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1. Executive Summary
Strata Community Australia (NSW) Limited (SCA (NSW)) welcomes the opportunity to
provide a response to the New South Wales (NSW) Governments Strata & Community Title
Law Reform Discussion Paper.
As identified by many stakeholders, the concept of strata was born in NSW fifty years ago,
refined since its inception and subsequently exported to other parts of the world. SCA (NSW)
claims with pride that many of those involved with the inception, refinement and export of
strata also have a close affiliation to SCA (NSW) - formally the Institute of Strata Title
Management (ISTM).
SCA (NSW) comes to the table with five decades of experience in all aspects of the strata
sector and a genuine desire to take a seat when the attention turns to assembling the new
strata landscape in NSW.
Given the spectrum of our membership and its footprint on the NSW strata landscape, SCA
(NSW) has chosen to address every aspect of this comprehensive discussion paper. In
doing so, SCA (NSW) has provided more than 100 different recommendations, please refer
to Appendix A. Table of Recommendations. Further, the Owners' Corporation Network (OCN)
were consulted in relation to our response as well as providing input into our response - SCA
(NSW) thanks OCN for their contribution.
If we were to distil our recommendations into one theme it would be that of education.
Education is a fundamental ingredient in the way in which strata works and operates. SCA
(NSW)'s reference to education is inclusive of both those who provide essential services to
lot owners (i.e. strata managers and strata service providers) as well as lot owners
themselves.
The education and professionalisation of strata managers - this is vital in our collective
goal of meeting the growing demand for strata living. It is also a cornerstone in ensuring that
lot owners are provided with the appropriate levels of services and consumer protection.
Education of the lot owner - it is appropriate that strata managers uphold a minimum
educational standard to equip them to act professionally and as agents for lot owners.
Equally, it is appropriate that lot owners (in particular executive committee members) obtain
a minimum standard of education with which to act and make informed decisions on behalf
of their owners corporations who have entrusted their assets to them.
Given the predicted population increases for strata living in New South Wales in the coming
years, SCA (NSW) calls on the NSW Government to put education funding front and centre
on the strata landscape.
SCA (NSW) is firmly of the view that the NSW Government should invest heavily in
education funding. That this investment should be directed to the SCA Registered Training
Organisation (RTO) for the Accreditation of strata managers in NSW and to SCA (NSW) for
the ongoing provision of education and information to lot owners.
Table of Contents
1. Executive Summary ........................................................................................................................ 2 2. SCA (NSW) ..................................................................................................................................... 8 3. Introduction .................................................................................................................................... 10
3.1 Strata sector profile ................................................................................................................ 10 3.2 About the strata industry in NSW .......................................................................................... 10 3.3 Additional relevant information .............................................................................................. 11
4. Future Regulatory Approach ......................................................................................................... 12 4.1 Should the law distinguish more between different schemes based on size, usage, type of
construction or other reasons? If so, how? (Q 1) .................................................................. 12 4.1.1 Size matters ................................................................................................................. 12 4.1.2 Compulsory audits for budgets exceeding $200K or schemes exceeding 100 lots .... 13 4.1.3 Usage type (residential, commercial/industrial/retail, mixed, carparks, retirement
villages, holiday resorts) .............................................................................................. 14 4.1.4 Style of development (horizontal v vertical) ................................................................ 14
4.2 Should the current laws be combined and if so, how? (Q 2) ................................................. 15 4.2.1 Possible new suite of strata and community legislation .............................................. 16
4.3 What examples of unnecessary red tape do you believe should be removed? (Q 3) ........... 17 4.3.1 The selling and conveyancing process ....................................................................... 19 4.3.2 When is a community not a community?..................................................................... 19 4.3.3 Community Title v Torrens Title .................................................................................. 19
4.4 To what extent should the Government prescribe rules for all schemes? (Q 4) ................... 20 4.5 Should broad principles apply to the making of by-laws? (Q 5) ............................................ 21 4.6 Is there merit in the mission statement idea? (Q 6) ............................................................... 21 4.7 Should the law give more recognition to the personal freedoms of owners? (Q 7) .............. 22 4.8 Are reforms needed to address the competing interests of stakeholders? If so, what should
they be? (Q 8) ........................................................................................................................ 23 4.8.1 Developers v Owners .................................................................................................. 23 4.8.2 Mortgagees and Covenant chargees v mortgagors/owners ....................................... 23 4.8.3 Investors v resident owners ......................................................................................... 23
5. Governance ................................................................................................................................... 24 5.1 What terms or provisions in the current law do you believe should be rewritten in plain
English? (Q 9) ........................................................................................................................ 24 5.2 Which of the following would help to improve awareness and in what ways? (Q 10) ........... 24
5.2.1 More information resources (e.g. factsheets, targeted brochures, template forms, sample documents and an email newsletter) .............................................................. 24
5.2.2 Compulsory training for executive committee members of all schemes or just large schemes ...................................................................................................................... 25
5.2.3 Having new committee members signing a statement setting out their obligations and responsibilities ............................................................................................................. 26
5.2.4 Requiring managing agents/Secretaries to supply new owners and tenants with an up to date set of by-laws within a specified timeframe (e.g. 14 days) .............................. 26
5.2.5 Making it a requirement that schemes review their by-laws at regular intervals (e.g. every 5 years) .............................................................................................................. 27
5.2.6 Expanding the section 109 certificate to disclose more matters likely to be of material interest to prospective buyers ..................................................................................... 27
5.2.7 Clarifying and simplifying the law dealing with the inspection of records .................... 27 5.3 Do you have any other suggestions for how awareness of rights and responsibilities could
be improved? (Q 11) .............................................................................................................. 27 5.4 Which of the following would help to improve participation and in what ways? (Q 12) ......... 28
5.4.1 Limiting the numbers or restricting the use of proxies ................................................. 28 5.4.2 Introducing a system of pre-meeting postal voting for those who cannot attend a
meeting ........................................................................................................................ 28 5.4.3 Mandating that all owners must vote, with fines imposed if they do not ..................... 28 5.4.4 Providing the option of secret ballots on certain issues .............................................. 28 5.4.5 Reducing the restrictions on quorum requirements or removing the need for quorums
altogether ..................................................................................................................... 28
5.4.6 Enabling some form of tenant representation in schemes .......................................... 29 5.4.7 Calling for committee nominations in advance of AGMs ............................................ 29 5.4.8 Allowing payments to be made to committee members for attending meetings ......... 29 5.4.9 Clarifying the legal liability of executive committee members ..................................... 29
5.5 Do you have any other suggestions for how participation in schemes could be improved or owner apathy addressed? (Q 13) .......................................................................................... 29
5.6 Which of the following would help to improve communication and in what ways? (Q 14) .... 30 5.6.1 Recognising various technological options for distributing information to those
involved with individual schemes ................................................................................ 30 5.6.2 Enabling teleconferencing, videoconferencing or other means of holding meetings .. 30 5.6.3 Providing more certainty as to how correspondence to schemes should be handled 30 5.6.4 Reducing the documents required to be sent to owners ahead of meetings .............. 31 5.6.5 Giving schemes the flexibility to make documents available on their website or on
request from owners .................................................................................................... 31 5.6.6 Requiring minutes of meetings to be made available within a specified time after the
meeting (e.g. 14 days) ................................................................................................. 31 5.6.7 Making it clear when contact details can be given to executive committees and
owners/residents ......................................................................................................... 31 5.7 Do you have any other suggestions for how communication in schemes could be improved?
