Major changes to strata laws

New strata laws started on 30 November 2016 and the new Building Defect Bond Scheme started on 1 January 2018.

New strata laws started on 30 November 2016 and the new building defect bond scheme started on 1 January 2018. Some key changes include:

  • strengthening the accountability of strata managers
  • allowing owners to adopt modern technology to conduct meetings, vote, communicate and administer their scheme
  • the need for owners to review by-laws by 30 November 2017, which can be customised to suit their lifestyle - like whether to allow owners to keep a pet by giving notice to the owners' corporation
  • a process for the collective sale and renewal of a strata scheme
  • a simpler, clearer process for dealing with disputes
  • broadening tenant participation in meetings
  • a new option to manage unauthorised parking through a commercial arrangement between a local council and a strata scheme
  • a clearer and simpler three-tier renovations process, which waives approval for cosmetic renovations within the strata lot (for example, installing handrails for safety).

There are also measures to reduce red tape, such as simplifying financial statements for owners.

Owners

Review the new model by-laws and consider whether these may be suitable for your scheme. The model by-laws include options for rules on permitting pets, preventing nuisance smoke and other lifestyle issues.

By 30 November 2017, all schemes must have reviewed their by-laws. If your strata scheme decides that there should be changes, you can choose to adopt some or all of the model by-laws or adapt your current by-laws to better suit your scheme's particular circumstances.

Consider how you would like to participate in meetings, such as electronically, by phone and whether your scheme should adopt electronic voting.

Landlords

Landlords must notify the owners' corporation in writing of each tenancy and can provide the tenant's email address for the strata roll. This helps the strata committee to determine whether the strata scheme should have a tenant representative (where at least half of the properties are being rented).

Be part of the conversation when your by-laws are reviewed and consider which changes could make it easier for you to rent out your unit, for example. Become informed about the streamlined process for getting renovations approved. This should make it easier for you to add value to your investment. It should also make the process simpler if you decide to pursue a tenant's request for alterations

Tenants

Tenants should be aware that where at least half of the properties in the strata scheme are tenanted, they will be invited to elect a tenant representative to the strata committee (the committee responsible for the day-to-day running of the strata scheme). This is done before the next AGM.

Tenants should check noticeboards and keep informed in case their strata scheme makes changes to current by-laws. This may happen when the strata scheme reviews its rules (by-laws) by 30 November 2017. Remember, you still have to get your landlord’s approval first to do things such as keep a pet or make any alterations to the property.

Strata committees

Review any contract with your strata managing agent or caretaker or building manager entered before 30 November 2016 and be aware of these end dates on their term of appointment:

  • For a strata managing agent, all current contracts will end up to 3 years after their term commenced or on 30 May 2017 (that is, 6 months after the new laws start), whichever is the later.
  • For a caretaker or building manager, all current contracts will remain in force for up to 10 years after the laws commence, unless there is a shorter period in the terms of the contract.

Schemes were required to review their by-laws by 30 November, 2017 (if your scheme had not done so since 30 November 2016). If your review led to a decision to change by-laws, the scheme will need to lodge a full set of all by-laws with NSW Land Registry Services.

Be aware that where at least half of the properties in the strata scheme are tenanted, the owners corporation must call a tenants meeting to elect a tenant’s representative. This must be done before the AGM.

Also, make sure you understand how the new laws about proxies, renovations, and a collective sale will impact on the decision making of the scheme.

Your scheme may also want to consider:

  • adopting the Common Property Memorandum to clarify repair and maintenance responsibilities
  • developing an internal dispute resolution process.

Strata managing agent

Be aware of the date that your contract will be terminated. Under the new laws, all current contracts will end up to 3 years after the term commenced or on 30 May 2017 (that is, 6 months after the new laws start), whichever is the later.

Be an industry leader and support your strata scheme to explore and adopt electronic communications options that make it easier for them to take part in meetings and decision making. Examples include web or phone conference calls, or an electronic voting service.

Review your processes for seeking insurance for owners corporations. Strata managing agents must now seek at least three quotes from different providers when sourcing insurance as part of the strata scheme’s requirements to have certain types of insurance in place.

Strata reform myth busters

These myth busters are to help people who live or own strata townhouses and apartments to understand the new strata laws that started on 30 November 2016.

The following myths are to help overcome misunderstandings about what changes the reforms bring.

Owners corporations must meet right away to decide their new by-laws 

MYTH! By-laws passed by the owners corporation and registered remain valid after 30 November 2016 until removed or amended by the owners corporation. Owners must review their rules by 30 November 2017.

Strata buildings cannot ban pets

MYTH! It is up to each strata scheme, through the owners corporation that all owners belong to, to decide which updates they want to make to their by-laws, if any. So, the owners decide if they wish to keep or change their existing pet rule.

