NSW Strata Laws set for major changes

Commercial Directions

New strata laws introduced by the Strata Schemes Management Act 2015 (NSW) and the Strata Schemes Management Regulation 2016 (NSW) are set to start on 30 November 2016. These laws aim to modernise the legal framework for people living in strata in NSW. The key areas of reform are set out below.

Strata committee

From 30 November 2016, the executive committee will be known as the strata committee.

Strata management agents

The accountability of strata management agents has been increased. Agents will have an obligation to disclose whether they have any links to, or financial interest in, the developer of the strata scheme, as well as any third party commissions that have been paid to the agent within in the last 12 months. An agent’s appointment will also now be limited to one year in the first year of the reforms, and up to three years in the years following (this can be extended but only up to a period of three months).

Collective sales

A process has been established to allow lot owners to collectively end or wind up a strata scheme. Collective sale or renewal plans will be developed by a strata renewal committee and referred to the Land and Environment Court for approval. On the sale of the strata site, lot owners will be entitled to receive the market value of their lot as well as moving costs.

Building defect bond scheme

A new building defect bond scheme will come into effect on 1 July 2017. The scheme is designed to increase building and developer accountability and improve the defect rectification process. For strata buildings over three stories high, developers must lodge a bond of 2% of the final contract price, which will be used to fund repairs in the event that the construction work is defective. Developers will be responsible for engaging an independent building inspector to provide defect inspection reports.

Owner renovations

The new laws streamline the approvals process for owners who wish to carry out renovations to their lot. There will be no need to obtain the approval of the owners corporation for cosmetic work, and minor renovations will only require an ordinary resolution (50% of a vote) to be approved. The need for a special resolution (75% of a vote) to approve renovations affecting the structure or external appearance of a building, or waterproofing, is preserved.

By-laws reform

There have been a number of important reforms concerning by-laws. These include:

  • Parking control: owners corporations will have more options to control unauthorised parking on common property
  • Noise and short-term letting: it will be easier for owners corporations to enforce by-laws relating to noise and resident behaviour in the NSW Civil and Administrative Tribunal (the Tribunal), and penalties for poor behaviour will be increased
  • Overcrowding: owners corporations will be permitted to make a by-law limiting the number of people who can reside in a lot (but must be no less than two adults per bedroom)
  • Pets: owners corporations will have flexibility in allowing pets in strata schemes
  • Smoking: this will now be considered to be a nuisance or hazard, and owners corporations may adopt a model by-law that bans residents from allowing smoke to drift into another person’s lot or into common property
  • Common property memorandum: strata schemes will be able to adopt a model by-law which sets out who is responsible for the maintenance, repair and replacement of common property.

Breaches of by-laws will now attract a maximum penalty of $1,100 (instead of $550) for each offence.

Use of technology

An owners corporation or strata committee will be able to utilise technology in order to facilitate modern and flexible meeting and voting procedures. Voting will be able to take place via teleconference, email or any other agreed electronic means.

Increased tenant participation

Tenants will now have a right to attend owners corporation meetings, regardless of how many lots are tenanted in the strata scheme. If at least half of the lots are tenanted, a tenant representative may be nominated as a non-voting member of a strata committee.

Limitations on proxy voting

The new laws have introduced limitations on proxy voting to avoid scenarios where an individual effectively controls the owners’ decisions by obtaining a majority of proxy votes. In a strata scheme with less than 20 lots, a person will only be permitted to hold one proxy vote. In a strata scheme with more than 20 lots, a person will be permitted to hold 5% of the proxy votes.

Dispute resolution

The dispute resolution powers of owners corporations and the Tribunal are broadened under the new laws. Owners corporations will be able to register outstanding levies as a debt in the NSW Local Court and enforce these accordingly. They may also enter payment plans with lot owners for a period of up to 12 months. The Tribunal will have the power to remove the strata management agent and/or members of the executive committee, and to force elections of office holders. It will also have the power to limit the matters that a committee can make decisions about and require a vote on particular matters.

Authored by: Fiona Nelson, Partner – Newcastle and Isabella Rebellato, Paralegal

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