A NSW Strata Law Reform Report Card

or, how do I score the latest strata law changes in NSW ...

We’ve been waiting a few years for the latest round of NSW strata title law reforms.  And a few have been just announced as stage 1.  What are they and  how do they affect stakeholders?  In this article, I mark these reforms in a strata law reform Report Card.

[9:00 minutes estimated reading time, 1774 words]

INTRODUCTION

After a 3 year wait, multiple discussion papers, 222 submissions, and 329 survey responses, the New South Wales government has released information and draft legislation for some new strata law reforms.

It’s not everything that was recommended in the November 2021 paper Report on the statutory review of the Strata Schemes Development Act 2015 and Strata Schemes Management Act 2015 as there are only 31 reforms of the 139 that were recommended.  And some of the reforms are actually to community title laws and not strata title laws.

The current position is that the law reforms have been approved by the Legislative Assembly and the Legislative Council so are only waiting on Ministerial assent and gazetting to become law. 

You can find the latest New South Wales strata and community title law reform source materials here.

• Statement of Public Interest

• Strata Legislation Amendment Bill 2023

• Second reading speech by The Hon. Mark Buttigieg

So, what are the reforms, what’s the reasoning behind them, and are they any good?

In this article, I’ll briefly outline the Stage 1 reforms to strata laws [as they’re not yet law and could change] and mark them on my strata law reform report card.

I haven’t covered community title law reforms here as they try to make community title provisions match strata title, which may or may not be a good idea.

I’ve also written many other articles about the latest NSW law reform process and proposals including a detailed submission which are linked at the end of this article.

MY NSW STRATA LAW REFORM REPORT CARD

Since there are no major or earth shattering New South Wales strata law changes in these reforms, it’s not worth a detailed analysis [although I might highlight a few issues in future articles], so, I’ve decided to produce a report card on the work so far.

It rates each reform on a scale we all know and understand as follows.

5.  OUTSTANDING WORK

4.  AT EXPECTED STANDARDS

3.  PASS [so, neither good nor terrible]

2.  POOR or BELOW EXPECTATIONS

1.  UNSATISFACTORY

Here’s the Report Card and more detailed explanations and comments follow.

Strata building renewal

• Strata renewal committees can last 2 years instead of just one.

• Relaxing some procedural preconditions to Court orders in there’s no substantial injustice.

• Allowing cost orders against objectors if they are not acting in good faith.

• Giving Courts discretion about the costs payable to objectors.

These reforms seem okay. 

But they only affect a tiny minority of strata stakeholders, they appear to be knee-jerk responses to problems only a few people have experienced in the strata renewal process, and it’s impossible to predict whether they will work because the strata termination provisions are still very new, they’re infrequently used, Courts have barely considered and interpreted them.

So, it’s a PASS.

Strata committees

• Committees can be elected at any general meeting, not just AGMs.

• AGM agendas must include nomination calls.

• Committee members with conflicts of interest are excluded from discussions and voting, not just have to disclose conflicts.

• Committee members can be removed by majority vote, down from a three-quarter majority vote.

• Removed committee members cannot be re-appointed for 12 months.

Two of the changes are just fixing procedures.

The new restrictions for committee members’ conflicts of interest face the existing problem of identifying what is a conflict and when it arises.  Plus, why can’t strata committee members act self interestedly since strata owners can?  So, it’s poorly considered and likely to lead to more confusion over these issues.

Making it easier to remove committee members and excluding them for 12 months also appears to be a knee-jerk response to problems only a few strata buildings have experienced without considering the wider impact on all strata buildings, which I’d say is to decrease strata owner willingness to be committee members and cause more strata committee instability.

So, overall, these changes are at or below expectations.

Strata Managers

• Strata managers must give between 3 and 6 months’ notice to strata buildings that their agreements are expiring.

• NCAT can appoint an administrator strata manager at any time.

• One change is just tweaking procedures.

Whether or not NCAT should be able to appoint a strata manager to take over schemes concerns me since I worry about NCAT’s ability to make sensible decisions in circumstances where parties are not usually legally represented, the rules of evidence don’t apply and procedures are very informal.  That’s especially so since lot owners who aren’t involved in the existing dispute can be affected without notice and appointing administrator strata managers impacts a range of existing contracts and arrangements.

So, overall, these changes are at or below expectations.

Meetings

• Existing limits on proxy votes extended to company nominees and powers of attorneys.

• Strata buildings must give 14 days’ notice of annual general meetings [but not other general meetings], instead of 7 days.