(Q 15) ..................................................................................................................................... 31 5.8 Which of the following would help to improve transparency and in what ways? (Q 16) ....... 32
5.8.1 Requiring any person with a conflict of interest to declare that interest and not participate in any discussion or voting on the matter .................................................. 32
5.8.2 Restricting the ability of certain persons (e.g. non-owners or more than one co-owner) from being elected to executive committees ............................................................... 32
5.8.3 Making the managing agent automatically a non-voting committee member ............. 32 5.8.4 Requiring office bearers be elected at each annual general meeting ......................... 32 5.8.5 Imposing a minimum number of committee members (e.g. three) ............................. 32 5.8.6 Limiting the period of time any individual can continually hold the same office (i.e.
Chairperson, Secretary or Treasurer) ......................................................................... 32 5.8.7 Requiring motions to be accompanied by an explanatory note and to identify the
person who submitted the motion ............................................................................... 33 5.8.8 Prohibiting or requiring the disclosure of commissions ............................................... 33 5.8.9 Imposing further restrictions on the length of contracts associated with schemes ..... 33 5.8.10 Streamlining the levels of consent required to make decisions .................................. 33 5.8.11 Providing greater clarity over who can make what decisions in schemes .................. 33 5.8.12 Requiring all or some schemes to have accounts audited .......................................... 34 5.8.13 Giving owners a right to request and receive copies of any documents relating to
expenditure .................................................................................................................. 34 5.9 Do you have any other suggestions for improving transparency within strata and community
schemes? (Q 17) ................................................................................................................... 34 5.10 Which of the following would help to improve accountability and in what ways? (Q 18) ...... 35
5.10.1 More clearly defining the role of managing agents, executive committees and office bearers ........................................................................................................................ 35
5.10.2 Holding agents directly accountable for their actions .................................................. 35 5.10.3 Providing an easier process for schemes to terminate the services of agents ........... 35 5.10.4 Making professional management mandatory for large schemes .............................. 36 5.10.5 Introducing a Code of Conduct for executive committees or requiring them to act with
due care, skill, honesty and for the benefit of all owners ............................................ 36 5.10.6 Giving the CTTT more options before appointing a compulsory agent ....................... 36 5.10.7 Requiring executive committees to prepare brief annual reports ................................ 36
5.11 Do you have any other suggestions for how to improve accountability? (Q 19) ................... 36 6. Managing the Built Environment ................................................................................................... 37
6.1 Do you support the introduction of an alternative process for terminating strata schemes? If so, how many lot owners would need to agree to initiate the process? (Q 20) ..................... 37
6.2 Should any alternative process accommodate only collective sale or should the process be more flexible, to enable co-operative redevelopment of the scheme? (Q 21)....................... 37
6.3 Should the meaning of common property be changed? If so, which approach do you favour? (Q 22) ..................................................................................................................................... 37
6.4 Should owners be responsible for all internal repairs within their lot and/or work which only benefits or affects them? (Q 23) ............................................................................................ 38
6.5 Should the absolute obligation to maintain common property be changed to take account of the age and life of the scheme and the funds available? (Q 24) ........................................... 39
6.6 Should owners or occupants be responsible for any damage to common property they cause? (Q 25) ........................................................................................................................ 39
6.7 Should the law about common property for pre 1974 strata schemes be changed? (Q 26) . 40 6.8 Should the process for owners wanting to renovate or make changes to their lot be
simplified and/or clarified? (Q 27) .......................................................................................... 40 6.9 Could easy-to-read guidelines be produced giving information to owners on what they can
and cannot alter/renovate? What would the content of these guidelines be? (Q 28) ........... 40 6.10 Which of the following would help address overcrowding and short-term rentals in schemes
and in what ways? (Q 29) ...................................................................................................... 41 6.10.1 Enabling schemes to make and enforce by-laws to deal with the issue ..................... 41 6.10.2 Giving the CTTT power to prohibit certain letting arrangements for a lot where there is
a proven pattern of anti-social behaviour .................................................................... 41 6.10.3 Introducing a law setting the maximum number of persons per bedroom .................. 41 6.10.4 Giving local councils more power to deal with such matters ....................................... 41
6.11 Do you have any other suggestions for how the issues surrounding overcrowding and short-term rentals could be addressed? (Q 30) .............................................................................. 41
6.12 Do you think that a maintenance schedule prepared by the developer would be useful? (Q 31) .......................................................................................................................................... 42
6.13 Should defects be a compulsory agenda item for discussion at the first AGM? (Q 32) ........ 42 6.14 Should the law set clear rules for voting on action regarding defects? (Q 33) ...................... 42 6.15 Should any other changes be made to the strata laws to more adequately deal with defects?
