Australia: New laws on managing and living in strata schemes

Last Updated: 21 December 2015
Article by Gary Newton

In brief - Management of strata schemes to become more efficient

The NSW parliament's approval of major strata reforms will, among other things, impact how strata schemes are managed. Owners and tenants will be affected by these reforms, which include new rules around voting, proxy farming and representation at meetings, as well as new model by-laws on pet keeping and smoking, and extended powers for tribunals in the strata dispute resolution processes.

Reforms aim to improve and modernise management of strata schemes

On 28 October 2015, the NSW parliament approved major reforms to the state's strata title laws. Both the Strata Schemes Management Bill and Strata Schemes Development Bill, which now have passed through both the Legislative Assembly and the Legislative Council, contain around 90 changes to the current laws. The new laws are expected to come into effect in July 2016.

This is the third of three articles addressing the amendments that have been made and the potential impact of those changes. This article examines how the reforms will impact owners and tenants and the management of strata schemes through addressing issues including proxy farming, new model by-laws and dispute resolution.

The recent reforms to strata laws attempt to improve and modernise the way strata schemes are managed.

The main objects of the Strata Schemes Management Bill 2015 include providing for:

  • the management of strata schemes
  • the resolution of disputes arising from strata schemes

Bringing governance into the electronic age

Meetings now will be able to be held electronically, by Skype, teleconferencing and passing paper resolutions. Furthermore, data and records may be stored in any form determined by the owners' corporation, which includes allowing records to be stored, delivered, received and inspected electronically. Records and documents passing between a strata manager, the strata committee and lot owners can take electronic form and be delivered electronically.

Proxy farming to be limited

Many owners raised concerns about the practice of proxy farming in strata schemes; where individuals give their proxy to another owner, authorising them to represent them at the meeting. This meant that by obtaining a majority of votes using the proxy system, one or two individuals could potentially control the decisions made by the owners' corporation.

The strata reform will limit the number of proxy votes able to be held by an individual for schemes with less than 20 lots to one proxy vote, or 5% for schemes with more than 20 lots.

Tenants' participation improved but no voting rights

Under the reforms, if tenants occupy the majority of the lots in a building, they can elect a representative to attend meetings of the strata committee and speak on their behalf. A tenant representative can be excluded from a meeting of the strata committee if a number of matters, including financial statements and levying of contributions, are to be discussed. A tenant representative cannot vote on any decisions affecting the strata scheme.

Tenants will also be able to attend meetings of the owners' corporation, unless the owners' corporation votes to exclude them when certain nominated issues, such as financial statements, are being discussed or voted on. However, a tenant will not be entitled to speak at a meeting unless authorised by a vote of the owners' corporation.

Quorums to be facilitated at owners' corporation general meetings

Lack of interest in participating in the management of the scheme has frequently led to an inability to obtain a quorum and results in the application of a complicated time-wasting procedure for the passage of legislation-mandated resolutions. Proxies were the traditional way in which those who did take an interest in management of their complex achieved a quorum.

As proxy farming reforms would prevent this, the new laws will achieve a quorum by making it permissible for the chair to adjourn an inquorate meeting for seven days, or declare a quorum for a general meeting without regard to the number of eligible voters in attendance half an hour after the relevant business is called on for discussion.

Scheme management to allow for personal, electronic and postal votes and secret ballots

Previously, owners could only vote in person or by mail. Under the reforms, voting will be able to occur through personal voting, electronic voting, postal votes or secret ballot. A secret ballot, if determined by the strata committee, or by at least 25% of the eligible voters, will allow owners to vote according to their conscience without their decision being known or being influenced by other voters.

Furthermore, the reforms give the strata committee greater flexibility to determine when their annual general meeting is held. An owners' corporation will simply be required to hold an annual general meeting once in each financial year. The reforms will accommodate meeting attendance through social media, video and teleconference. Email will also be an acceptable way to distribute papers for meetings.

Strata committee members must declare conflicts of interest

Acts of the strata committee are taken to be acts of the owners' corporation unless there is a disagreement between the resolutions of a general meeting and the strata committee when the owners' corporation prevails. The strata committee is prevented from making determinations that require a special or unanimous resolution or one which is of a type that the owners have determined should not be decided by the strata committee. There is a maximum of nine strata committee members, while large schemes will be required to have a minimum of three.

