The two new Acts affecting strata title development and
management have been passed by the New South Wales parliament. The
operation of the new legislation is yet to be revealed, however, it
is anticipated that it will be 1 July 2016.
The changes to termination of strata schemes have been heralded
and it is now clear that a strata scheme will be able to be
terminated by way of a special resolution (in effect, a 75%
majority). As the regulations surrounding the changes are yet to be
published, further details of the process involved will be set out
in a subsequent issue of Momentum.
There are other significant changes with respect to which
developers should be aware. These changes are highlighted
Original owners and persons connected with such persons are
prohibited from being strata managers for the first ten years of
the strata scheme. Developers had established management firms as
they wishing to retain control of the strata scheme, including,
quite reasonably, for ongoing development considerations. The
prohibition now prevents any such connection. The reform will mean
that in a development that, for instance, involves staging care,
will need to be taken in preparing a strata development contract
and/or bylaws to ensure that a developer has ongoing control and
authority where required to complete the project without
unreasonable interference from owners and occupiers within that
There is a requirement for a developer to provide a maintenance
schedule at least 2 days before the first annual general meeting.
The issue of building defects was a very real one and remains so.
The requirement for the provision of a proper maintenance schedule
is an attempt to overcome difficulties in relation to building
defects. It is considered that it will be advantageous for a
developer to provide a proper maintenance schedule which will also
be in the interests of the owners corporation. A developer can,
provided such maintenance schedule is properly and thoroughly
presented, find such a provision a great advantage with respect to
ongoing problems with respect to building defects. It will, for
instance, be easier to establish that a defect is a maintenance
When preparing a strata plan, a schedule of the unit
entitlements must be included. It is now a requirement that this
schedule be determined by a registered valuer. Previously, it was
possible for the original owner to provide an instruction to the
surveyor to include unit entitlements. Such instruction could be
based on whatever the original owner considered to be relevant,
including, somewhat cynically, attractiveness to buy the unit. This
practice is now being outlawed.
A building bond (being 2% of the Contract Price for the building
work) must be provided. The Bond may be claimed by the owners
corporation to rectify defective building work. It must be claimed
within 2 years after the date for completion of the building work
or within 60 days after the final report by the building inspector
(whichever is the later). It is somewhat unclear when the unused
bond should be returned.
A developer must appoint a building inspector, within certain
prescribed time limits, to inspect and report upon building work.
The owners corporation must approve the appointment. It can refuse
to approve the appointment on any grounds. It will be, therefore,
in a developers interest to ensure that the Inspector chosen is
reputable and competent. Interim rectification work must be carried
out. The changes permit a builder to enter the building to carry
out rectification of defects.
It had been an accepted course of action for a developer to
provide an undertaking with respect to expenses of an owners
corporation from the time the strata plan was registered until the
convening and holding of the first annual general meeting.
The requirement now is that a developer must ensure that proper
budgets are prepared and the levies truly reflect the
Once again it will be to the advantage of the developer to
provide such budgets and with the assistance of a competent strata
manager and lawyer, ensure that transparency and good governance
criteria are established and met.
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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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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