Strata Reforms [NSW] Update 2: Lessons & Challenges from past reforms
Learning from what we did [and didn’t do] before …
Before we reinvent the strata wheel, let’s consider what we can learn from the discussion papers, submissions, and changes made [and not made] during the last round of NSW strata law reforms between 2011 to 2015.
Aldous Huxley said: "That men do not learn very much from the lessons of history is the most important of all the lessons of history."
So, as a long time fan of Brave New World, I shall heed his words for the latest NSW strata law reform cycle and look at what was said last time these laws were considered in the early noughties to see what we should be considering and re-considering this time.
Plus, there’s plenty of material to work from since the process took almost 5 years and an independent public forum was commissioned to capture leading voices [including mine] on the issues. And, it would be a shame for all those efforts to go to waste again.
You find a reading list of older reform materials if you’re interested at the end of this article.
Here are the top 9 things I learned from my review and how they still need attention [or don’t] in the current NSW strata reforms.
1. Uniformity across Australia
Let’s start with a big issue that’s never been substantively addressed in strata law reform: actively trying to get some uniformity of strata laws around Australia.
Whilst strata laws are all conceptually similar there are substantial differences from state to state in fundamentals [title structures, boundaries, unit entitlements, etc], decision-making [meetings, decisions, committees, voting rights], finances [funds, expenditures, provisioning, etc], dispute handling, by-laws, language, and much much more.
It’s more than a bit confusing to owners and residents. After all, why is a strata building called by the all following names at the moment [and that’s after more than a few states changed the entity names over the last 10-15 years].
owners corporation [NSW & VIC]
units plan [ACT & NT]
strata company [WA]
strata scheme [TAS]
body corporate [QLD]
corporation [NT]
I could go on ad nauseum about things like this. And, it’s fairly obvious why more uniformity would benefit all strata stakeholders.
And, in an environment promoting law harmonisation around Australia since at least the 2006 report of the Australian House of Representatives Standing Committee on Legal and Constitutional Affairs, I haven’t seen any significant effort to do that.
I’ll be writing more about the differences and similarities in Australian strata laws.
But in the meantime, the first lesson is that any changes should enhance uniformity of strata laws around Australia rather than create or exacerbate differences.
2. Tenants
The best strata data available suggests that almost half of the strata lots in Australia are tenanted, which means tenants and the rent they pay forms a big part of strata operations and finances.
But, as Chris Martin of the NSW Tenants Union wrote in 2012, ‘in strata schemes, a large proportion of people – that is, tenants – are excluded from the owners corporation, and so have no say in the rules that affect their lives’. He even explored the idea of ‘residents corporations’ rather than ‘owners corporations’.
That hasn’t happened, but there were some changes in the 2015 strata law reforms to give tenants a bit more information and a very limited ability to attend meetings. Plus, tenants usually have no standing to apply for things to the strata building or to seek NCAT orders [although orders can be made against them]. However, from my observations, there isn’t much actual tenant participation going on and most strata stakeholders seem pretty happy with that outcome.
The current discussion paper [at questions 96 & 97] only considers the existing provisions about providing by-laws to tenants and capturing tenant information without addressing new issues.
This is short-sighted and missing an opportunity to engage with this massive strata stakeholder sector based on stereotypical pre-conceptions about tenants and pro-owner biases.
The lesson to take from this is not to ignore the [strata tenant] elephant in the room this time too.
3. Strata Renewal or Collective Sale
One of the biggest changes in the 2015 strata reforms was the introduction of complex mechanisms for strata renewal or collective sale: the ability to end a strata title scheme despite owner objections.
This was supported by many commentators like the Property Council of Australia, UDIA, the Urban Taskforce Australia, the Planning Institute Australia, and many more commentators.
Well, the laws have come, they are quite complex [as they should be] and they’ve been only lightly used with very few Court decisions over the last 5 years.
The current discussion paper [at questions 5-19] devotes a lot of attention to strata renewal with a consistent theme of adding more provisions and complexity to address what appears to be one-off problems and issues that may have arisen so far.
So, whether that’s because the demand for strata renewal/collective sale is low or it is too early days, it seems obvious to me that there’s not much to be gained by reworking these new and novel laws yet.
The lesson is that laws about strata renewal and collective sale are too new and should be left alone for people to use them more and for Courts to make more decisions about how they operate.
4. Mission Statements for Strata Buildings
Jimmy Thomson, a Journalist and Flat Chat strata writer, wrote about the disconnect between the sameness of strata buildings to external observers and the significant differences in each strata building to participants resulting from the make-up of owners and residents, committee styles, manager approaches, and the course of decision making.
It means that buyers [and others] can’t make intelligent decisions about those buildings; leading to negative experiences and wasted resources [money and time] that might have been avoided. It’s a real issue.
Jimmy suggested a mission statement which is one approach. But, there are many other ways this kind of information about strata buildings could be made available. Imagine if buyers actually knew about the strata building and were better matched or prepared for it; rather than assuming a generic strata style applied.
Nothing was done about this in the 2015 reforms and there’s nothing in the current discussion paper about it either.
So, there’s a lesson in these ideas that more information and transparency about strata buildings could have a significant positive impact on all strata stakeholders.
5. The Role of NSW Fair Trading
in 2012 Rod Stowe, then Commissioner for Fair Trading, flagged the role of NSW Fair Trading, covering things like the information [telephone helpline, Strata Living handbook, and the Letterbox email newsletter], the mediation service and enforcement of offences against strata laws. He asked how NSW Fair Trading could improve those services and what more could be done.
