STRATA REFORMS - STRATA SCHEMES MANAGEMENT ACT 2015

In October 2015, the Strata Schemes Management Act 2015 (NSW) (2015 Management Act) and the Strata Schemes Development Act 2015 (NSW) (2015 Development Act) were passed by the NSW Parliament.

The new strata laws commenced on 30 November 2016 except for the building defect bond scheme reforms in Part 11 of the 2015 Management Act, which commenced on 1 July 2017.

KEY REFORMS IN THE STRATA SCHEMES MANAGEMENT ACT 2015

Name changes

• The “Executive committee” will be known as the “strata committee”
• “Caretakers” will be referred to as “building managers”
• “Sinking fund” will be referred to as “capital works fund”
• “Exclusive use by‐law” will be referred to as a “common property rights by‐law”

Strata committee

• The strata managing agent, building manager, leasing agents or person with an undisclosed connection to the original owner, is not eligible to be elected to the strata committee unless that person is an owner.
• A tenant may be nominated to a strata committee but will not be able to vote on committee decisions and may be excluded from discussions about certain financial matters.

Appointments, disclosure, and the liability of strata managing agents

• The term of appointment of a strata managing agent for a strata scheme expires:
  a) at the end of 12 months following appointment at the first annual general meeting, or
  b) at the end of 3 years following an appointment in any other case.
• The term of appointment of a strata managing agent may be extended by the strata committee for successive periods of up to 3 months after it would otherwise expire (but not for any period that would extend beyond the date of the next annual general meeting of the owners corporation) pending a decision as to the reappointment of the strata managing agent.
• If a strata committee has extended a term of appointment, the strata committee must give the strata managing agent at least one months’ notice of a decision not to reappoint the strata managing agent or not to further extend the appointment.
• A strata managing agent must give the owners corporation written notice of the end of a term of appointment:
  (a) at least three months before the end of the term of appointment, and
  (b) at least one month before the end of each extension of a term.
• It is an offence for a strata managing agent to, in connection with the provision of services as an agent, request or accept a gift or other benefit from another person for him/herself or for another person (certain exclusions apply).
• Strata managers must report monetary commissions received from third parties in the previous 12 months as well as estimates of commissions expected in the following 12 months and any variations on commissions at an AGM.
• If a strata managing agent has been delegated a duty by an owners corporation and a breach of the duty by the owners corporation would constitute an offence under the Act, the agent is guilty of an offence for any breach of the duty (instead of the owners corporation).
• The developer of a strata scheme, or a person connected with the developer, is not entitled to be appointed as the strata managing agent of the scheme until ten years after the date of registration of the strata plan.

Records and information

• An email address may be given as an address for service.
• Access to records of the owners corporation for inspection purposes may be given by electronic means.

Changes to by-laws

• An owners corporation of an existing strata scheme is to review the by-laws for the scheme not later than 12 months after the commencement of the Act.

A by-law:

• cannot be unjust, unconscionable or oppressive
• cannot prevent dealings relating to a lot
• cannot restrict children
• cannot prevent the keeping of assistance animals, and
• a by‐law resulting from an order cannot be changed, and
• community and precinct management statements prevail over by‐laws.

By-law breaches

• The maximum penalty for a by-law breach will increase from five to ten penalty units (maximum penalty of $1,100). A new enforcement process will allow owners corporations to bypass the need to issue a notice to comply when the tribunal has imposed a penalty for the same breach in the past 12 months.
• Any second and subsequent penalty in that 12-month period will attract a maximum penalty of 20 penalty units (maximum $2,200).

Overcrowding

• A by‐law may limit the number of persons who may reside in a lot, but not to less than two adults per bedroom.
• The first offence for a breach of an overcrowding by-law is 50 penalty units ( $5,500). If there are subsequent offences, the owners corporation will not be required to first serve a notice to comply but will be able to go straight to the tribunal. Second and subsequent offences will attract a maximum penalty of 100 penalty units ( $11,000).

Renovations

• Minor cosmetic work (including installing hooks used to hang things on walls, painting internal walls and laying carpet) in connection with a lot will not require authorisation by the owners corporation.
• Minor renovations (including renovating a kitchen or bathroom, changing recessed light fittings, installing or replacing wood or other hard floors) can be done after approval by the owners corporation at a general meeting. A special resolution authorising the work is not required.

Keeping of pets

• While a scheme can make its own by-laws, it cannot unreasonably refuse the keeping of the animal, nor can it prevent a resident from keeping an “assistance animal”.
• The tribunal still retains the power to make an order for the removal of an animal from a strata scheme if the animal is a nuisance or a hazard.

Smoke drift

• Depending on the circumstances in which it occurs, the penetration of smoke from smoking into a lot or common property may cause a nuisance or hazard and may interfere unreasonably with the use or enjoyment of the common property or another lot.

Parking

• The owners corporation may, by special resolution, enter into an agreement with the council in relation to a strata parking area.
• The driver of a vehicle parked in a strata parking area or a community scheme parking area otherwise than as permitted by a notice or sign erected by the council is guilty of an offence.

Levies set by the original owner

• An owners corporation may obtain an order by the Tribunal ordering the original owner to compensate the owners corporation if the Tribunal determines that the estimates and levies determined during the initial period were inadequate.

Proxy farming

• The number of proxies held by one person is limited to one if a scheme has 20 lots or fewer, or not more than 5% of the lots if the scheme has more than 20 lots.
• A contract of sale cannot contain a requirement for the owner to provide a proxy to a particular person or be directed to vote in a particular way.

10‐year capital works fund plan

• An owners corporation is to prepare a plan of anticipated major expenditure to be met from the capital works fund for a 10‐year period commencing on the first annual general meeting of the owners corporation and for each 10‐year period following.

Building defects

• An initial maintenance schedule must be provided by the original owner to the owners corporation at its first annual general meeting.
• The agenda for the annual general meeting of an owners corporation must include consideration of building defects and rectification until the end of any applicable statutory warranty.
• A developer is to lodge a building bond which will be 2% of the contract price for the building work and paid into a Building Bond Account. Amounts of a building bond may be paid to the owners corporation to meet the costs to rectify defective building works identified in an inspection.
• A developer is required to arrange for the building work to be inspected by a building inspector approved by the owners corporation who is to give an interim report identifying any defective work.
• The building inspector must not be connected with the developer and an owners corporation may refuse to approve the appointment of a building inspector on any grounds. The costs of obtaining an inspection and report are to be borne by the developer.
• If a building inspector proposed has been employed by, or a contractor of, the developer, the developer must disclose that fact to the owners corporation before the owners corporation approves the appointment.
• The inspector is to be appointed not later than 12 months after the completion of the work and the interim report to be given not later than 18 months after completion.
• A final inspection is to be carried out and a report given by the same inspector (if available) or another inspector arranged by the Chief Executive not later than 2 years after the completion of the work.
• The developer is not entitled to vote on a matter concerning building defects or rectification of building defects.
• A building inspector is to carry it out and provide a final report, not earlier than 18 months and not later than 2 years after the completion of the building.
• A building bond must be paid out or refunded not later than two years after the date of completion, or within 60 days after the final report on the building work is given to the developer by the building inspector, whichever is the later.

The final defect report must:

• identify defective building work identified in the interim report that has not been rectified,
• identify any defective building work arising from rectification of defective building work previously identified in the interim report,
• specify how the defective building work should be rectified and the estimated costs of rectification.
• Must not contain matters that relate to defective building work not identified in the interim report, other than work arising from rectification of defective building work identified in the interim report.

November 2019