Owners Corporations / Associations now subject to Unfair Contract Terms

Under the new strata law reforms commencing 1 July 2025 (th eStrata Schemes Legislation Amendment Act 2025 (No. 14) NSW) a key change that will impact owners corporations and associations¹ are the unfair contract terms (UCT) provisions.

In line with Australian Consumer Law, UCT will now be banned and will apply to:

• contracts for a supply of goods or services to an owners corporation or association; and
• contracts for a sale or grant of an interest in land to an owners corporation or association.

The UCT changes do not apply to existing contracts and will only apply to:

• contracts entered into after the new provisions come into effect;
• renewed contracts but only in relation to conduct occurring after the renewal; and
• new or varied terms inserted into existing contracts but only in relation to conduct occurring after the variation or insertion.

Read more on this at the Guide to 2025 strata law changes | NSW Government and Unfair contract terms in outdated standard form contracts could cost you a possible fine of $50 million (Companies) or $2.5 million (Individuals).

Under section 24 of the Australian Consumer Law, UCT means terms that:

• would cause a significant imbalance in the parties' rights and obligations under the contract;
• is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term;and
• would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

In order to determine whether a term is unfair, the Court must take into account the following:

• the extent to which the term is transparent i.e. expressed in reasonably plain language, legible, presented clearly and readily available to any party affected by the term;
• the contract as a whole.

Some examples of unfair contract terms:

• a term that permits one party but not the other party to avoid or limit performance;
• a term that permits one party but not the other party to terminate the contract;
• a term that penalises one party but not the other party for a breach or termination of the contract;
• a term that permits one party but not the other party to vary the terms of the contract.

Typical examples of the types of agreements entered by owners corporations or associations which will be impacted by UCT from 1 July 2025 include:

• Building Management/Facilities Services Agreements
• Concierge/Cleaning Agreements
• Services Agreements
• Strata Management Agency Agreements
• Building Contract/Consultancy Agreements
• Contracts for sale or grant of an interest in land

Swaab has an experienced team of lawyers specialised in strata law to assist with updating agreements and contracts for the supply of goods and services and/or contracts for sale of or granting of an interest in land to be entered after 1 July 2025.

Footnote

¹ association means a community association, precinct association or neighbourhood association under the Community Land Management Act 2021 (NSW)

For further information please contact:

Helen Kow­al, Partner
Phone: +61 2 9777 8321
Email: hek@swaab.com.au

Julianne Con­ce­icao, Associate
Phone: +61 2 9233 5544
Email: jxc@swaab.com.au

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.