The NSW government has taken a significant step towards reforming strata living with the introduction of the Strata Legislation Amendment Bill 2023. Presented to the NSW Parliament on 12 October 2023, this bill swiftly passed through the NSW Legislative Council and is now under consideration by the Legislative Assembly.
This legislation is part of a broader set of strata reforms slated for 2024, which includes the Building Legislation Amendment Bill 2023. The Strata Legislation Amendment Bill 2023 implements 31 recommendations from the 2021 statutory review of two key acts: the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015.
The primary goal of these reforms is to enhance governance, accountability, and effectiveness in strata buildings. This article focuses specifically on the proposed changes to The Strata Schemes Management Act 2015 and its 2016 Regulation.
These amendments are expected to significantly impact the management and regulation of strata schemes in NSW. They reflect the government’s dedication to improving industry practices and safeguarding the interests of consumers and stakeholders in the strata sector.
As these reforms progress, they aim to bring about substantial improvements in the quality and safety of building and construction projects across New South Wales.
Reforms to the Strata Renewal Process: 2023 Amendment
Before the Amendment
- The Strata Renewal Committee’s term was limited to one year.
- No specific provisions addressed potential conflicts of interest in strata renewal schemes, sometimes leading to manipulation for commercial gain.
Changes Proposed by the Amendment Bill
- Extended Committee Tenure: The bill proposes extending the strata renewal committee’s term to two years, allowing for more thorough planning and implementation.
- Mandatory Disclosure of Conflicts: All owners must now disclose any direct or indirect financial or other interests in a strata renewal proposal at key decision-making points. This ensures transparency and fairness throughout the renewal process.
- Enhanced Role of Land and Environment Court: The court must consider potential conflicts of interest in both strata renewal applications and objections before issuing an order. This ensures fair representation of all interests in the court’s decision-making.
- Revised Cost Allocation (Section 188 Amendment): The court gains the power to award costs against dissenting owners who act unreasonably, including those with conflicts of interest that make it inappropriate for the owners’ corporation to bear their costs. Such owners may be ordered to pay their own costs and contribute to a portion of the proceeding’s costs via levy.
- Cost Order Options: The court can issue either an ordinary costs order (approximately 55-75% of costs) or indemnity costs (80% of costs) to dissenting owners, depending on the circumstances.
Changes to Subdivisions in Strata Schemes Under New Laws
Current Situation
- Strata Plan of Subdivision Affecting Common Property: When a subdivision plan involves changes to common property, it currently requires adjustments to unit entitlements for the entire strata scheme. This includes modifying the total aggregate of unit entitlements.
- Comprehensive Lot Inclusion: The unit entitlement schedule must include all existing lots (except those being subdivided) and the newly created lots resulting from the subdivision.
Proposed Changes in the Amendment Bill
The amendment introduces a significant change for subdivisions involving minimal common property alterations:
- Simplified Process: There will no longer be a requirement to review and modify unit entitlements for the entire strata scheme when only a small amount of common property is involved in the subdivision.
- Efficiency Boost: This change aims to streamline the subdivision process, making it less complex and time-consuming, particularly for minor common property modifications.
- Benefits: The amendment is expected to facilitate easier strata plan modifications, benefiting both strata managers and property owners by reducing administrative burden and potentially lowering associated costs.
Improving Pet-Friendly Living in NSW Strata Schemes
Current Situation
The existing Act lacks specific regulations regarding fees, bonds, or insurance requirements for pet ownership in strata schemes. This absence of clear guidelines has resulted in:
- An increase in pet-related levies
- Financial barriers to pet ownership within strata communities
Proposed Changes in the Amendment Bill
The bill introduces clear restrictions to promote pet-friendly living:
- Ban on Pet Fees and Bonds: Owners’ corporations are explicitly prohibited from charging residents any fees or bonds for keeping pets in their units.
- No Mandatory Pet Insurance: The amendment prevents strata schemes from requiring residents to obtain specific insurance for their pets.
- Increased Accessibility: By eliminating these financial barriers, the bill aims to make pet ownership more accessible and less stressful for strata residents.
- Promoting Pet-Friendly Communities: These changes align with efforts to create more inclusive and pet-friendly living environments in strata and community land schemes.
Enhancing Strata Committee Governance in NSW Strata Schemes
Current Situation
- Committee Member Removal: Removing a strata committee member currently requires a special resolution, which needs 75% of votes.