I don’t understand why a corporate strata owner of multiple lots can’t have one nominee for all those lots, no matter how many they own.  It’s hardly ‘proxy farming’ since the corporate owner is entitled to vote any way they want for some or all of them and this change only creates a need for multiple company nominees.

Plus, since granting a power of attorney to someone has much more significant legal consequences than just giving a limited and expiring strata proxy, I also wonder about the need for that change as well.

Plus, I’ve always said that any restrictions on lot owners giving proxies is ‘nanny state’ regulation of adults that is unwarranted.

So, overall, these changes are at or below expectations.

Money and expenditure controls

• At least 2 quotations are required for spending over $30,000 for all strata buildings, not just large [over 100 lots] strata buildings.

• Strata buildings can decide not to reimburse money transferred between funds.

• Levies for emergency works can be made payable within 14 days, instead of 30 days.

It makes sense to allow strata buildings to decide to leave transferred money where it ended up and was spent.

But, why in the world would you create an obligation of all 85,000 New South Wales strata buildings to get 2 quotes for all larger expenditures forever?   $30,000 is not a huge amount of money these days for any semi-major common property works, insurance premiums, litigation costs, and even strata management services and there is a lot of work and delay involved in getting multiple quotations [adding to strata building operational costs].

Plus, of course, half of the service providers quoting will never get the job and will either have to charge for quotations [as we’re seeing some trades doing already or increase prices generally to cover the extra non productive overhead.

So, this also appears to be another knee-jerk response to complaints from or problems that only a few strata buildings have experienced without considering the wider impact on all strata buildings.

So, these changes are AT EXPECTATIONS FOR emergency levies and fund transfers, but POOR for 2 quotes for all expenditures over $30,000.

Pets

• A by-law cannot impose unreasonable burdens on keeping and using assistance animals.

• A pet bond or a requirement to insure the pet cannot be imposed.

These changes are consistent with the last 2-3 years pro-pet position in New South Wales strata title.

But I’m not sure that assistance animals in strata buildings need more protections as they already have significant rights under the National Disability Discrimination Act 1992, and there’s nothing wrong with a moderate pet bond or other mechanisms to cover potential damage caused by pets in strata building since existing controls on pet approvals and/or by-laws in New South Wales would already prohibit unreasonable controls.

So, overall, these changes are AT or BELOW EXPECTATIONS.

Tenants

• Must be given any by-laws or Strata Management Statement within 14 days of becoming a resident.

• Tenants can give strata buildings notice of their lease if the strata owner doesn’t.

Tenants in strata buildings are not well catered for even though they represent half the residents in Australian strata buildings [and pay part of their lot owners’ mortgages and strata levies].

So increasing obligations to give tenants the key strata building documents is necessary since strata owners and property managers haven’t been giving these documents to strata tenants yet they’re expected to comply with by-laws and Strata Management Statement.

And, if strata owners don’t notify the strata building that they have a tenant, then the tenant should be able to do so.

So, these changes are OUTSTANDING.

Strata records

• Developers must provide the handover records 14 days before the first AGM, instead of 2 days.

• Strata records must be kept electronically from now onwards.

• By-laws can be consolidated even if they haven’t been changed.

Giving developers more time to provide handover records is unlikely to improve compliance levels, but it can’t hurt.

And saying strata records should no longer be kept on dog-eared paper in archive boxes seems like something that should have occurred sometime since networked computers and the World Wide Web became mainstream in the late 1990s and early 2000s.

So, these changes are AT EXPECTED STANDARDS since they’re overdue housekeeping and simply bring strata record keeping into the computer age.

Subdivision

• A valuation is not required for lots in a strata plan of subdivision that only changes common property in minor ways and doesn’t change those lots

This reform fixes a serious complication and additional cost for simple strata re-subdivisions that have existed since 2016. 

So, this change is AT EXPECTED STANDARDS.

CONCLUSIONS

Overall that’s a PASS with an score of 68 out of a possible 120 marks. BTW … I’m unashamedly a hard marker.

There are some necessary and straightforward housekeeping reforms, some good reforms recognising the role tenants play in strata buildings and moving strata records into modern realities. But there’s too much focus on strata renewals when they are such a small part of strata building operations, and some of the changes impose sector-wide burdens that haven’t been fully considered to fix occasional and one-off problems in only a few strata buildings.

I wrote about that kind of knee-jerk reaction and ill-considered law making in the article How Reforms Can Morph Into Strata Monsters.

So, what do you think of the Stage 1 New South Wales strata law reforms?

December 05, 2023

Francesco ...

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