(Q 34) ..................................................................................................................................... 42 6.16 Should land be able to be added to a community scheme, precinct scheme and a subsidiary
neighbourhood or strata scheme? If so, should land be able to be added only as association or common property or should land also be able to be added as a separate lot? (Q 35) ..... 43
6.17 Should a mechanism be introduced to enable amalgamation of subsidiary neighbourhood schemes with a community scheme? If so, what kind of resolution should be required? (Q 36) .......................................................................................................................................... 43
7. Managing Money ........................................................................................................................... 44 7.1 Should initial unit entitlements for strata schemes be based upon a valuation from a qualified
valuer as it is for community and staged strata schemes? (Q 37) ........................................ 44 7.2 Should more flexibility be given to schemes to determine levies other than on the basis of
unit entitlements? (Q 38) ....................................................................................................... 44 7.3 How could the process of reallocating unit entitlements be improved? Would you support the
ACT model being adopted in NSW? Should the procedure for revising unit entitlements in community schemes be expanded to precinct scheme, standalone neighbourhood schemes and strata schemes? (Q 39) .................................................................................................. 45
7.4 Should notices for AGMs contain more details about proposed levy increases? If yes, what additional information do you suggest? (Q 40) ...................................................................... 45
7.5 Should the law require periodic levy notices to be issued? (Q 41)........................................ 45 7.6 Is more regulation over the initial setting of levies by developers required? (Q 42) ............. 46 7.7 Should developers be liable for budget shortfalls in the initial period? (Q 43) ...................... 46 7.8 Should the law allowing discounts for early payment of levies be removed? (Q 44) ............ 46 7.9 Should a strata management statement be required to disclose the method of allocating the
shared expenses and/or be certified by a quantity surveyor? (Q 45) .................................... 46 7.10 Should the penalty interest rate on outstanding levies be raised? If so, what should the
figure be? (Q 46) .................................................................................................................... 46 7.11 Should schemes be required to take recovery action within a certain time? If so, what should
the timeframe be? (Q 47)....................................................................................................... 47 7.12 Should the CTTT be given jurisdiction to deal with outstanding levies? (Q 48) .................... 47 7.13 What hardship provisions (if any) should be introduced? (Q 49) .......................................... 47 7.14 Should the recovery of expenses for outstanding levies be limited to reasonable expenses
or built into the penalty interest rate? (Q 50) ......................................................................... 47 7.15 Should owners who owe levies continue to not have voting rights? Do you support any other
practical punishments or deterrents and if so what? (Q 51) .................................................. 47
7.16 Should a minimum period of arrears (e.g. two levy payments) be required before loss of voting rights or other punishments are imposed? (Q 52) ...................................................... 48
7.17 Should schemes be able to seek orders that tenants pay rent to them to cover debts owed by investor owners? (Q 53).................................................................................................... 48
7.18 Should sinking funds remain compulsory? Should schemes be able to carry forward budget surpluses instead? (Q 54)...................................................................................................... 48
7.19 Should the law dictate contributions to sinking funds? If so, how? (Q 55) ............................ 49 7.20 Have the 10 year sinking fund plan reforms been successful? Should they be retained and
expanded to the community scheme sector? Are any refinements needed to make them more effective? (Q 56) ........................................................................................................... 49
7.21 Should the requirement for valuations every 5 years be kept or changed? (Q 57) ............... 50 7.22 Should insurance and valuation details be on the notices for each AGM? (Q 58) ................ 50 7.23 What items should the law require to be covered by scheme insurance policies? (Q 59) .... 50 7.24 Should schemes be encouraged or required to have a higher insurance excess? (Q 60) ... 51 7.25 How could the law give schemes more flexibility over their insurance requirements? (Q 61)
51 7.26 Should the cost of insurance be shared only on the basis of unit entitlements? (Q 62) ....... 51 7.27 Is there a need to increase the minimum public liability cover for schemes? If so, what
should be the amount? (Q 63) ............................................................................................... 52 7.28 How do the laws around accounting records need to be modernised (if at all)? (Q 64) ....... 52 7.29 Do you support a simplified set of financial statements? (Q 65) ........................................... 52 7.30 Are annual financial statements sufficient? Should the law require or recognise the ability of
schemes to request statements on a more regular basis? (Q 66) ........................................ 54 8. Managing Disputes ........................................................................................................................ 55
8.1 Should internal dispute resolution mechanisms be recognised in the law? (Q 67) ............... 55 8.2 Should attendance at mediation be made compulsory? (Q 68) ............................................ 55 8.3 If mediation is unsuccessful should parties be able to apply for a CTTT hearing without
needing to go through the Adjudication step? (Q 69) ............................................................ 55 8.4 Should legal representation be limited to where a proven need is shown or the dispute is
over a specific amount (e.g. $10,000)? (Q 70) ...................................................................... 56 8.5 Is there merit in establishing a ‘duty advocate’ like information service at mediation sessions
and CTTT hearings? (Q 71) .................................................................................................. 56 8.6 Should mediation for strata and community schemes be a free service? If so, how should
dispute resolution services be funded? (Q 72) ...................................................................... 56 8.7 Should the jurisdiction of mediation and the CTTT be broadened to cover the majority of
disputes which arise in strata and community schemes? If so, should such jurisdiction be exclusive? What types of matters would be inappropriate for mediation and the CTTT to handle? (Q 73) ....................................................................................................................... 56
8.8 Should the procedure around cost orders and interim orders be clarified? (Q 74) ............... 57 8.9 Should there be a process to reject applications about trivial matters or where the same
matter has been contested before? (Q 75)............................................................................ 57 8.10 Which of the following would improve the level of compliance? (Q 76) ................................ 57
8.10.1 Streamlining the number of offences........................................................................... 57 8.10.2 Increasing the penalties that can be imposed ............................................................. 57 8.10.3 Enabling penalty notices to be issued ......................................................................... 58 8.10.4 Requiring or encouraging schemes to appoint a committee member as a ‘compliance
officer’ .......................................................................................................................... 58 8.11 Should schemes be able to issue their own fines for by-law breaches? (Q 77) .................... 58 8.12 Should it be mandatory for a scheme to enforce its by-laws? (Q 78) ................................... 59 8.13 What other changes to the system of enforcing by-laws would you like to see? (Q 79) ....... 59 8.14 What do you think should be done, if anything, about parking in schemes? (Q 80) ............. 59 8.15 What do you think should be done, if anything, about pets in schemes? (Q 81) .................. 60 8.16 What do you think should be done, if anything, about noise in schemes? (Q 82) ................ 60 8.17 What do you think should be done, if anything, about smoking in schemes? (Q 83) ........... 60 8.18 What do you think should be done, if anything, about flooring in schemes? (Q 84) ............. 61 8.19 What do you think should be done, if anything, about washing in schemes? (Q 85) ............ 61 8.20 Do you agree with any of the above reform proposals? (Q 86) ............................................ 62
8.20.1 Developer documents at handover ............................................................................. 62 8.20.2 Empowering schemes to deal with abandoned goods ................................................ 62 8.20.3 Authorise schemes to enter lots to trim trees .............................................................. 62
8.20.4 Remove the cap of 9 Executive Committee members ................................................ 63 8.20.5 Who is the 'controlling officer' in a scheme for OH&S purposes? ............................... 63 8.20.6 Expand the info to be kept on a strata roll to include details of all licenses, loans and
an index ....................................................................................................................... 63 8.20.7 Enabling legal notices to be served on the managing agent ...................................... 63 8.20.8 Clarify the circumstances when a scheme can restrict owners or residents from
accessing common property ....................................................................................... 63 8.21 Do you have any other suggestions for how the existing law regulating strata and community
schemes could be improved? (Q 87) ..................................................................................... 63 9. Conclusion ..................................................................................................................................... 65 10. Appendix A. Table of Recommendations ...................................................................................... 67
2. SCA (NSW)
SCA (NSW), formerly the ISTM and founded in 1980, is the peak body for the strata sector in
NSW. SCA (NSW) represents approximately 1,300 strata managers, service companies to
the sector and strata owners. SCA (NSW) membership ranges from large corporate
companies to small family businesses, lot owners and volunteers. These stakeholders have
expertise in all facets of strata management, service provision, governance and ownership.
