A number of important changes to strata laws in New South Wales came into effect on 1 August 2008.

The changes were introduced by the Strata Management Legislation Amendment Act 2008, and their purpose is to enhance the operation and management of strata schemes.

The five areas of change are summarised below.

This amendment makes it clear that all on-site caretakers are covered by the Strata Schemes Management Act, even if they use a different job title such as ‘building manager’.

The changes to the caretaker laws make it clear that anyone carrying out the role of an on-site caretaker is subject to the those laws, regardless of whether they are called a caretaker or use a different title, such as building manager or resident manager.

This change is important, because the Strata Schemes Management Act sets out strong protections for strata owners in relation to caretaker contracts. The amendment will ensure that a caretaker cannot avoid the requirements of the Act simply by using a different job title.

Caretakers may be employed to assist the owners corporation in carrying out its functions. They do not have the same delegated functions as a licensed strata managing agent.

Caretakers may assist the owners corporation in:

• managing the common property
• controlling the use of common property by tradespersons and other non-residents
• the maintenance and repair of common property.

Caretakers may not enforce by-laws or carry out other similar functions of the owners corporation. A person is not a caretaker if they exercise their functions on a voluntary or casual basis or as a member of the executive committee.

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This amendment prevents by-laws giving a right to park on common property being made during the initial period of a strata scheme.

An owners corporation in a strata scheme may make by-laws giving rights to an owner for the exclusive use of, or special privileges in relation to, an area of the common property.  However, these types of by-laws cannot generally be made during the ‘initial period’ of the scheme, that is, the period from the commencement of the scheme up until one third of the unit entitlements have been sold.

The Strata Schemes Management Act contains an exemption allowing by-laws to be made in the initial period authorising an owner to park a vehicle on the common property. This has led to disputes when buyers later move in and find that the developer has given themselves or someone else the right to permanently park in visitor parking spaces. This exception has been removed by the amendments so that such by-laws can only be made after the expiry of the initial period when other owners besides the developer are able to vote on the proposal.

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These amendments will protect strata buyers from terms in sale contracts which require them to give proxy voting rights or power of attorney to the developer of the strata scheme.

Under the legislation, owners in a strata scheme who are entitled to vote in an owners corporation meeting can appoint a person as proxy to vote on their behalf. Proxy appointments enable owners who are unable to attend meetings to have a say on issues under consideration.

A proxy appointment must be made on a prescribed form and remains in effect for 12 months or two consecutive annual general meetings. The owner making the appointment can, if they wish, specify how their proxy is to vote on any matter.  Alternatively, an owner may allow the proxy full discretion in the use of their voting entitlements. An owner can revoke or replace the proxy appointment at any time or may attend a meeting and vote in person, thus overriding any proxy they have issued.

However, some developers seek to avoid these requirements by making it a condition of the sale of a strata lot for the buyer to give the developer unconditional proxy voting rights or a power of attorney. Owners who have signed such contracts could risk having action taken against them for breach of contract if they attempt to exercise their right to vote at an owners corporation meeting or make a change to their proxy.

To provide greater safeguards for owners’ voting rights, the legislation has been amended so a developer or a person connected with the developer cannot make use of a proxy voting appointment or power of attorney that was obtained by a condition in a contract for the sale of a strata lot, or another related contract or arrangement.

In the case of proxy voting appointments or powers of attorney in place before 1 August 2008, these remain in effect. However, if the proxy appointment or power of attorney was obtained by a condition in the sale contract and is renewed or extended on or after 1 August 2008, that appointment or power is invalid.

The amendment does not stop an owner from giving proxy voting rights to anyone they choose – including the developer or caretaker if that is what they wish. However, the provisions of the Act apply and the owner can cancel their proxy at any time or override it by attending a meeting to vote in person without fear of legal action or penalties.

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Executive committee members will need to disclose any personal, business or financial connection they have with the developer or caretaker.

The executive committee of the owners corporation is a group which represents owners or owners’ nominees. It administers the day-to-day running of the strata scheme and is elected at each Annual General Meeting (AGM). The owners corporation may limit the matters that the executive committee may decide and the Act contains various matters that must be decided by the owners corporation in a general meeting.

The owners corporation has the authority to dismiss some or all of its executive committee. An owners corporation may also employ a strata managing agent and/or caretaker to carry out some or all of the functions of the executive committee. If a vacancy occurs during the term of the executive committee, the owners corporation must appoint a person to fill the vacancy until the next AGM.

In response to complaints about executive committees being ‘stacked’ by friends or associates of the developer, the Act has been amended so that a person nominated for election to an executive committee must disclose any financial, business or family connections they have with the developer or caretaker. The disclosure will need to be made at the meeting at which the executive committee is to be elected before the election is conducted and the disclosure must be recorded in the meeting minutes.

Once elected, members of executive committees will also have to disclose any connection they subsequently develop.  The disclosure must be made in writing to the secretary of the executive committee and placed on the agenda for the next general meeting. If the person is the secretary, the disclosure is to be made to the chairperson of the committee. A person being appointed to act in the place of an executive committee member must also disclose any connections they have with the developer or caretaker. This disclosure is to be made in writing to the executive committee before the appointment.

However, the disclosure of a connection with the developer or caretaker does not prevent an executive committee member from continuing to hold their position on the committee. Equally, the disclosure of a connection between an executive committee candidate and a developer does not prohibit or prevent the candidate from being elected to the committee.

This measure will enhance the transparency of executive committee elections, and will enable the other owners to take candidates’ association with the developer into account when voting on membership of the executive committee or when voting to remove a member of the committee.

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Individual owners in strata and community schemes will be able to lodge a building dispute with the Office of Fair Trading and arrange for an inspection of building work in common areas.

The Home Building Act provides for complaints about defective building work on the common property of a scheme to be made to the Office of Fair Trading by an owners corporation, or by a community association in relation to association property in a community scheme.

Where the developer has majority ownership or voting rights, it can be difficult for the owners to agree about the lodgement of a complaint. This sometimes occurs because the developer is also the builder, or is financially connected with the builder, and is seeking to avoid their responsibilities.

As of 1 August 2008, individual strata and community lot owners will be able to lodge complaints with Fair Trading and to invite a Fair Trading building inspector onto the common property of a strata scheme or association property in a community scheme. As a further safeguard, caretakers and other persons who control access to areas of the common property will be obligated to cooperate with officers from Fair Trading and provide assistance to enable the inspection to be carried out, for example by providing access to locked areas of the common property.

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