Posted by Grant Beaumont on July 16, 2015

HAVE YOUR SAY – STRATA LAW REFORM DRAFT RELEASED

STRATA LAW REFORM – EXPOSURE DRAFT RELEASED

Today, the Minister responsible for Fair Trading Victor Dominello, released two exposure drafts outlining proposed strata law reform. The community is able to make comment on the drafts until 12 August.

With 25% of Greater Sydney’s population residing in strata and community title schemes, the proposed update to New South Wales’ strata laws, first introduced in 1961 and updated on various occasions since that time, will be welcome. The government has recognised that the existing laws do not adequately deal with modern strata living. It is evident that one of the key themes is a Government response to community calls for greater protections for the purchasers of strata property, especially against residential developers/builders who may leave new properties with defects. As a consequence, the building industry will likely strongly object to some of the reforms. By contrast, developers will welcome the opportunities that will flow from the lesser hurdle of 75% support for cancelling a strata scheme.

The strata management industry has been consulting with other stakeholders and the government for many years. Accordingly, the proposed disclosure requirements, especially targeted at insurance commissions, will not come as a surprise. As a practical matter, the financial services industry is moving toward a fee for service approach, and it is probable that the market (is strata communities) will follow that lead naturally. The reforms require strata managers to disclose commissions received in the prior year and the owners corporation will be required to decide whether the strata manager should receive the insurance commission in the following year or receive a fee.

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The key proposals include:

  1. Attempts by the government to lift the level of standards and accountability of strata managers. There will be limitations on the terms of strata management agreements and greater disclosure of third party commissions.
  2. A new process for winding up strata schemes – 75% of owners could vote to wind up a scheme. Mechanisms would be in place to ensure all owners receive a fair price and protections for the elderly and vulnerable would be enacted.
  3. A building bond of 2% of construction value and a mandatory building inspection would be introduced to protect owners of new strata property. The bond would be used to rectify building defects identified by those inspections.
  4. Limitations on the number of proxies that may be held by a single party.
  5. Model by-laws would be introduced to deal with smoke drift; making it easier to keep pets, take action against misuse of visitor carparking, noise and short term letting. There would be greater fines for failing to comply with by-laws.
  6. Tenants would be able to participate in owners corporation meetings
  7. Developers will be required to set realistic levies for the “initial period” (ie until 1/3 of the unit entitlements are sold) and for the subsequent year
  8. Additional powers will be given to the Tribunal, making the collection of outstanding levies easier. In addition, the Tribunal will be given wider powers to resolve disputes, rather than the compulsory appointment of a strata managing agent.

No specific date has been set for effect of the new laws, although given the timetable for consultation and the time required to pass through parliament, we would expect that the new laws would be effective from 1 July 2016.

A copy of the Exposure Drafts is available at www.fairtrading.nsw.gov.au

About the Author, Grant Beaumont

Grant Beaumont

As Director of Beaumont Strata, Grant is passionate about the management of Commercial & Industrial Property. With an enthusiastic attitude toward innovation, and adoption of modern practices, the businesses have significantly developed in terms of the internal processes, creating business efficiencies and enhancing the customer experience for clients and customers. In addition, he handles much of the administration side of the businesses, comprising legal, accounting, human resources and office matters.

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