Indirectly these stakeholders are a significant and growing proportion of the NSW population
- representing lot owners and employees in NSW. Their individual and collective contribution
to the social fabric and economy of NSW cannot be underestimated or overlooked.
SCA (NSW) members' experience ranges from large corporate, small family businesses and
individual lot owners. They have expertise in all facets of strata management, service
provision and ownership. Their experience spans those with a lifetime in the industry, to
those who are just beginning their careers or strata title ownership.
As part of membership requirements, SCA (NSW) requires:
all members to adhere to and uphold the Code of Ethics; and
all corporate strata members hold Professional Indemnity insurance coverage.
SCA (NSW) has a robust track record, established over many years, in the provision of
quality education to professionals in the strata sector as well as the delivery of consumer
awareness seminars for lot owners. This is evidenced by member and public attendances at
various event and educational forums.
SCA (NSW) is a RTO that offers and undertakes numerous courses, specifically:
Certificate of Registration (Certificate III);
Certificate IV in Property Services (Operations);
Continuing Professional Development; and
Continuing Professional Development (via distance learning).
SCA has recently launched and will be introducing its Accreditation to its strata manager
members in 2013.
Further, SCA (NSW) offer the following free information and education sessions to the
public:
Consumer Awareness Seminars; and
Online Executive Training module.
In the context of the NSW strata sector, the scope and impact of our individual and collective
members is substantial. SCA (NSW) currently has 113 corporate strata members and an
additional 574 individual strata manager members. These strata manager members service
all types of strata, including:
residential, commercial, retail and mixed-use, large, small, boutique and assistance
with self managed schemes;
serviced apartments;
retirement villages;
company title;
community title; and
building management committees.
SCA (NSW) currently has 141 corporate supplier members and an additional 319 individual
strata supplier members. These strata supplier members provide a full spectrum of services
to the strata sector, including (but not limited to):
accounting, taxation and legal;
banking and finance;
building maintenance and repairs;
cleaning, facilities management and caretaking;
electrical, pest control and plumbing;
engineering services;
insurance;
Work Health & Safety (WH&S) services;
sinking funds and valuations; and
waterproofing.
This is not an exhaustive list, however, it does provide a snapshot as to the scope, impact
and importance that our members have in the context of their contribution and input into the
strata sector.
3. Introduction
3.1 Strata sector profile
The 2011 Census found 23.7% of Australian households living in medium and high density
housing types, predominantly strata titled, up from 22.5% in 2006. This would also include
some traditional terraces and public housing, but exclude lower density community
association developments which have the same legal structures as strata title. It also
excludes commercial and retail strata property, an increasingly popular form of property
ownership for businesses, investment, and holiday or second homes.
More than five (5) million Australians live in, own or work in a strata-titled complex, putting
the strata sector in touch with over 25% of all Australians.
The sector's growth trajectory is clear. The share of apartments in the Australian Bureau of
Statistics (ABS) building approvals series has trebled in the past two decades, while the
share of townhouse approvals has dropped slightly from more than 15% to just under that
percentage (as highlighted by the following graph). This implies that the share of all other
approvals (neither units nor townhouses) has dropped from three-quarters to two-thirds.
As the National Housing Supply Council's State of Supply Report 2011 found:
Most regions are projected to see a greater relative increase in demand for flats, apartments and
townhouses than for detached houses.... An ageing population, continued population growth,
changes in household formation patterns, urban consolidation around existing infrastructure and
trends in the labour market are all driving demand for higher density housing.
3.2 About the strata industry in NSW
There are currently 71,472 strata schemes in NSW, of which 65% are in Sydney. Further,
there are 712,141 strata lots in NSW, of which 81% are in Sydney1. According to the 2011
1 LPI numbers for August 2012 quoted in the SCA September Issue of Inside Strata.
0%
5%
10%
15%
20%
25%
19
91
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92
19
93
19
94
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95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
New housing market share - 20 year trend
Units Townhouses
Census, nearly 30% of NSW households lived in medium to high density housing that is
overwhelmingly strata or community titled.
Owners' corporations comprise of all of the registered owners of all the units in the strata
plan. An owner’s corporation and its executive committee have powers and responsibilities
to administer the building on behalf of all owners2.
While owners enjoy the rewards that strata living provides, an owners' corporation is an
unlimited liability legal entity, thereby exposing owners to financial loss to the full extent of
their net wealth. This can occur in the event of a shortfall in funds to meet statutory
requirement to maintain and repair, or the uninsured or underinsured losses following an
accident or incident. The growth of this sector raises increasingly important questions over
property ownership and governance3.
Strata developments are the fastest growing residential segment in New South Wales. SCA
(NSW) estimates that more than half of all new residences built in NSW over the next
decade will be strata-titled4. Further, that by 2032 more than 3 million people in NSW will live
under a strata titles arrangement, more than double the current number.
The growing number of people living and working under strata titled arrangements in NSW
now require solutions to issues that are faced on a daily basis, including: the cost of housing,
urban renewal, sustainable living, regulatory complexity, unlimited liability risks in relation to
volunteer executive committee members and skills shortages.
The NSW Government and SCA (NSW) are in a unique position to be able to provide these
solutions, through the provision of education, boosting the capacity of the sector and
ensuring that equity is applied to both strata and non-strata residences.
3.3 Additional relevant information
SCA (NSW) notes the scope of the discussion paper and draws Fair Trading's attention to
the following recent and relevant SCA (NSW) policy documents and submissions:
Opportunities to consolidate tribunals in NSW (Inquiry), 2011;
2012 Policy Position: Improving NSW Communities;
SCA Community Renewal, 2012;
Submission to the Reform of the Home Building Act 1989, 2012; and
Submission to the Property Stock and Business Agents Amendment (Professional
Indemnity Insurance) Regulation 2012.