- Appointment Process: The law is unclear about appointing committee members outside of Annual General Meetings (AGMs).
Proposed Changes in the Amendment Bill
- Streamlined Removal Process: The voting threshold for removing a strata committee member will be reduced from a special resolution to an ordinary resolution. This change aims to:
- Simplify the process of removing committee members not acting in the scheme’s best interests
- Increase accountability within strata committees
- Flexible Appointments: The bill clarifies that strata committee members can be appointed outside of AGMs. This change:
- Provides more flexibility in managing committee composition
- Allows for quicker responses to committee vacancies or needs
These amendments seek to improve the efficiency and responsiveness of strata committee governance, making it easier for strata schemes to maintain effective leadership.
Enhancing Annual General Meeting Procedures in Strata Schemes
Current Situation
- AGM Notice Period: The minimum notice period for Annual General Meetings (AGMs) is currently seven days.
- Original Owner Documentation: The original owner must provide specified documents 48 hours before the first AGM.
Proposed Changes in the Amendment Bill
- Extended AGM Notice Period: The minimum notice period for AGMs will be increased from seven to 14 days. This change aims to:
- Give owners more preparation time
- Allow for thorough review of meeting materials
- Facilitate more informed participation in AGMs
- Revised Documentation Timeline for Original Owners: The bill requires the original owner (typically the developer) to provide essential documents at least 14 days before the first AGM. This amendment:
- Ensures new owners have sufficient time to review key scheme documents
- Promotes transparency in the early stages of the strata scheme
These changes are designed to improve owner engagement, increase transparency, and enhance the overall effectiveness of AGMs in strata schemes.
Strengthening Assistance Animal Protections in Strata Schemes
Current Situation
- General Allowance: Assistance animals are broadly permitted in strata schemes.
- Limited Provisions: No specific measures protect the privacy of individuals with assistance animals or allow owners corporations to verify animal accreditation.
Proposed Changes in the Amendment Bill
- Enhanced Protections: The bill explicitly prohibits by-laws from restricting or unreasonably burdening the use of assistance animals on lots or common property. This ensures:
- Assistance animals can effectively support residents
- Unimpeded access for assistance animals, such as guide dogs for visually impaired individuals
- Privacy Safeguards: The bill outlines acceptable evidence types to confirm an assistance animal’s status, protecting individuals’ privacy by:
- Limiting unnecessary personal or medical information disclosure
- Balancing verification needs with resident privacy
- Evidence Requirements: Owners’ corporations gain the ability to request evidence of an animal’s accreditation under the Commonwealth Disability Discrimination Act 1992 or other relevant training, as specified in regulations.
These amendments aim to strike a balance between protecting the rights of individuals with assistance animals and providing clarity for strata schemes in managing these situations.
Flexible Internal Fund Transfers in NSW Strata Schemes
Current Situation
- Strict Reimbursement Rule: When transferring money between administrative and capital works funds, or using funds for unintended expenses, rectification is mandatory within three months.
- No Discretion: The owners corporation must reimburse the inappropriately used fund, with no flexibility in the matter.
Proposed Changes in the Amendment Bill
- Increased Flexibility: The amendment grants discretion to the owners corporation when using funds from one account for expenses typically covered by the other.
- Decision-Making Window: Within a three-month period, the owners corporation can now determine:
- Whether reimbursement is necessary
- The extent of any required reimbursement
- Clarification of Timeframe: This change resolves the ambiguity over whether funds must be repaid within three months or if the decision about repayment should be made within that period.
- Enhanced Financial Management: These amendments aim to provide strata schemes with more adaptable financial management options while maintaining accountability.
This change offers strata schemes greater flexibility in managing their finances, allowing for more efficient allocation of resources based on immediate needs and long-term planning.
Expedited Emergency Repair Levies in Strata Schemes
Current Situation
- 30-Day Payment Window: Special levies for urgent repairs are currently payable 30 days after imposition.
- Scope: These levies are intended for repairs that address “serious and imminent threats to the health or safety of occupants.”
Proposed Changes in the Amendment Bill
- Shortened Notice Period: The bill proposes reducing the notice period for urgent work levies from 30 to 14 days.
- Faster Response: This change aims to expedite responses to serious or imminent health and safety threats in strata properties.
- Enhanced Safety Measures: The shortened timeline allows for quicker action on critical repairs, potentially preventing further damage or safety risks.
This amendment seeks to improve the strata scheme’s ability to address urgent safety issues promptly, balancing the need for quick action with reasonable notice for owners to prepare for the additional expense.