To change a by-law, the owners corporation needs to pass a special resolution (ie. 75% of the owners at a meeting being in favour).

There are model by-laws, which are a guide for strata schemes only. These provide options, including rules on pets, for strata schemes to consider. Owners are always allowed to have assistance animals, such as guide dogs.

Tenants still need the landlord’s permission (although, the landlord cannot accept a pet if their strata scheme does not allow the pet).

Smoking is banned

MYTH! Smoking is not banned in all strata schemes. However, occupants must not create a nuisance or hazard or stop others enjoying the strata complex. If smoking is offending someone, the smoker could be taken to the NSW Civil and Administrative Tribunal and penalised.

Also, the model by-laws include options for rules that would further restrict smoking. Owners corporations may adopt such rules or develop their own by-law that places restrictions on smoking.

I can’t have BBQs on my balcony 

MYTH! There is no set ban on barbecues.

The model by-laws provide a guide for strata schemes in shaping their own rules. These include an example rule that restricts tobacco smoking, not smoke from barbecues.

Owners corporations can make their own decision about the use of barbecues when reviewing their by-laws. Changes to the use of barbecues will need a special resolution vote of owners (at least 75% of owners being in favour of the change).

Remember however that people must not create a nuisance or hazard to others in strata or compromise someone’s enjoyment of their strata unit and the common property. Otherwise, they may be taken to the Tribunal and penalties may apply.

If you are using a barbecue, make sure you have checked your by-laws first. Also be sure to maintain and clean it regularly to avoid issues with excess smoke. You should also observe any fire bans in place, for example, due to hot weather.

Contracts with strata managers or building managers end on 30 November 2016 

MYTH! If a strata manager was appointed before 30 November 2016, their term ends whichever is the later:

  • 3 years after their term commenced, or
  • 6 months from the start of the new laws.

For building managers, contracts in force before 30 November 2016 remain in place until 10 years after the reforms start (unless the contract is for a shorter period, then that will apply).

Tenants can vote at owners corporation meetings 

MYTH! Tenants who are registered with the owners corporation by their landlord will have the right to attend and be notified of upcoming meetings. It is an offence for a landlord not to register a tenant with the owners corporation. The owners corporation may agree to tenants speaking on a particular matter. However, a tenant may only vote if they hold a proxy to vote on a lot owner’s behalf.

In schemes where a least half of the lots are tenanted, a non-voting tenant representative can be nominated as a member of the strata committee after being elected by the tenants. The tenant representative is entitled to receive agendas and minutes of meetings. They can be excluded when certain financial issues are to be discussed (e.g. collective sales). Their involvement can be helpful as tenants can identify issues, for example, repairs to fix water leaks affecting common property.

If someone who isn’t a visitor parks in my apartment’s visitor parking, the body corporate (owners corporation) can fine them 

MYTH! The owners corporation cannot fine non-visitors for parking breaches directly.

An owners corporation may adopt a by-law preventing owners and occupiers of lots parking in visitor parking spaces. Normal notice requirements for a by-law breach would apply and if the unauthorised parking continued, a penalty may apply.

Alternatively, the owners corporation may decide to enter into an agreement with their local council to prosecute car parking breaches on the common property. If the local council agrees to such an arrangement, the owners corporation would need to pass a special resolution vote (that is, 75% of the owners in a meeting agreeing) to enter into a commercial contract. The council would provide all parking signage for the scheme, for a cost that would be outlined in the agreement.  Council rangers could then issue infringement notices to any vehicle breaching the requirements of parking signs on the common property, including visitors.

You will be able to access NSW Office of Local Government guidelines for how to engage a council in providing parking management services through the Fair Trading website from 30 November 2016.

If most of the owners want to sell their apartment I’ll be forced to leave my apartment at any time 

MYTH! For the collective sale of a strata scheme to be considered there are several stages that the owners will need to follow before any proposal to sell the strata block can be put to a vote. This includes owners being given at least 60 days to consider the proposal and to seek independent advice. Under the proposal, all owners must receive at least market value plus other costs, such as moving costs, and compensation for inconvenience for their property. At least 75% of owners must then agree to collectively sell their scheme for redevelopment and any plans must be submitted to the Land and Environment Court for final approval (and the Court may reject the plan or require certain conditions be met).

A Strata Renewal Advice and Advocacy Program has been established by Fair Trading to provide free advice and advocacy services to vulnerable lot owners.

Proxy voting will be unlimited

MYTH! Proxy votes able to be held by one person will be limited to:

  • one proxy vote only for schemes with less than 20 lots, or
  • 5% for schemes with more than 20 lots.

Limiting proxy votes in this way makes voting fairer and puts an end to ‘proxy farming’ (where one or two owners can control an owners corporation's decisions by obtaining the majority of votes by proxy).

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