2
http://www.lawsociety.com.au/community/publicationsandfaqs/legalquestions/Buyingastrataunit/index.htm 3 UNSW City Futures Research Centre ‘Strata Data’ Issue 4, October 2011
4 Residential Strata in NSW: A summary analysis, Issue 1, April 2010, City Futures Research Centre
4. Future Regulatory Approach
4.1 Should the law distinguish more between different schemes based on
size, usage, type of construction or other reasons? If so, how? (Q 1)
SCA (NSW) asserts that it is important to simplify the current suite of legislation and
resultant red tape, rather than adding too many variations regarding size, usage or type of
construction. The alternatives presented in the Discussion Paper will be dealt with
individually. The law should distinguish between different schemes, specifically:
between residential, commercial and industrial strata and community schemes;
mixed-usage (these should be separated into two distinct strata plans, where there is
some degree of commonality these could be solved by registering a community title
to common property);
common areas of management could be modified to suit the scheme type,
irrespective of scheme size;
the streamlining of compliance and the reduction of red tape;
as commonality applies, the Strata Schemes Management Act (SSMA), the
Community Land Management Act and the Retirement Villages Act should be
merged into the one Act with the ability to treat each scheme separately; and
the creation of standard by-laws, which then should apply to residential, commercial
or industrial strata and community associations.
Any new legislation should be drafted in such a way, so that all the general rules relating to
insurances, repairs and maintenance, dispute resolution, financial recording and reporting,
management and dispute resolution are reasonably uniform to all types of schemes. By-laws
in the Schedules should be removed from the Act and placed in the Regulations and this is
where different types/usage of schemes should be distinguished.
4.1.1 Size matters
The current SSMA defines 'large schemes', but does not define ‘small schemes’. That
definition requires addressing as well as a revision of the selected 100 lot threshold. In itself,
size is an important criterion for setting rules on the management of the scheme, its
executive’s powers and obligations, financial management and reporting and overall
governance of the scheme (please refer to sections 5 and 7 of this submission).
The Victorian model of using the size of the scheme as a threshold for mandating the
existence of an executive does not seem a justifiable reason for differentiating the legislation
or setting different rules. In section 5 of this submission, the responses to executive training
and education highlight the need for an educated executive, regardless of the size of the
scheme.
SCA (NSW) recognises and supports Self-Managed Schemes (SMS), typically administered
by volunteer residents. These volunteers are equally responsible for the compliance and
regulatory administration of their scheme as is a professional strata manager.
SCA (NSW) recognises that most office bearers govern with the best of intentions. Owners
in SMSs have an unlimited (joint and several) liability to the scheme, most of whom are not
aware of their liability. Further, many officer bearers will have little or no protection due to
either underinsurance or no insurance at all.
The regulatory and administrative environment for all schemes is becoming increasingly
complex. Such requirements continue to impose considerable time, resources and specialist
knowledge on volunteers. SCA (NSW) is concerned that many volunteers do not have the
necessary resources or knowledge to appropriately and adequately discharge their
obligations on behalf of millions of people living under strata-titled arrangements.
Given the regulatory framework that strata managers are subjected to by way of licensing,
SCA (NSW) asserts that SMSs require professional guidance in relation to management and
financial reporting of their scheme. Such guidance may also include an enhanced regulatory
framework that is appropriate for SMSs.
In the context of the current 100+ lot schemes, the additional rules were largely introduced
due to the size of their budgets and the then perceived need for specific regulations relating
to such buildings. Rather than specifying a lot size differential, a budgetary threshold should
be the prime criterion for additional rules (as there are small strata schemes that have
substantial budgets and vice versa, such as strata shopping centres and retirement villages).
Recommendation(s):
1. Executive committee education and information levels, particularly for large schemes,
should be addressed in any new legislation.
2. That consistent with residential strata schemes, commercial/industrial/retail and
mixed-use schemes engage the services of a licensed strata managing agent.
3. The classification of large lot schemes for the purpose of special or additional
legislative rules needs to be reviewed, and consideration of a financial criterion (of
annual budgets) rather than lot quantity be included in the new legislation.
4.1.2 Compulsory audits for budgets exceeding $200K or schemes exceeding 100
lots
Auditing should not be mandatory for all sized schemes although SCA (NSW) supports a
threshold for compulsory audits. Schemes that engage an SCA (NSW) member have the
benefit of managers abiding by a code of conduct and undertaking relevant training.
Section 108 of the current SSMA ‘Inspection of Records’ provides an opportunity for owners
to seek information and inspect the accounts held by a manager. Further, some managers
voluntarily allow their owners to have electronic banking ‘viewing rights’ to the appropriate
scheme's accounts. SCA (NSW) asserts that auditing under these scenarios is restrictive,
burdensome and unnecessary - further it may add to the cost of administration.
Recommendation(s):
4. Retain the optional nature of auditing under the SSMA for both managed and SMSs.
SCA (NSW) asserts that audits should commence at the same threshold that GST is
required.
4.1.3 Usage type (residential, commercial/industrial/retail, mixed, carparks,
retirement villages, holiday resorts)
Schemes that have different usage typically demand different rules, including:
insurance (commercial/retail strata may have a different public liability risk loading to
that of single storey residential scheme or villas);
executive committee education and information levels (the educational requirements
for executive committees of different schemes sizes should be addressed in any new
legislation); and
commercial and mixed-use schemes require specialist strata managers given the
complexity of their needs and requirements.
Specifically relating to retirement villages, the management of strata retirement villages
works well within the strata legislation, however, the Retirement Villages Act takes into
consideration the “retirement manager’s” role and thus creates confusion for the residents in
differentiating between the two levies, meetings etc – one for strata and one for
“management”. Better education of stakeholders, enforced by the Retirement Villages Act or
equivalent will assist in resolving this issue.
Recommendation(s):
5. As commonality applies, the Strata Schemes Management Act and the Community
Land Management Act should be merged. Further, the obligations of an owners'
corporation operating within the Retirement Villages Act requires further clarification
and certainty for all stakeholders.
4.1.4 Style of development (horizontal v vertical)
SCA (NSW) asserts that the style of development lends itself to different legislative
approaches, particularly in relation to:
scheme management;
insurances;
fire safety checks and audits and WH&S; and
by-laws specific to balconies, child window and balcony safety, pools etc.
