Strata Law Reforms – What You Need to Know

In 2015 the New South Wales Parliament passed the Strata Scheme Management Bill 2015 and the Strata Scheme Development Bill 2015, more than 90 law changes were passed.

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. The new strata laws commenced operation on 30 November 2016.

Before the new laws commenced research and community consultation was undertaken:

• new regulations were developed setting out how the laws will operate;
• key information was developed and released for strata schemes; and
• a public awareness campaign has taken place.

We examine some of the more significant reforms set out in the new legislation below.

Collective sale 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 rights of the owners are protected by the inclusion of certain checks and balances. For example, if a strata sale is agreed to, the owners are to receive the market value of their lot plus an extra amount to cover costs associated with moving.

The purpose of the amendment is to prevent individual owners from blocking redevelopment of aging and high-maintenance unit blocks.

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.

Other notable changes

The new legislation also includes provisions which:

• make it easier for owners to complete cosmetic and minor renovations to their units;
• address issues of parking, pets and smoke drift;
• allow an owner’s corporations some flexibility in deciding when their general meetings will be held; and allowing more modern forms of communication to be used to attend meetings, such as video and teleconferencing.

What about the other states and territories?

NSW is not the only state turning its attention to strata law reform. In Queensland, discussion papers for similar reforms were prepared in 2014 at the request of the previous State Government. Similarly, in Western Australia a Strata Reform Project Team has been tasked with undertaking research into strata reform to ensure Western Australia has a modern Strata Titles Act. Victoria’s last round of reforms of owner’s corporation legislation took place in October 2014.

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 on 02 6542 5566 or email michaelobrien@equilaw.com.au.