Enhanced Quote Requirements for Strata Works
Current Situation
- Limited Scope: Only large strata schemes (100 lots or more) must obtain two quotes for works exceeding $30,000.
- No Specification on Quote Sources: No requirement for quotes to come from unrelated entities.
Proposed Changes in the Amendment Bill
- Universal Application: The bill extends the requirement to obtain two quotes for works over $30,000 to all strata schemes, regardless of size.
- Independent Quotes: The two required quotes must now come from unrelated entities.
- Improved Transparency: These changes aim to ensure fair pricing and reduce potential conflicts of interest across all strata schemes.
- Cost-Effective Decision Making: By mandating multiple quotes from independent sources, the amendment promotes more informed and economical choices for significant works in all strata properties.
This amendment seeks to standardise best practices in procurement across strata schemes of all sizes, potentially leading to more competitive pricing and better value for owners.
Simplified By-law Consolidation in Strata Schemes
Current Situation
- No Consolidation Option: Currently, there’s no provision for consolidating by-laws without registering changes.
- Potential Confusion: This can lead to scattered and potentially unclear by-law documentation.
Proposed Changes in the Amendment Bill
- Streamlined Consolidation: Owners corporations will be able to consolidate their current by-laws through a special resolution.
- No Registration Requirement: This consolidation can occur without the need to register any changes to the by-laws.
- Improved Clarity: The amendment aims to create a more organised and accessible set of by-laws for strata schemes.
- Efficient Management: This change allows for easier reference and management of by-laws without the administrative burden of formal registration.
This amendment seeks to simplify strata scheme governance by allowing for more organised and accessible by-law documentation, potentially improving understanding and compliance among owners and residents.
Modernising Record Keeping in Strata Schemes
Current Situation
- Seven-Year Retention: Strata schemes must keep necessary records and statements for at least seven years.
- No Digital Mandate: There’s no requirement for records to be kept in electronic format.
Proposed Changes in the Amendment Bill
- Electronic Record Keeping: Six months after the amendment takes effect, specified records of the owners corporation must be maintained in electronic form.
- Specific Focus: This requirement will apply to certain documents, including strata rolls.
- Modernization Effort: This change aims to bring strata record keeping into the digital age, improving accessibility and management of important documents.
- Transition Period: The six-month grace period allows strata schemes time to adapt to the new electronic record-keeping requirements.
This amendment seeks to enhance efficiency, accessibility, and long-term preservation of crucial strata documents through mandatory electronic record keeping.
Refining Voting in Two-Lot Strata Schemes
Current Situation
- Vote Reduction: The original owner’s (typically the developer) votes are reduced to one-third until they’ve sold more than 50% of the property.
- Illogical Application: This arrangement doesn’t work well in two-lot schemes, creating potential voting imbalances.
Proposed Changes in the Amendment Bill
- Targeted Application: The amendment specifies that the reduction in voting value for original owners will only apply in strata schemes with more than two lots.
- Preserving Equity: This change ensures a more balanced voting structure in two-lot schemes, where the current rule could lead to unfair outcomes.
- Simplified Governance: By addressing this specific scenario, the bill aims to make strata living more manageable and equitable, particularly in smaller schemes.
- Improved Decision-Making: The amendment allows for more logical and fair voting processes in two-lot schemes, potentially reducing conflicts and improving scheme management.
This change recognizes the unique dynamics of two-lot strata schemes and adjusts voting rules to better suit their needs, promoting fairer governance in these smaller strata communities.
Streamlining By-law Enforcement in Two-Lot Schemes
Current Situation
- Resolution Requirement: Two-lot strata schemes must pass a resolution before issuing a Notice to Comply for by-law breaches.
- Potentially Cumbersome Process: This requirement can delay enforcement and complicate management in small schemes.
Proposed Changes in the Amendment Bill
- Simplified Enforcement: The amendment eliminates the need for a resolution before issuing a Notice to Comply in two-lot strata schemes.
- Faster Response: This change allows for quicker action on by-law breaches in these small schemes.
- Reduced Administrative Burden: By removing the resolution requirement, the amendment streamlines the enforcement process for two-lot schemes.
- Improved Compliance: The simplified procedure may encourage more consistent enforcement of by-laws in these smaller strata communities.
This amendment recognizes the unique dynamics of two-lot schemes and adjusts the enforcement process to be more efficient and practical for their specific needs.