Pets can be accommodated in both horizontal and vertical complexes and, therefore, trying
to separate this could create more confusion or disputes.
The components that are relevant and consistent to all schemes should form the basis of
any new legislation. Prescriptive rules that differentiate on scheme or management type
could be provided in the regulations or schedules (by-laws, management, meetings,
executives and their meetings, financial management and reporting).
Templates of good practice (e.g. strata/neighbourhood roll, notices of meetings, minutes,
notices of levy contributions, periodic financial reports and annual financial statements) could
also be included in the Regulations/Schedules with differentiation based on the three criteria
highlighted above.
SCA (NSW) asserts that disputes relating to alterations can partly be resolved if boundaries
are redefined.
Recommendation(s):
6. The revised legislation for both strata and community scheme management and
development should have consideration for the different types of schemes:
● Very small 2-3 lots v large – under self-management v professional
management;
● Residential v Commercial/retail/industrial v Mixed-use v Retirement
village v Holiday parks etc – professionally managed
● Horizontal v Vertical development – self managed v professional
● Building Management Committee (BMC)
7. Templates of good practice could also be included in the Regulations/Schedules with
differentiation based on the four criteria highlighted above.
8. Changing of the AGM date should be allowed.
9. Office bearer liability insurance should be compulsory.
10. Postal address change could be to strata manager or secretary with executive
committee approval.
11. Allow the vacancy on the executive committee to be filled by a resolution of the
executive committee.
4.2 Should the current laws be combined and if so, how? (Q 2)
Duplication across the various Acts and Regulations for the strata and community industry
could be removed in many ways. SCA (NSW) asserts that the most effective approach
would be to combine the Development Acts of strata and community and to combine the two
associated Management Acts (as the day-to-day management of a scheme once built and
operational is rarely referred to or relevant). From a strata professional’s perspective, the
education of a licensed strata manager does not include the in-depth study of these latter
Acts as compared to the two prime Management Acts.
By combining the various forms of legislation, substantial duplication as well as red tape will
be removed. Also, where future changes are made to the new Acts and Regulations, both
strata and community provisions will be concurrently affected, reducing the need for
duplication in the legislative process and reducing the possibility of omissions occurring to
one of the Acts.
The Regulations that currently exist have substantial similarity for the two types of schemes.
Although combining all regulations into one body of Regulations may not be necessarily
practical, those similar components could form a core set of Regulations, and those
pertaining to specific scheme types be provided as a series of attachment Schedules. See
the diagram below.
4.2.1 Possible new suite of strata and community legislation
Strata and Community Development Act
Paragraphs/laws differentiated by:
A. Small v Medium v Large Schemes
B. Residential v Commercial v Mixed v Retirement Villages, v Holiday Parks, etc
C. Horizontal v Vertical development
Strata and Community Management Act
Chapters:
1. Intro, general (name, seal, address contracts, legal proceedings, role of Dir -
Gen.)
2. Managing the scheme (Owners' Corp. Assoc., initial period, Exec., Caretakers,
Strata/Community Managers, making By-law changes)
3. Meetings (First AGM requirements, subsequent meetings: notices, procedures,
quorums, proxies, voting/polls etc.)
4. Managing the Built Environment (Repairs, Insurances)
5. Financial Management (levying, record keeping and reporting)
6. Interests in lots (owner responsibilities, s.108 inspections, s.109/26 certificates,
borrowing money, i.e. SSMA Ch 3 Part 6)
7. Disputes (mediation, Arbitration, CTTT)
Regulation differentiation:
A. Small v Medium v Large Schemes
B. Residential v Commercial v Mixed v Retirement Villages, v Holiday parks etc
C. Horizontal v Vertical style
Strata and Community
REGULATIONS/Schedules
By-laws (ex Schedule 1 SSMA templates)
Meetings (templates of good practice)
Executive (ex Sch 3)
Financial reports
(ex Reg Part 2 with Templates of good
practice)
Fees (ex Reg Part 5)
Usage of scheme (Residential v Commercial v Mixed
v Retirement v Holiday parks)
Style of construction (Horizontal v Vertical)
Size of scheme (Small v Medium v Large Schemes)
Recommendation(s):
12. Combining the various forms of legislation as follows will remove substantial
duplication as well as red tape:
● Strata Schemes Development Act and Community Land Development Act;
and
● Strata Schemes Management Act and Community Land Management Act.
4.3 What examples of unnecessary red tape do you believe should be
removed? (Q 3)
Examples of unnecessary red tape that should be removed and/or improved include the
following recommendations.
Recommendation(s):
13. Retain the requirement for insurance to be sought only from Federal Government
approved companies. There is minimal public advantage in securing insurances with
companies that fail to provide the minimum mandatory insurance;
14. Standardise the notice period for all meetings across strata and community schemes
(e.g. 14 calendar days) and accelerate the uptake of electronic communication for
notices, minutes and other related communications;
15. Special levies to be paid into the appropriate fund: i.e. the owners' corporation should
be able to determine if a special levy is for either the administrative fund or the
sinking fund depending on the nature of the works needing additional funding;
16. Allow matters to be decided by the owners/association at a general meeting by
special resolution i.e. changing the financial year and the date of the AGM;
17. The requirement of filling a vacancy on an executive committee meeting should
remain to ensure they have a quorum for a subsequent meeting. The wording should
be altered to read that the “executive committee” may appoint a person, instead of
the ‘owners' corporation’ must appoint a person. There should be no appointment
time limit;
18. Convening general meetings – It is presently too difficult to requisition a general
meeting. Clause 31 of Schedule 2 of the SSMA requires that a requisition be made
by the holders of 25% of the unit entitlements, which can be impractical, particularly
in relation to a larger scheme;
19. Blocking decisions to be made by the executive committee - It is presently too difficult
to block a decision of the executive committee at a future meeting. Clause 11 of
Schedule 3 of the SSMA requires that a notice signed by one-third of the unit
entitlements be provided to the secretary prior to a meeting at which only 72 hours
notice is required to be given. This is often completely impractical, particularly in
relation to a larger scheme;
20. Governance requirements – In our view, the requirements in this area are
unnecessarily restrictive, e.g. section 18 of the SSMR presently requires that each
ballot paper be completed and signed by each voter, which is impractical where there
are large numbers of proxies;
21. SSMA: Section 52 - Section 52 deals with the grant of exclusive use rights and/or
special privileges and provides for this to be effected by a by-law approved by special
resolution and having the consent of the owners of the “lots concerned”. This
presents a number of issues, precluding certainty as to the validity of such
arrangements, in particular:
● what is a “special privilege” if not an exclusive use right or licence?
