Australia: Strata title law reform: significant changes that impact developers in NSW

A position paper on reforms to strata and community title legislation was released by the NSW Department of Fair Trading in November 2013.

There are more than 50 proposed changes, which reflect a significant and overdue overhaul of the law. The changes impact strata lots owners, tenants and, significantly, developers. These changes, once implemented, need to be addressed in off-the-plan contracts, bylaws and construction contracts. It is anticipated that the Bill will be released within several months.

Some of the more significant changes address governance issues, managing the built environment and bylaws.


New options for attending meetings and voting

Under the current law, a vote can only be cast by proxy or in person at a general meeting of the owner's corporation. It is proposed that schemes will be allowed to hold meetings via social media, video and teleconferencing or even other methods that may become available. This is clearly a sensible proposal in keeping with changes in technology and behaviours.

Enhancing opportunities for tenant participation

Currently, strata title legislation does not provide for any form of tenant participation. It is proposed that tenants will be allowed to attend and participate in owners corporation meetings. Tenants will be allowed to appoint a representative to the strata committee in circumstances where tenants occupy more than half of the lots in a strata scheme (so, this will only apply to a minority of strata schemes). Tenants will not be given voting rights.

A limitation on "proxy farming"

There are currently no limits on the number of proxy votes that can be held by one person. The proposal is for this to be limited to 5% of the lots if the scheme has more than 20 lots, or one vote if the scheme has fewer than 20 lots.

A limitation on the terms of strata management contracts

There is no limit on strata management contracts after the initial period and automatic rollover clauses are not prohibited. It is proposed that strata management contracts will be limited to a maximum term of three years with no automatic rollover allowed.

Managing the built environment

Encouraging defects to be dealt with early

Under the current legislation, defect rectification does not have to be discussed at annual general meetings. It is proposed that defect rectification will be a compulsory agenda item for discussion at each AGM until expiry of the statutory warranty periods as defined by the Home Building Act 1989.

Provision for independent defects report

An independent defects report is not currently required. It is proposed that an independent defects report is prepared for the owners corporation.

Bonds to be paid by the developer

Currently, the payment of a bond is not required, nor contemplated. It is proposed that the developer of a high rise strata building, that is a building with more than three storeys, must pay a bond as assurance that defects will be rectified. This money will be held in trust until an independent inspector agrees that any identified defects have been fixed. The bond is likely to be 2% of the construction costs. At a practical level, it is likely that the developer will pass this obligation on to the builder.

Restriction on the right of developers to vote on defects matters

The developer currently has the right to vote on defects matters, albeit it with a reduced entitlement. The right of developers or anyone connected to the developer to vote on matters relating to building defects will be removed.

Establishment of a process to facilitate the collective sale or renewal of a strata scheme

Currently, strata schemes can be wound up only with the unanimous support of owners or by an order of the Supreme Court. It is proposed that a process to facilitate the collective sale or renewal of a strata scheme, where there is less than unanimous support from the owners, will be introduced with oversight by a strata commissioner. Ultimately, a 75% resolution will be required to wind up a scheme.


Introduction of a maintenance model bylaw

Owners corporations are ultimately responsible for maintenance of common property, but confusion often arises over the responsibility of lot owners.

It is proposed that schemes be allowed to adopt a maintenance bylaw based on a memorandum to be developed by the strata industry working group to aid the identification of common property items that an owners corporation is required to maintain.

Amend model bylaws to deal with the issue of cigarette smoke drift

Currently, there are no such bylaws. It is proposed to introduce a model bylaw dealing with smoke drift and make it clear that cigarette smoke can be a nuisance or a hazard to other residents.

Amend the model bylaw to require owners corporation approval to install hardwood floors

Currently, residential model bylaws exist regarding flooring but these do not require owners corporation approval. It has been recommended that they be amended to require owners corporation approval to install wooden or other hard floors (other than in the kitchen or bathroom) in any lot.

Modernise the model bylaws to encourage more schemes to allow pets

The current model bylaws include an option for schemes to ban pets. It is proposed that certain pets be allowed and all other pets be allowed with permission, which cannot be unreasonably withheld. This is a sensible introduction since it has been the subject of much confusion, debate and concern in the past.

Options to deal with unauthorised parking

Parking disputes will be managed by a new regulatory framework, which includes establishing conditions for use and entering into agreements with councils to issue penalties for non-compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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