Strata Law Reform in NSW – An update for owners

The NSW Government is reforming strata laws in NSW, in what represents the most extensive overhaul since the commencement of the Strata Titles Act 1973. Owners of strata lots can primarily expect changes to the management of strata schemes, building defects in new buildings and redevelopment of older buildings.  Here is a summary of the major changes:

By-Laws

The reforms propose the following changes to by-laws:

  • Owner renovations – the proposed changes would establish a streamlined approach for owner renovations, categorised in three tiers: cosmetic changes, minor renovations and renovations that change the external appearance of the lot. The proposed changes would simplify the approval process for owners wanting to make minor changes to their lot;
  • Parking control – the reforms propose to provide more options for owners corporations to control unauthorised parking on common property, including employing local council to manage unauthorised parking;
  • Short-term letting – easier procedures are proposed for owners corporations to enforce by-laws pertaining to excessive noise and poor behaviour, which is often a by-product of short-term letting;
  • Overcrowding – the reforms allow owners corporations to make a by-law limiting the number of occupants who can reside in a lot;
  • Pets – reforms would amend the model by-laws to remove any reference to a ban over having pets in a strata scheme, so that a request to keep a pet cannot be unreasonably refused. The reforms do not prevent a strata scheme from making its own by-laws regarding the keeping or prohibition of pets;
  • Smoke drift control – smoke drift will be specifically noted as a nuisance and owners corporations would be allowed to enforce a ban on any nuisance or hazard by issuing a notice to comply and ultimately seek an order in the Tribunal.
  • Penalties – the maximum penalty for breach of a by-law would increase from $550 to $1,100.

Collective sale and renewal process

Under the proposed reforms, 75% of owners can agree to end their strata scheme. This requirement has been reduced from a unanimous agreement of owners. The reforms set out a collective sale and renewal process that strata schemes would need to follow. Fair Trading would establish a Strata Renewal Advice and Advocacy Program to provide advice and referrals to owners. Additional protections are proposed for elderly and vulnerable owner-occupiers.

Dispute Management

Proposed reforms will expand the jurisdiction of the Tribunal to exclusively deal with the majority of strata disputes, including recovery of outstanding levies (the Owners Corporation may still apply to the Local Court to obtain a judgment debt), removal of members of the executive committee and strata managing agents, forcing elections of office holders, limiting matters that committees can make decisions about, requiring votes on certain matters and the issuing of orders to comply with by-laws or impose higher financial penalties for non-compliance.

Scheme management

The reforms propose the following changes to the way strata schemes are managed:

  • Executive Committee – under the reforms the executive committee of the Owners Corporation will be known as the “strata committee”. Strata Committee members will be required to declare any conflicts of interest in relation to matters to be considered by the Strata Committee and certain individuals will be prohibited from joining the Strata Committee;
  • Voting – options for voting methods will be expanded to include personal voting, electronic voting, postal votes or secret ballots;
  • Annual General Meeting – the reforms will require an AGM be held once every financial year, allowing the Strata Committee greater flexibility to determine when the AGM is held;
  • Service of documents etc. – papers for meetings will be allowed to be distributed via email;
  • Proxy farming – limitations will be placed on the number of proxies an owner can hold to avoid “proxy farming”;
  • Tenant participation – if tenants occupy more than half the lots in a scheme, they can elect a representative to attend meetings of the Strata Committee and speak on their behalf (but this does not include a right to vote).

Strata Managing Agents

Under the reforms a time limit will be applied to the appointment of a strata manager of 1 year at the first AGM and 3 year terms for new appointments and re-appointments at subsequent AGMs. Strata Managers will be required to disclose conflicts, including if they are connected with the original owner, if they have received third party commissions and are prohibited from receiving gifts or benefits for their services other than commission. The Tribunal will have greater powers to remove Strata Managers where they have refused or failed to perform their duties to an acceptable standard in line with their agreement.

What’s next?

The draft Strata Schemes Development Bill 2015 and Strata Schemes Management Bill 2015 were released for public consultation on 15 July 2015. Following the final consultation the Bills will be considered by the NSW Parliament perhaps later this year or in early 2016. Stay tuned.

For more information visit www.fairtrading.nsw.gov.au.

Genevieve McManamey is an Associate at Trouncer Legal and an experienced strata and property lawyer. Contact Genevieve today by phoning (02) 9481 9800, emailing admin@trouncerlegal.com or by filling out our contact form here.

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