DLS Updates – Strata Law Reforms

Strata Law Reforms

What’s new?

The Strata Schemes Management Act 2015 and Strata Schemes Development Act 2015 commenced on 30 November 2016 and have replaced the Strata Schemes Management Act 1996, Strata (Freehold Development) Act 1973 and Strata Schemes (Leasehold Development) Act 1986.
The new pieces of legislation set out comprehensive reforms of NSW strata laws modernising the law to reflect the reality of living in a strata townhouse or apartment today. The changes are aimed at improving strata living and providing greater opportunity for strata redevelopment.

What’s changed?

Some of the key changes include the following:-

  • a disclosure requirement for strata managing agents of conflicts of interest;
  • an easier process for the collective sale and renewal of a strata scheme and protection of owners;
  • introduction of a new set of by-laws;
  • broadening tenant participation in meetings;
  • a simpler and clearer dispute resolution process;
  • a simpler renovations process for owners;
  • a new solution to unauthorised parking; and
  • building maintenance.
Below, we examine some of the more significant reforms set out in the new legislation.

Collective Sale or Redevelopment of a Strata Scheme

Previously, a strata scheme could only be ended or “collapsed” with the unanimous support from all owners in a strata scheme. The new provisions allow for the collective sale or redevelopment of a strata scheme by a 75% majority of lot holders. The purpose of the amendment is to prevent individual owners from blocking redevelopment of aging and high-maintenance unit blocks.

However, this new process only applies to newly established strata schemes. Those strata schemes established under the old strata laws still require unanimous support from all owners. For old strata schemes to move to the new process, the owners corporation of the old strata scheme must opt in to the new process by ordinary resolution at a general meeting.

New Set of By-Laws

The new by-laws commenced operation on 30 November 2016. This does not necessarily mean that those owners corporations established before 30 November 2016 are immediately bound to the new by-laws. However, all owners corporations must review and consider the new by-laws by 30 November 2017.

Some of the new by-laws:

  • make it easier for owners to complete cosmetic and minor renovations to their units;
  • address issues of parking, pets and smoke drift; and
  • allow an owners corporations some flexibility in deciding when their general meetings will be held and allowing more modern forms of communication to be used to attend/participate in meetings, such as by video and teleconferencing.
Owners corporations should contemplate which updates would best suit their strata scheme and can use the new by-laws as a guide. The model by-laws can be found here.

Proxy Voting

The number of proxies a member of a strata scheme can hold is now limited to:

  • one proxy vote only for schemes with less than 20 lots; and
  • 5% for schemes with more than 20 lots.
The intention is to restrict “proxy farming”, whereby members gather up the votes of uninterested or absent members in the strata scheme to enable them to pursue their own agenda.

Inspection reports

In relation to all future strata developments, a developer must appoint an independent building inspector to provide both an interim building report (identifying any defective building work) and a final report on completion of the building work.

Building defects

A developer of a high rise strata building is required to place a bond of 2% of the contract price of the building work to cover potential defects identified after completion and those which are set out in the final inspection report. The building bond must be claimed or realised 2 years after completion of the building work or within 60 days after the final report is given.

The reforms are aimed at protecting buyers of new units, encouraging early identification and rectification of defects and helping improve the standard of building construction.

How we can assist you?

David Landa Stewart Lawyers have dedicated lawyers to assist you with the new requirements under the new strata laws, including:

  • review of your existing by-laws;
  • advise which aspects of the new by-laws should be considered or adopted;
  • draft tailored by-laws to meet your owners corporation’s needs;
  • review of a collective sale/redevelopment plan;
  • negotiate the terms of the collective sale/redevelopment plan with owners/owners corporation; and
  • complete the purchase/sale of your strata scheme.

The reforms are intended to promote redevelopment of strata apartment buildings, assist in urban renewal and increase housing supply. Apartment owners are encouraged to make themselves aware of the strata reforms and consider the impact the changes may have on their strata living.

If you or someone you know wants more information or needs help or advice, please contact us.