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Changes to the laws governing Strata Schemes

Property Law News | June 2016

If you plan to live in or invest in property close to transport and infrastructure you will more than likely be attracted to selecting an apartment as your home or investment. It is estimated that the proliferation of multi-storey developments will result in 50% of Sydney’s population living or working in “strata” units by 2020.

What is a Strata Scheme?

Strata Schemes are, put simply, a system of landholding whereby a property is subdivided into layers or smaller parcels (strata) which are able to be owned by different people or entities. As a lot owner in a strata plan you are responsible for the “inside skin” of your lot with the management and administration of the building and any common property (gardens, driveways, shared lawns etc.) being the responsibility of what is known as the “Owners Corporation” (OC) which is comprised of all of the lot owners within the strata scheme.

It is common practice, especially in larger schemes which can have dozens of lots, for the OC to employ a Strata Manager to manage the building as its agent. The Strata Manager takes care of the day-to-day responsibilities of the OC including dealing with residents, maintenance staff and repair crews. The development and management of strata schemes is governed by state legislation which sets out the rules and regulations that OCs and Strata Managers must observe in their dealings with the Strata Scheme.

Reforms to the current regime

The NSW Parliament has recently passed key reforms to the governing legislation which are currently expected to come into effect in January 2017. They should have a significant impact on the lives of all of those who currently live or work in a strata scheme. The most salient of these reforms include changes to the:

  • Statutory duty of strata committee members which may result in the OC being liable for the acts and omissions of committee members.
  • Disclosure obligations of Strata Managers requiring potential Strata Managers and Building Managers to disclose connections to the original owner and any other pecuniary interest other than their appointment along with expected commissions or training at each Annual General Meeting (AGM). Gifts must also be disclosed. Strata committee members must also disclose whether or not their direct or indirect pecuniary interests conflict with their proper performance of their duties.
  • Appointment of Strata Managers who can now only be appointed for a maximum term of 12 months from the first AGM and for a period of up to 3 years in any other case. The legislation provides a highly complicated system for the extension of the term of appointment either by 3-month terms up to the next AGM, or through a statutory option for a further period of 3 years.
  • Voting procedures which may be made easier with provisions allowing for attendance at meetings other than in person or by proxy, provided the OC approves the procedure and for secret ballots. Proxy farming (a process whereby an owner or owners gather in large numbers of proxies to allow them to influence the decision-making processes for the OC) will be prohibited.
  • Budgets and levies with notices being streamlined with key financial information required for the Administrative and Capital Works (Sinking) Funds. The New South Wales Civil and Administrative Tribunal (NCAT) has also been empowered to order the original owner to pay compensation for inadequate initial estimates for levies and maintenance contributions.
  • Consent for minor renovations to certain “cosmetic” works conducted by the owner (such as the laying of carpet) which has been reduced. Minor renovations require approval by ordinary resolution (50% of the votes at a general meeting of owners) and work affecting the external appearance requires approval by a special resolution (75% of votes).

What does it all mean?

As a lot owner in a strata scheme, it is important that you try to stay abreast of the changes in the legislation and their potential impact on your rights and responsibilities as part of an OC. Even if you are not currently an owner of a property in a strata scheme, the rapidly increasing population of Sydney and the rise in multi-storey developments invariably means that you will be involved in a strata scheme at some point either now or in the future.

If you have any questions about purchasing or selling a strata unit or if you have questions about the functioning of your strata scheme contact us at Forum Law for an obligation-free 30-minute phone chat on (02) 9560 3388.

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