The first and subsequent annual general meetings of owners will directly elect the officers of the strata committee. Those who have a financial interest in a scheme will be ineligible to be a member of the strata committee unless the person is a lot owner. Ineligible people include real estate agents, building managers and "connected persons".

The Strata Schemes Management Act 1996 imposes a duty on members of the strata committee to carry out their functions without favour and to the benefit of all owners, and act with due care and diligence. Furthermore, a strata committee member with a pecuniary interest in a resolution or who may have a conflict of interest must disclose that conflict and will be excluded from any vote. Failure to disclose a conflict will be a criminal offence.

Strata managing agents face new disclosure and accountability requirements

The Act implements a new disclosure and accountability regime in terms of commissions. At every annual general meeting, the managing agent will have to disclose the amount of, and services provided in respect of commissions received by, the agent during the previous 12 months from entities contracting with the owners' corporation. Similarly, they must estimate the amount to be received in the following 12 months. Strata managing agents must not request or accept gifts or other benefits in connection with the provision of any strata managing services.

Automatic "roll-overs" of a strata managing agent's contract are prohibited and terms for such contracts are limited to three years, including an option to renew. A strata managing agent and a building manager are required to disclose any direct or indirect pecuniary interest in the scheme, and they are also ineligible if they are "connected persons".

By-law reforms address visitor parking, noise and short-term letting

Reforms will allow schemes to take more action against the misuse of visitor parking spaces, noise and short-term letting, as well as introduce increased fines for non-compliance. The reforms will also help better manage issues in strata. The new Act has doubled the maximum penalty from $550, to $1,100 for each offence, and if the tribunal believes a person has broken a by-law within 12 months of the tribunal issuing a fine for breaching the same by-law, the tribunal will have the power to issue a fine of up to $2,200 for each offence.

Approval for owner renovations to be streamlined

A three-tiered approval process for owner renovations will apply for:

  • cosmetic changes (like installing a picture hook), the owner will not need to seek approval
  • minor renovations (such as installing timber floors), only general resolution is required (50% of those entitled to vote)
  • renovations that change the external appearance of a lot or are likely to affect waterproofing or structural changes, special resolution approval will be needed before the work could begin (75% of those entitled to vote)

By-laws will help to prevent overcrowding

The reforms allow owners' corporations to make a by-law limiting the number of people who can reside in a lot, so that strata schemes are better able to manage overcrowding. They must allow a maximum of two adults per bedroom. Schemes wanting to impose such a limit will be able to introduce a by-law by passing a special resolution.

If any owner or tenant breaches the by-law after the notice has been issued, the owners' corporation will be able to apply to the tribunal and impose penalties of up to $5,500 for the first offence and $11,000 for each and every subsequent offence detected within 12 months of the imposition of the earlier penalty.

Model by-laws address pet-keeping and smoking

The strata reforms will remove any reference to a ban on pets in the model by-laws. The reforms will not remove a scheme's ability to make its own rules about pets, and reasonable conditions may be placed on keeping pets. If the model by-laws are adopted, the request to keep a pet could not be unreasonably refused.

The reforms include a model by-law that would ban a resident from allowing smoke to drift into another person's lot. Under the reforms, smoking is considered to be a nuisance or hazard, and therefore if a resident allows it to interfere with another person enjoying his or her lot or common property, that resident can be taken to the tribunal.

Tribunal's powers to be extended to allow better dispute management

The strata reforms will expand the jurisdiction of the tribunal to deal exclusively with most strata disputes, including orders to recover outstanding levies. The outstanding debts will then be registered with the local court and debt recovery could then commence. This includes garnishee orders on a lot owner's income and on rent paid by a tenant to a real estate agent. These will be able to be used to recover outstanding levies.

The tribunal's expanded powers will help it to ensure that owners' corporations can run more efficiently 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. The tribunal will also be able to limit the matters that committees can make decisions about and require votes on certain matters.

Strata reforms aim to improve management of schemes

The changes made by the Strata Law Reform are significant. There are many new approaches to strata management that the legal profession, strata committees, strata managing agents, caretakers/managers and lot owners will need to absorb. Through these reforms it is likely that there will be more efficient management of schemes and improved resolution of disputes arising from management schemes.

Gary Newton
Strata, community and neighbourhood title law
Colin Biggers & Paisley

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Gary Newton
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.