-laws apply? (Section 134, Strata Management Act 2015)

  • Schemes registered before 1/07/1997. By-laws will change to those contained in Schedule 2 of the Strata Schemes Management Regulation 2016 including any registered by-law changes.
  • Schemes registered between 1/07/1997 and 30/11/2016. No change. The existing by-laws including any registered by-law changes will still apply.
  • For schemes registered after 30/11/2016. The by-laws are those adopted when the plan is registered.

 

Pets (Schedule 3 Strata Schemes Management Regulation 2016) 

There are no changes to the pets by-law for existing schemes. For schemes registered after the 30/11/2016 the model by-laws default option is that an animal can be kept provided the owner notifies the owners corporation within 14 days. The option stating no pets are allowed has been removed.

 

Consolidated by-laws (Section 141 (3) Strata Management Act 2015)

The Secretary must keep a consolidated up to date copy of the by-laws for the strata scheme. A consolidated set of by-laws would likely be in a word document format created by the strata manager and list all of the applicable by-laws including any registered changes. Consolidated by-laws should be kept in the strata records and do not have to be registered with Land & Property Information.

 

Penalties for breach of by-laws (Section 147 (6), Strata Management Act 2015)

If the tribunal decides a penalty is payable by a lot owner for a breach of by-law the penalty will be payable to the owners corporation unless the NCAT otherwise orders.

 

Attendance at meetings (Section 14, Strata Schemes Management Regulation 2016) 

An owners corporation or strata committee may by resolution allow owners to attend and vote at meetings through social media or video and teleconference services such as Skype. Strata managers will need to establish these facilities which may allow the more technology savvy companies to differentiate from their competitors.

 

Tenant representative to the strata committee (Section 33, Strata Management Act 2015)

If an owners corporation has tenants for at least half of the number of lots in the scheme a tenants representative may now been appointed. The owners corporation will need to arrange a tenants meeting before each annual general meeting. The tenants can then elect a representative to represent their interests at strata committee meetings. 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.

 

Quorums for general meetings (Schedule 1, Section 17 Strata Management Act 2015)

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. Previously a meeting had to be adjourned for at least 7 days.

 

Limits on proxies (Schedule 1, Section 26, Strata Management Act 2015)

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.

 

Appointment of strata managers (Section 49, Strata Management Act 2015)

A developer of a strata scheme, or a person connected with a developer (eg a relative or employee), cannot be appointed as the strata managing agent for the scheme until 10 years after the registration of the strata plan.

 

Strata manager contracts (Section 50, Strata Management Act 2015)

Strata managing agent agreements will be time limited to 1 year in the first year of the strata scheme and 3 years in following years.

 

Occupancy limits (Section 137, Strata Management Act 2015)

Owners corporations will be able to set occupancy limits on units, which will avoid over-crowding and the associated building fire safety risks. The limit may not be fewer than 2 adults per bedroom.

 

Collective sale and renewal (Strata Schemes Development Act 2015)

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. Any plan for renewal will be referred to the Land and Environment Court for final consideration.

The Court will be able to reject a renewal 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 settlement were not just and equitable in all the circumstances.

Similar models already operate in New Zealand, most states of North America, and the United Kingdom. There is no restriction concerning the age or condition of the strata scheme.