● who is an “owner concerned”? The case law conflicts on this, variously
suggesting a lot owner whose use of common property is adversely effected
(potentially being all lot owners), and the lot owners to whom the rights are
granted.
● why is the consent of an owner concerned required if given the broader
meaning referred to in paragraph (b)? Why should a section 52 by-law
potentially require unanimous consent, when other more substantial
transactions, e.g. a subdivision, do not?
22. SSMA: Section 65A - Section 65A requires a special resolution for the purpose of
approving works by an owner adding to or altering common property. However, it
makes no provision for retrospective approval nor does it provide any practical
solution in relation to works which have already been carried out. In such situations, it
can be very difficult to reach a solution with an owner who has carried out such
works, let alone at a general meeting of owners, who in any event lack power to
approve retrospectively. Such situations can involve very minor works.
23. SSMA: Section 65B – section 65B deals with the grant of a licence to use common
property to a lot owner, requiring a special resolution. However, the absence of
reference to a non-owner casts doubt on whether, either:
● the owners' corporation may grant a licence to a non owner without a
special resolution being required; or
● the owners' corporation has no such power, leading to a widely held view
that an owners' corporation must pass an “empowering by-law”, empowering
it to grant licences to non owners, before granting such licences. This would
be at odds with provisions such as sections 25 and 26 of the SSFDA, which
permit much more significant rights to be granted to non-owners, where the
right will be the subject of a registered dealing.
● this needs to be clarified if owners' corporation's and others dealing with
them are to have certainty regarding such arrangements.
24. Decisions reserved to the owners' corporation in general meeting – Substantial
delays can be experienced obtaining owners' corporation resolutions, if they can be
obtained at all, taking into account notice requirements, owner apathy, quorum
requirements and the requirement of a special resolution in many cases. Further,
action frequently needs to be taken, in order to protect the interests of the owners'
corporation more quickly than is possible for an owners' corporation. For example:
● Section 80A of the SSMA effectively precludes expenditure in excess of 10%
over a predetermined amount, without a further resolution of the owners'
corporation in general meeting. However, this is in tension with the owners'
corporation's other obligations, e.g. its obligation to maintain common
property under section 62 of the SSMA. This is compounded by section 80B,
which refers to quotations, rather than estimates, the former often being
unavailable. That the owners at the AGM opt whether to comply.
● Section 65B of the SSMA provides that a special resolution is required for an
owners' corporation to grant a licence to use common property to a lot
owner. This can hinder an owners' corporation's arrangements with owners
and occupiers of lots to an unwarranted extent, especially in a commercial or
mixed-use scheme.
4.3.1 The selling and conveyancing process
The Strata/Community Development Acts and Management Acts do not educate purchasers
about the rights and responsibilities of becoming an owner in a scheme. SCA (NSW) asserts
that Sales Agents and Conveyancing professionals owe the public a duty of care with
respect to informing purchasers of these rights and responsibilities. There needs to be a
greater emphasis placed on the education of the owner and owner-to-be.
Legal professionals and Sales Agents involved in the preparation of the contract for sale
need to consult with the Secretary/Strata Manager as to obtaining and distributing the
relevant information for the purchasers.
Recommendation(s):
25. Contracts for sale should contain: copies of the by-laws or Management Statement of
the scheme; copies of the strata plan or deposited plan (already required); copies of
the Strata Living or Living in a Community booklets of Fair Trading; a
recommendation that purchasers undertake a thorough pre-purchase inspection of
the books and financial records.
26. The obligation rests with the owners' corporation to provide the relevant updated
material.
27. That there be an option for the vendor to undertake the same.
4.3.2 When is a community not a community?
Some developers are taking advantage of the provision in the Community Land
Development Act allowing ‘sales off the plan’ and classifying schemes that appear and act
like strata, as community schemes. This can cause confusion to owners, for example,
community title for terrace houses is fraught with difficulties whenever individual owners are
given the right to insure their own building and the responsibility, but don’t necessarily
implement, to carry out their own repairs and maintenance. Common area (guttering,
fascias, facades, eaves, etc) create complex insurance and repairs scenarios for managing
agents and owners.
4.3.3 Community Title v Torrens Title
The exemptions currently afforded to two-lot strata schemes could also be valuable and
relevant for the 3-lot (2-occupied lots) community scheme; the current Community Land
Management Act is deficient in relation to this point. Community schemes with only two (2)
ownership lots are becoming more abundant as developers utilise the zoning rules to fit two
(2) villas on the same sized plot of land as a standard residential block. These schemes are
currently required to uphold insurances as set by their Management Statement and the
CLMA. The level of owner dismay at this requirement regularly results in community
associations not reinsuring their community property – which may be as small as 1m² of
lawn.
Recommendation(s):
28. Allow 3-lot community schemes with Lot 1 of <2m2 (and no other community
property) to be exempt from the current insurance requirement.
4.4 To what extent should the Government prescribe rules for all schemes?
(Q 4)
SCA (NSW) asserts that the current system is too complex which gives rise to errors,
disputes and cost. Simplicity and prescription for all schemes could include:
transferring surplus funds from one account to another should be permitted where
the circumstances are justifiable and approved at general meeting. However, there
should be a requirement to review the funds and accounts at the AGM to ensure
budgetary integrity. There is an obligation to account for transferred funds at the
subsequent AGM.
Recommendation(s):
29. The Acts that evolve from this review should outline the basic and common rules to
be applied by all schemes in such things as:
● naming the scheme, address of the scheme, the Common Seal (basic
fundamentals);
● calling meetings, chairing, documenting and disseminating minutes;
● role of executive positions;
● role of caretakers;
● duty of managing agents;
● duty of owners' corporations to maintain the built structures and duty of
individual owners to do the same in their community scheme;
● what funds are required to operate all schemes and some basic rules such as
separation, loans, transfers between financial reporting of funds
management, its frequency and basic content of reports procedures for
inspections of records and legal certificates for the sales process dispute
resolution procedures
The Regulations would outline the varying principles as well as rules and exemptions
to those rules for specific scheme types.
4.5 Should broad principles apply to the making of by-laws? (Q 5)
By-laws have become a "default" as a part of buying into a scheme. They set the tone of the
standards of architectural consistency, landscaping and protection of the peaceful living of
the community. It would be idealistic if legislation could cover all scenarios and offer a
perfect set of by-laws for every scheme type; that is, simply, not realistic.
