Radical reforms on the cards for NSW regs

Big changes are in the wind for strata in NSW with two working groups having recommended reforms – some radical – in legislation and regulations for the sector.

One report recently tabled by the NSW Department of Customer Service is on “Empowering Stakeholders from Point of Sale through to Establishment and Management of Strata Schemes.”

A second report on sustainability has been issued and a third working group has met only recently to discuss insurance and affordability, so it hasn’t reported yet.

The Owners Corporation Network (OCN), representing apartment owners and residents, and Strata Community Australia (SCA-NSW), representing strata managers and other professionals joined with leaders in industry, academia, business partners and regulation to tackle some of the challenges facing strata in the state.

Among the recommendations is one to make the initial AGM of new buildings a two-stage process so that owners, especially first-timers, can’t be railroaded into agreements that are not in their best interests, such as embedded networks.

Instead they would elect the committee at the initial AGM which would then scrutinize the contracts on the table and take advice on them, then return at a later general meeting to advise on whether to accept, reject or renegotiate the contracts.

Allied to this is a suggestion that all contracts entered into during the owners corporation’s initial period – before 50 per cent of the apartment have been sold –  should expire and be re-negotiated as part of the two-stage first AGM proposal. 

This would remove the pressure on new owners – many of whom will have never lived in strata before – to accept that agreeing to complex and potentially burdensome contracts, virtually on the day of the meeting, was “standard practice.”

Another suggested reform would be to ensure that proper budgets, minimum standards for initial maintenance schedules, and asset registers were provided at settlement or handover as a condition of plan registration.

The working group agreed that risks incurred through strata lending need to be investigated and appropriate regulatory safeguards implemented.

There was a call for mandatory minimum disclosure standards in point of sale and marketing to be developed and implemented, including:  Defect disclosure  (with required detail to be codified); Vendor accountability and responsibility for disclosure to be quantified and mandated; Strata loan disclosure at point of sale or marketing;

And compulsory appointment of managing agents to be noted.

There was also a call for section 184 sales certificates to include notices of strata loans, compulsory managing agent appointment, NABERS ratings and any legal proceedings.

And there was a recommendation that developers engaged in off-the-plan sales should engage accountable licensed professionals to prepare information for  prospective purchasers about proposed budget for the scheme, levies for various lots and the structure of the strata scheme.

Many of these reforms could be implemented in the mandatory five year review of strata legislation due in 2025

Clearly the proposals are all about transparency and accountability. The preamble to the first working group report said its mission was to deliver an “empowered, accountable, and trusted property services sector, [which] will never be more important than it is in strata.”

“Confidence in strata remains fundamental to housing supply, affordability, economic well-being, and social cohesion in NSW,” it continues. “Owners, residents, industry practitioners, investors, businesses, and developers all need greater transparency, certainty, and awareness for this to occur.

“With affordability and availability a growing problem, particularly with the worsening rental crisis, strata will play an important role in future solutions.”

Nothing is set in stone and any major reforms will have to be agreed by parliament.  But this maps a clear road forward for potential reforms in NSW strata, and that alone is worthy of note.

A version of this first appeared in the Australian Financial Review