Expanding Authority for Compulsory Strata Management
Current Situation
- Limited Applicants: Only owners and certain individuals, such as creditors, can request the NSW Civil and Administrative Tribunal (NCAT) to appoint a compulsory strata managing agent.
- Restricted Intervention: This limitation can leave dysfunctional strata schemes without proper management if owners or creditors don’t take action.
Proposed Changes in the Amendment Bill
- Expanded Authority: NSW Fair Trading gains the power to request NCAT to appoint a compulsory strata manager.
- Targeted Intervention: This authority applies to cases where a strata scheme fails to perform its core duties due to dysfunction.
- Protecting Owners’ Interests: The change aims to safeguard owners in situations where internal processes have broken down.
- Ensuring Effective Strata Management: By allowing NSW Fair Trading to intervene, the amendment seeks to maintain proper functioning of strata schemes even in challenging circumstances.
This amendment broadens the scope for addressing severe management issues in strata schemes, potentially improving outcomes for owners and residents in dysfunctional strata communities.
Impact of the Strata Legislation Amendment Bill 2023 on NSW Strata Schemes
The Strata Legislation Amendment Bill 2023 represents a significant step towards enhancing transparency and democracy in New South Wales strata schemes. This legislation brings several key changes that will affect strata owners and owners’ corporations:
Improved Decision-Making Process
- The bill streamlines and safeguards the decision-making process, particularly for strata renewal.
- Owners gain more power to make informed decisions about their properties’ future, especially regarding collective sales or redevelopment.
Enhanced Livability
- Amendments simplify the process for keeping pets and assistance animals in strata and community land schemes.
- These changes recognize the importance of pets in residents’ lives, contributing to mental and physical well-being.
Clearer Guidelines for Owners’ Corporations
- The bill provides more transparent procedures for conflict-of-interest disclosures.
- It allows owners’ corporations to hold dissenting owners accountable for unreasonable actions or legal costs in renewal proceedings.
Extended Operational Period
- Strata renewal committees can now operate for two years instead of one, offering more flexibility.
- This extension helps prevent procedural lapses in the renewal process.
These changes reflect the growing popularity of strata living in NSW and aim to improve governance, transparency, and quality of life for residents in strata communities.
Key Takeaways: A New Chapter in NSW Strata Laws
The Strata Legislation Amendment Bill 2023 marks a significant shift in the governance and management of New South Wales strata communities. This comprehensive legislation addresses critical aspects of strata living:
- Enhanced Renewal Process: Streamlining procedures for strata scheme renewals.
- Pet-Friendly Policies: Simplifying regulations for keeping pets in strata properties.
- Refined Committee Governance: Improving transparency and efficiency in strata committee operations.
- Updated Emergency Repair Protocols: Expediting responses to urgent maintenance issues.
- Modernised Record Keeping: Mandating electronic storage of key strata documents.
- Fairer Voting Procedures: Adjusting voting rules for two-lot schemes to ensure equity.
- Streamlined By-law Enforcement: Simplifying compliance processes, especially for smaller schemes.
- Expanded Intervention Powers: Allowing NSW Fair Trading to address dysfunctional strata management.
These reforms demonstrate a deeper understanding of strata living challenges and opportunities, aiming to create a more democratic, transparent, and efficient environment for residents and owners.
Looking Ahead
As these changes approach implementation, it’s crucial for those involved in strata schemes to:
- Understand the impact on their roles and responsibilities
- Prepare for potential complexities arising from the new legislation
- Stay informed about the evolving strata landscape in NSW
Adapting to these changes will be key to ensuring compliance and maximising the benefits of this enhanced framework. As the Strata Legislation Amendment Bill 2023 becomes law, it will be important to seek professional guidance to navigate these new regulations effectively.
The proposed changes to strata laws in NSW represent a significant step forward in addressing the unique challenges of strata living. By improving transparency, efficiency, and fairness in strata management, these reforms aim to enhance the quality of life for the growing number of residents in strata communities across New South Wales.
These amendments reflect a comprehensive approach to modernising strata legislation, taking into account the diverse needs of strata schemes of all sizes. From large complexes to two-lot properties, the bill aims to provide tailored solutions that address specific challenges while maintaining overall consistency in strata governance.
As the strata sector continues to evolve, these legislative updates will play a crucial role in shaping the future of communal living in NSW. The success of these reforms will depend on effective implementation and ongoing engagement from all stakeholders in the strata community.
