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Sweeping Changes to Strata Legislation

Sunday, 03rd April 2016

Sweeping changes have been made to the Strata Schemes Management Act 1996, the legislation that governs the operation of Strata Schemes in New South Wales.

The new Act which will be accompanied by a new set of Regulations is expected to come into operation late 2016. The new Act will be named the Strata Schemes Management Act 2015.

Accompanying the Strata Schemes Management Act 2015 (Strata Act), will be the Strata Schemes Development Act 2015, which deals with the establishment of Strata Schemes and the much publicised revamped Strata Renewal laws.

Summary of the Changes

In the Strata Act alone there are approximately 90 substantial changes. This Fact Sheet highlights the important changes in both the Strata Act and the Development Act that may impact apartment living.

Meetings of the Owners Corporation

When to hold the Annual General Meeting There is no longer a designated period of time you must hold the annual general meeting, it may be held at anytime but must be held once each financial year.

Limitation on Proxies

A proxy holder is restricted to a maximum of 1 vote where the strata scheme contains 20 lots or less. For strata schemes with more than 20 lots, they will be restricted to a maximum of 5% of the total number of lots.

Quorum for General MeetingThe quorum for general meetings remains at 25% of the lots, however the Chairperson may declare that the persons present at the meeting constitute a quorum and the meeting may commence.

Agenda to be given to Tenants

An agenda for any general meeting must be sent to tenants or placed on the notice board at the scheme.

A tenant may attend an annual general meeting or other general meeting but may not vote at the meeting unless they are a proxy holder. If the tenant wishes to address the meeting, a resolution must be passed permitting the tenant to do so.

Financial Matters

The sinking fund is now called the ‘capital works fund’.

Financial audits must be carried out for schemes that have a budget of over $250,000. Requirements are already in place where schemes over 100 lots must have an annual audit carried out.

Strata Committee

The Executive Committee is now known as the ‘Strata Committee’.

In large schemes (schemes over 100 lots) there must be a minimum of 3 Strata Committee members.

An owner is not eligible for election to the Strata Committee if they are not financial (have levies owing).

The Owners Corporation may pay a member of the Strata Committee in recognition of services. Any payment must be resolved at an annual general meeting and be for the services of the prior financial year

Tenant Representatives at Strata Committee meetingsThe following applies only where 50% or more lots have a tenant listed on the Strata Roll:

The tenants of the scheme may nominate one tenant to be the tenant representative on the Strata Committee.

The tenant representative is not entitled to vote or put forward a motion at a Strata Committee meeting.

The tenant representative is not counted for the purpose of establishing a quorum.

The tenant representative may be asked to leave the meeting when certain matters are discussed, such as financial, levies, or a strata renewal proposal (redevelopment of the strata scheme).

 

  

Repairs & Maintenance 

Duty to Repair There are complex changes in regards to the Owners Corporation’s duty to repair and maintain common property and resulting damages that may be claimed by an owner. See section 106 of the Strata Act for further information.

To assist with the responsibility to repair and maintain common property, an Owners Corporation may adopt a ‘common property memorandum’ to provide clarification on whether a part of the building is common property or lot owners property.

Initial Maintenance Schedule

An initial maintenance schedule is to be provided to the Owners Corporation by the developer at its first annual general meeting

The maintenance schedule sets out obligations and costs associated to the future maintenance of common property.

There is no obligation for the Owners Corporation to conform to the maintenance schedule.

Cosmetic Renovations / Building Works

Owners may carry out cosmetic works within their lot without approval, including installing picture hooks, handrails, painting, filling minor holes and cracks in walls, laying carpet,  installing built-in wardrobes or installing internal blinds and curtains. Other renovation works that impact common property must be approved and may require a special By-law.

 

 

 

By-laws

Any scheme registered prior to 1996 relies on the set of By-laws outlined in the new Regulations (which are pending release), except for any special By-laws registered previously.

The Owners Corporation must create and keep a consolidated set of By-laws. Meaning a single document that lists all registered and applicable By-laws.

 A By-law may be registered to restrict occupancy numbers in a strata lot. For example, a restriction that up to four adults only may occupy a 2 bedroom apartment. Strata Managing Agents

The developer of a new strata scheme may not be appointed as the strata manager until a period of 10 years has expired.

