New strata laws ease through NSW parliament

The most radical shake-up of strata law in Australia since the current Act came into force in 2016 could, at a push, be in place by Christmas.

Changes to NSW’s strata laws have passed the first two readings in both chambers of the NSW parliament, without amendment, and now only await a simple procedural third reading, followed by the Governor’s assent, before becoming law.

That means big changes on issues as diverse as conflicts of interest and sacking underperforming committee members are well on their way.

The highlights of the legislative tweaks include the following changes:

• Committee members who have a financial interest in the decisions by a committee will no longer be allowed to participate in discussions and votes on the issues. Previously they simply had to declare an interest but could still participate and vote.
• Committee members can be “sacked” by a simple majority of the owners at a general meeting. Previously it took a “super majority” of 75 per cent of owners. Also under the new rules they won’t be able to rejoin the committee for at least a year.
• Strata managers will have to give owners corporations at least three months but no more than six months’ notice that their contract is about to expire and “roll over”. This is to avoid the roll-over provisions coming through unnoticed by strata owners becasue they are so far off.
• Fair Trading will be able to apply to the Tribunal (NCAT) to have dysfunctional schemes taken over by a statutorily appointed strata manager. Currently only owners or the Tribunal members can propose the appointment of statutory managers.

You can read the Bill HERE and the explanatory notes HERE but here, again, is a quick guide to some of the changes that should become law in the next month or so.

ORIGINAL OWNER VOTES: The proposed amendments provide that the value of a vote cast by an original owner (usually developer) of a strata scheme may be reduced only if the scheme comprises more than two lots.

Currently, the original owner’s votes are reduced to one-third until they have sold more than 50 percent of the property. Doesn’t make any mathematical sense if there are only two parties involved.

INITIAL AGM DOCUMENTS: The proposed amendment requires the developer of a strata scheme to deliver certain documents to the owners corporation at least 14 days, instead of at least 48 hours, before they convene the first annual general meeting.

SACKING COMMITTEE MEMBERS: The proposed amendment enables an owners corporation to remove a member of the strata committee from office by ordinary, instead of special resolution. Also, the former member is not eligible for re-appointment or re-election as a member for 12 months from the day the resolution is passed.

Furthermore, members of a strata committee may be elected at a general meeting called to elect members of the committee and not just at an annual general meeting.

The call for member nominations must be given at the same time notice of the general meeting is given and the proposal clarifies nomination procedures.

STRATA MANAGERS: The proposed amendment requires a strata managing agent to give the owners corporation written notice of the end of the agent’s term of appointment at least 3 months, but not more than 6 months, before the end of the term.

INTERNAL FUND TRANSFR:  Continuing confusion over the rules about movement of money  between strata admin and capital works (sinking) funds has been clarified. Under the proposed amendment, the owners corp must, within three months of the transfer, decide at a general meeting, whether or not the funds should be repaid, and if so, how it should be done – either a simple reverse transfer or by special levy.

This would clear up the debate over whether the current law meant money had to be repaid within three months or merely whether a decision on paying back the money had to be made in that period.

EMERGENCY REPAIR LEVIES: The proposed amendments shorten the period from 30 days to 14 days after which a special levy for urgent repairs becomes payable. This is for repairs to a building that are “necessary to mitigate a serious and imminent threat to the health or safety of the occupants.”

WORK QUOTES: All strata schemes, not just large ones (over 100 units),  will need to get two quotes for work costing over $30,000. Also the comparative quotations will need to be for people or companies that are not connected with each other. Reasons will have to be provided if the owners corporation is not able to comply with the demand for two quotes.

PET RESTRICTIONS: The proposed amendment prohibits an owners corporation from requiring an owner or occupier of a lot to pay a bond or fee relating to the keeping of an animal on the lot or to obtain insurance for the animal.

When it comes to assistance animals, the amendment specifies the types of evidence that show an animal is an assistance animal, which the person keeping the animal may be required to provide to the owners corporation.

BY-LAWS: Under the proposed changes, an owners corporation may consolidate the by-laws for the scheme only by special resolution, whether or not a by-law is amended, repealed or added,

The proposed amendment exempts two-lot strata schemes from needing to pass a  resolution before a Notice To Comply regarding a by-law breach.

ELECTRONIC RECORDS: The strata roll and other mandatory records will be required to be made or kept by an owners corporation in electronic form.

RENTALS: Rental agents will be required to give tenants and lessees a copy of a strata scheme’s by-laws and strata management statement on commencement of a lease and whenever those documents are updated if they are not provided by the landlord or head tenant.

Rental agents will have to give the owners corporation notice that a lot has been leased or subleased if the notice hasn’t been provided by the landlord or head tenant.

Tenants can give notice of the lease to the owners corporation if the landlord, head tenant or rental agent fails to do so. Also the regulations may prescribe the documents or other evidence a tenant must provide in giving notice of the lease or sublease.

COMPULSORY MANAGING AGENT: The Commissioner for Fair Trading or, if there is no commissioner, the Secretary of the Department of Customer Service can make an application to the Civil and Administrative Tribunal (the Tribunal) for the appointment of a compulsory strata managing agent or requiring an owners corporation to appoint a strata managing agent.

We think this means that Fair Trading can apply to NCAT to have a compulsory strata manager appointed to take over the running of a dysfunctional scheme, or they can ask NCAT to order a scheme to employ a strata manager under normal arrangement.

SERVICE OF DOCUMENTS: The regulations may provide for the service of documents, including by prescribing additional methods of service.

AGM NOTICE and PROXIES: The proposed amendment extends the minimum notice period for an annual general meeting from at least 7 to at least 14 days before the meeting.

Also there will be a limit on the number of owners for whom a company nominee or a person acting under a power of attorney may exercise voting rights, similar to how the voting rights of duly appointed proxies are limited.

Some owners have been using powers of attorney, linked to multiple owners, to sidestep the limits on proxy farming.

CONFLICTS OF INTEREST: The proposed amendment removes the power for a strata committee to allow a member who has disclosed a conflict of interest to be present during a deliberation, or take part in a decision, about the matter to which the conflict relates.

COMMUNITY TITLES:  Many if not most of the above proposals also apply to Community Title regulations.

COLLECTIVE SALES: As discussed previously, elsewhere on this website, the proposed amendments also contain some major tweaks to discourage failed developers from using the strata scheme’s funds to finance their legal battles against the same strata scheme.