From my observations, NSW Fair Trading is basically doing the same things today as it did then. The Strata Living handbook and Letterbox are much the same. I’m not aware of too many enforcement actions for strata offences. And, I’ll leave you to assess if the quality of services like the telephone helpline and mediation have improved.
Question140 in the current discussion paper asks the question again.
The answer to this question is obvious. Yes, NSW Fair Trading needs to improve the scope and quality of existing services, provide more and more detailed information and initiate new things for strata stakeholders.
But, the lesson here is that’s probably a departmental management issue and not a law reform matter.
6. By-laws
By-laws are an important part of strata title operations.
Cathy Sherry, Associate Professor of Law at UNSW, prophetically wrote about limits on by-law making in 2012, the 2015 reforms introduced new limits on reasonableness and in 2020, those limits were better defined by the NSW Court of Appeal [see my newsletter on Cooper’s case].
So, we’re just starting to get guidance and refinement to this long-standing strata feature and we need more which will come over time as judicial decision-making history builds. 5 years is not long enough for this to occur. At the same time, strata stakeholders have become comfortable with by-law processes over many decades.
Why then does the current discussion paper [at questions 79-87, 90, 91, 108 & 111] suggest making more changes to the ways by-laws are made, the model by-laws, reasonableness tests, and specific by-law changes?
It looks to me like tinkering and that there’s not much to be gained by more reworks on by-laws now when the last set of changes are just starting to settle down.
The lesson here is that strata laws about by-laws are not broken and should be left alone to keep evolving naturally.
7. Unit entitlements
Unit entitlements are a niche issue in strata buildings that seems to pop up every review without anything much happening.
In 2012, JBW Surveyors made submissions about guidance over unit entitlement setting and addressing inequities but no changes were made at the time.
The current discussion paper [at questions 36-40] raises unit entitlements but suggests downgrading valuation requirements, simplifying valuer roles, and easing review mechanisms.
Both, in my view, are well-intentioned but misguided attempts to make hard but important matters easy.
Unit entitlements are fundamental to owner’s rights and obligations in strata buildings: setting their voting rights, contributions to expenses, and, most importantly their respective interests in common property and the strata corporation’s capital [to use an inelegant expression to describe what strata owners’ posses]. The provisions about unit entitlement have existed for a very long time and have never changed in any significant way. Plus, there’s also a very detailed 2000 NSW Supreme Court decision [Anderson-Stuart v Treleaven] that covers unit entitlement re-allocation principles.
So, I’d say this area of strata title operation is pretty well settled.
The lesson here is that we should be careful to mess around with fundamentals like unit entitlements just because a few people have found it a bit hard.
8. Strata Records and Inspections
Although it might be a bit of a dull topic, the maintenance and accessibility of strata records are crucial to good strata building operations and stakeholder awareness.
The 2012 submissions by the NSW Strata Inspectors Association recognised that and identified a range of issues as follows:
highly variable record keeping systems,
inconsistent and non-compliant archiving systems,
inconsistent and poorly structured [or unstructured] electronic storage systems,
old [or no] technology use,
inconsistent capture of email and other electronic communications,
prevalence of paper-based records search and retrieval systems,
search timing and cost issues, and
incompatible record handover formats.
Nothing was done in the 2015 reforms about these issues and they persist today to the disadvantage of all strata stakeholders [managers and strata corporations included].
The current discussion paper [at questions 92-95 & 100] raises record-keeping systems, strata certificates, and a recycled idea of mine from 2005 about a searchable strata building register.
There’s no doubt we need to focus on this issue to bring record keeping and access to strata information into the current century.
But, the challenge here is how to do that with adequate flexibility and safeguards to suit different buildings [from self-managed small schemes to the largest complexes].
9. Community title reforms
Finally, here’s a no brainer.
In 2012 Phillippa Russell, strata lawyer, raised the need for a complete review of community title laws. She was right as they hadn’t changed since they were first introduced in 1990.
But it didn’t happen then and, despite an aborted review process during the last decade, community title laws are not covered by the current strata law reform process either.
So, let’s hope that the separate NSW law reform process announced in March 2020 proceeds [it’s already behind schedule] proceeds this year in parallel to strata title laws, and these 30-year-old laws get updated and fixed.
The lesson [and challenge] on this issue is to use the community title and strata title reforms to get more consistency between them.
So, I’ll be adding all these lessons, challenges, and learnings to things to my NSW strata law reform agenda shopping list.
Francesco …
Jan 25, 2021
READING LIST FROM 2011-2015 NSW STRATA LAW REFORMS
Global Access Partners Strata Title Laws Consultation Website
Turn your strata thinking forwards before making changes, Francesco Andreone [January 2012]
Not seeing the (strata) wood for the trees, Francesco Andreone [February 2012]
Mission Statements for strata plans, Jimmy Thomson [January 2012]
Union calls for greater say from tenants on strata laws, Chris Martin [February 2012]
Importance of creating reasonable by-laws, Cathy Sherry [February 2012]
NSW Fair Trading: What more could we do to help strata and community schemes?, Rod Stowe [January 2012]
The Law Society of NSW Property Law Committee Submission [February 2012]
JBW Surveyors Submission [February 2012]
Property Council of Australia Submission [February 2012]
Unlocking land for urban renewal, Stephen Albin, UDIA [February 2012]
Ability to terminate strata schemes key for growth, Chris Johnson, Urban Taskforce Australia [February 2012]
Planning Institute Australia Submission [February 2012]
Submissions by NSW Strata Inspectors Association [February 2012]
Wholesale review of community titles legislation overdue, Phillipa Russell [February 2012]