An agency agreement term is restricted to 12 months for new developments, and 3 years for all other schemes. When it expires, it must be renewed. If it is not, the Strata Committee can extend the expired agreement for three monthly periods up to the next annual general meeting.

A disclosure statement for any commissions received (e.g. insurance commissions) by the agent must be included in the annual general meeting agenda package.

Building Defects

At each annual general meeting, a motion must be placed on the agenda to ‘consider building defects and rectification’.

Must be on the meeting agenda until the statutory warranty period expire, in accordance with the Home Building Act 1989.

Current building warranty is 2 years for all defects and up to 6 years for major defects (structural / water proofing / fire safety).

The developer is not entitled to vote on this motion.

 

  

Building Defects The following new requirements relate to developments that are not captured by the Home Building Compensation Fund as per Part 6 of the Home Building Act 1989. For example, the types of buildings captured are as per the following:

Residential buildings of 4 storeys or more;

The residential component of a mixed use building of 4 storeys or more.

What party does it apply to?

It applies to the developer;

Not the builder.

Appointment of Building Inspector

The developer has an obligation to appoint a qualified person as a building inspector to carry out an inspection and report on building work within 12 months of the building works being completed, and the initial period has expired.

Approval of Building Inspector

Developer & Owners Corporation must agree on who to appoint. 

Developer pays all costs associated with the report.

Must use Building Inspectors who are listed on a public register.

Interim Report

Building Inspector must carry out the inspection within 15 – 18 months of completion of building work. Contents of the report to be as specified in the Regulations.

Completion means first occupation certificate as per the Home Building Act 1989.

Final Report

A Building Inspector must carry out an inspection no earlier than 21 months and no later than 2 years after the completion date.

If no defects noted in the Interim Report, a Final Report is not required. The Final Report cannot note new items not contained in the Interim Report.

 

 

Bond

Amount of 2% of the building contract price relating to the part of the building that is applicable.

Must be paid by the developer prior to receiving an occupation certificate for building work (cash/security).

Purpose and use of the Bond is for rectification of building defects.

Administered by NSW Government.

When is the Bond used?

Paid to the Owners Corporation for rectifying defective building work (if any).

Paid to the developer if no defective building works are contained in Interim Report.

Under any direction from the Tribunal or Supreme Court.

The Bond must be either used for building works or paid back to the developer within 2 years from completion of the building works.

Strata RenewalHighlights of Changes

Very defined process;

Detail will be contained in the Regulations (pending);

Relates to residential / commercial;

Lower approval required – 75% or more.

The Process

The following is in accordance with Part 10 of the Development Act.

A written proposal is provided to an Owners Corporation about a collective sale or redevelopment of a strata scheme.

The Strata Committee must consider the proposal at a Strata Committee meeting.

The Strata Committee decides if it warrants further consideration by the Owners Corporation. Copy of proposal is provided to all owners.

A general meeting is convened to consider a strata renewal proposal.

Establishment of a Strata Renewal Committee to prepare a strata renewal plan for a strata renewal proposal and elect members being no more than 8. Any potentially conflicted member must disclose their conflict.

The Strata Renewal Committee establishes a strata renewal plan. The Owners Corporation considers the plan.

Each owner notifies if they support the plan.

If the required support of 75% is reached, the Registrar-General and each owner in the strata scheme is notified.

Glossary

Terminology changes:

Current

New

Executive Committee

Strata Committee

Caretaker

Building Manager

Sinking Fund

Capital Works Fund

 

Considerations

The changes within the new Acts are extensive. The linkages on how the new laws interact with other pieces of legislation such as the Home Building Act 1989 are highly complex and specialist legal and expert advice is recommended. Please note the Regulations that will detail the operational aspects of the administration of the Acts have not been released to date by Government. The ‘developer’ and ‘original owner’ have the same meaning in this Fact Sheet.

Further Information:

Download our Fact Sheet

Fact Sheet – Strata Law Reform – Developers guide

Strata Schemes Management Bill 2015

Strata Schemes Development Bill 2015

Contact Us

To contact Strata Choice via email click here

Alternatively to contact one of our branches, click on the links below:
Strata Choice - Sydney Lower North Shore
Strata Choice - Sydney CBD Branch
Strata Choice - Sydney Inner West Branch

To request a quote click here

 

 

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