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Power to the People – Strata Reform Update: Position Paper Released in November 2013

On the 14th November 2013, the Minister for Fair Trading, Anthony Roberts, released the Strata & Community Title Law Reform Position Paper setting out proposed reforms designed to improve strata living in NSW.

The key message of this new Position Paper is that the current strata laws are out dated and need to be modernised.

The Position Paper recommends greater owner participation and increased transparency and accountability, easier dispute resolution, reduction of red tape and improved awareness.

The Position Paper follows the release by the NSW Government in September 2012 of the Discussion Paper “Making NSW No. 1 Again: Shaping Future Communities”.

In response to the Discussion Paper, submissions were received from a broad cross section of the community: owners, managing agents, caretakers, tenants, builders and developers.

The reforms that have been developed based on those submissions have been summarised in the Position Paper.

A draft bill giving effect to the reforms will be tabled in Parliament in early 2014. A separate paper focusing exclusively on reforms to Community Title will be released in coming months.

The Key Reforms

Some of the key reforms proposed by the Position Paper include the following:

Governance

  • Flexibility in the ways that meetings can be attended to increase and encourage participation for investor owners to be involved in decision making;
  • Greater recognition for modern forms of communication;
  • The inclusion of a personal liability clause for Committee members who acted in good faith for the purpose of executing their functions under the Act;
  • The provision of the right of tenants to attend and participate in meetings of owners corporations;
  • Changing the name of the Executive Committee to Strata Community to assist in changing perceptions about the role of Committee members;
  • Office bearers (Chairperson, Treasurer and Secretary) to be directly elected by owners corporations at each Annual General Meeting (AGM);
  • The requirement for managing agents to disclose at each AGM the amount and services provided in respect of any commissions received during the previous 12 months;
  • The requirement that managing agents get at least 3 quotes for certain products for example insurance to ensure competition and choice for the owners corporation;
  • Provision that the term of a Strata Management Contract cannot be longer than 3 years;
  • A requirement for managing agents to disclose any links to the developer and any other potential conflict of interests;
  • Streamline the information required to be kept by the owners corporation and improved access to information;
  • Provision to owners corporations of more flexibility about when they hold AGMs.

Managing Built Environment

In relation to building defects, the Position Paper recognises that there are inherent complications in identifying and rectify defects in new strata buildings.

This is because owners often arrive well after the building work is complete, at different times to each other, and do not usually have a contractual relationship with the builder.

Collective decision making procedures within strata schemes also make it difficult for new owners to respond quickly to issues of defects and maintenance.

In addressing these issues, the Government is pursuing a number reforms to planning laws and home building laws.

Some of the additional reforms proposed in the Position Paper include the following:

  • That an Independent Defects Report be prepared for the owners corporation agreed to by the developer/builder and the owners corporation;
  • The inspection is to be paid for by the developer/builder and conducted between 12 and 18 months after the building is complete (after the occupation certificate is issued);
  • That the developer of a high rise pay a bond which will be held in trust until the independent inspector agrees that the identified defects have been fixed;
  • Restriction of the right of the developer and people connected to the developer from voting on matters relating to building defects;
  • Requirement that the developer/builder prepare a maintenance schedule to help the owners corporation understand the applications and the likely cost associated with maintaining the common property;
  • Introduction of an obligation for the developer to provide any documents that are reasonably necessary to enable or assist the owners corporation to run the scheme and maintain the building;
  • Establish a process to facilitate the collective sale or renewal of a strata scheme.

Budgets and Levies

  • When registering a scheme, unit entitle-ments must be determined on the basis of an independent valuation;
  • Strata committees to prepare and distribute key financial information to all owners ahead of each AGM;
  • That a stepped process be established to allow schemes to recover outstanding levies including by seeking an order in the Tribunal.

By-Laws

  • Broad principles be established for the setting of by-laws including that they cannot be unreasonable, oppressive or discriminatory;
  • Schemes be required to review their by-laws and to consider whether any changes are needed within 12 months of the legislation coming into force;
  • Clarifying that ignorance of by laws is no defence;
  • Increase penalties for by-law breaches to give the tribunal scope to escalate penalties for repeat offences.

Managing Disputes

  • Recognise internal dispute resolution mechanisms;
  • Provide for the establishment of a duty advocacy service in the tribunal;
  • Allow the tribunal to deal with most strata related disputes;
  • Legal representation in mediation and in the tribunal would be allowed by exception;
  • Give the tribunal more options for dealing with dysfunctional schemes.

Download a pdf version of this article on the strata reform update here.

Further Information

If you would like any further information on this topic, please contact:

David Glinatsis

David Glinatsis

Solicitor Director
+61 2 8239 6502
Email David
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