A blend of prescription and a principles-based approach is a balance between regulation
and flexibility. Under this scenario, the needs and variations of individual schemes are too
great for the legislation to reasonably satisfy. Therefore, there is merit in the legislation
providing both a basic list of by-laws in model by-laws (as currently exists) for developers to
select as well as depicting some broad guidelines or principles to assist owners establish
new or modify existing by-laws.
By-laws should be written in plain English, be applied fairly to those parties affected by them
and ensure the peaceful enjoyment of the common/neighbourhood property by all owners
without placing burdensome restrictions on civil liberties. However, there should be a
restriction on the extreme use of power in by-laws.
We agree with the broad principals but there should be flexibility for individual schemes.
Recommendation(s):
30. The needs and variations of individual schemes are too great for the legislation to
reasonably satisfy. Therefore, a blend of prescription and a principles-based
approach to by-laws is required such that a balance between regulation and flexibility
is achieved. There is merit in the legislation providing both a basic list of by-laws in
model by-laws (as currently exists) for developers to select, as well as depicting
some broad guidelines or principles to assist owners establish new or modify existing
by-laws.
31. The creation of elective or discretionary model by-laws that deal with more complex
management issues, i.e. a generic works by-law, definition of a visitors by-law and
short-term letting requirements by-laws.
4.6 Is there merit in the mission statement idea? (Q 6)
There are merits in providing an indicator to a purchaser as to what style of owner/occupant
currently exists and to question whether or not a purchaser may wish to become part of that
community.
The direction of mission statements requires consideration. Statements that may be
prejudicial or defamatory or discriminatory (i.e. race, ethnicity, religion, gender) should be
excluded. Statements that provide a broader statement of "living intent" ought to be included
(i.e. carbon rating, pet friendly, proximity to public transport, short-term vs. long-term letting).
Substantial consideration as to the content and intent of a Mission Statement is required as
any statement may have both a positive and negative effect on a potential vendor’s sale.
Recommendation(s):
32. There are merits in providing an indication to a purchaser as to what style of
owner/occupant currently exists and to question whether or not a purchaser may
wish to become part of that community. Substantial consideration as to the content
and intent of a mission statement is required as any statement may have both a
positive and negative effect on a potential vendor’s sale.
4.7 Should the law give more recognition to the personal freedoms of
owners? (Q 7)
SCA (NSW) asserts that strata living is by definition, one that necessarily requires
community consensus and culture to prevail. In other words, community rights should come
before the personal freedoms of owners.
As the NSW population trends towards medium and high density living, there is a
requirement for people to understand their community rights and responsibilities. The
education of purchasers of all types of schemes (residential, commercial or retirement
villages) is crucial and should be provided via appropriate documents and information given
to prospective buyers before signing a contract. Such documentation should enable an
informed decision by the purchaser and could include: by-laws, status of funds, capital works
plans, a mission statement (see response 4.6). At the same time, the legislation should not
create an environment that is too restrictive of basic freedoms or deter purchasers from
strata living.
For example, a review of the lot boundaries may be required to permit owners more freedom
in the refurbishment of their lots. It is a conflicting situation when the tiles on an internal wall
belong to the owner, but the tiles on a common wall/floor belong to the owners' corporation.
Owners should be permitted to carry out works within their lot that do not affect the integrity
of the building (provided they give notice to the owners' corporation and residents in the
building). Under this scenario, such a review may make the lot owner responsible for the
future repairs and maintenance of these tiles and would negate the exercise of allocating
responsibility to the owner or owners' corporation.
Recommendation(s):
33. Strata living is by definition one that necessarily requires the community consensus
to prevail. In other words, community rights should come before the personal
freedoms of owners.
4.8 Are reforms needed to address the competing interests of stakeholders?
If so, what should they be? (Q 8)
All owners have a duty to maintain the common property properly and equally for all owners,
whether they are a resident or not. In the context of three of the most common competing
stakeholder scenarios, SCA (NSW) makes the following observations:
4.8.1 Developers v Owners
Getting builders to correct faults is a challenging exercise. Strata managers often find
themselves in a potentially compromising position once they have been appointed by the
owners at the first AGM to be then requested to write to the developer/builder (the entity that
first engaged the strata manager) in relation to defects. Mandating that the developer/builder
remains on the executive (as a non-voting member) for the first year of operation may
overcome such a conflict. Further, that the developer deposit a 10% retention fund for two
(2) years.
4.8.2 Mortgagees and Covenant chargees v mortgagors/owners
The ‘priority vote’ should be dispensed with as it is very rarely used and only causes
confusion to owners. The requirement that notices and minutes of general meetings being
required to be sent to mortgagees should also be abolished. The only exception could be
where a motion for the termination of a strata scheme was on an agenda. Mortgagee and
covenant-in-charge may only have a priority vote if and when that charge has been
expressed by court order.
4.8.3 Investors v resident owners
Some investors are excellent owners so to give them a lesser vote (as suggested in the
Discussion Paper p.6) would be unfair and also create conflict between the stakeholders at
meetings. It would be preferable to enforce the requirement that the amounts determined in
a sinking fund analysis must be levied and not amended. This will ensure both developers
and investor owners contribute fairly to future repair and maintenance.
5. Governance
5.1 What terms or provisions in the current law do you believe should be
rewritten in plain English? (Q 9)
SCA (NSW) recommends the following terminology:
Current Terminology Suggested Terminology
Executive Committee Maintain the current definition
Strata/Community Managing Agent Maintain the current definition
Administrative Fund Maintain the current definition
Sinking Fund Capital Works Fund
Strata Roll Owner Register
By-laws Maintain the current definition
Initial period Maintain the current definition
Unit Entitlements Lot Entitlement
Aggregate UE Total Lot Entitlement
Common Property Maintain the current definition
Parcel Maintain the current definition
Appurtenant Maintain the current definition
Occupier Maintain the current definition
Contributions Lot Owners Contributions
Owners' Corporation or
Neighbourhood Association
Maintain the current definition
Strata/Neighbourhood Roll Register of Owners
Poll voting Vote by Lot Entitlement
5.2 Which of the following would help to improve awareness and in what
ways? (Q 10)
5.2.1 More information resources (e.g. factsheets, targeted brochures, template
forms, sample documents and an email newsletter)
The current supply by Fair Trading of factsheets, booklets/brochures such as Strata Living
and Living in a Community are excellent and should be updated and expanded.
SCA (NSW) has a sound track record in educating strata managers and lot owners via our
RTO, Consumer Awareness Seminars, Industry Briefing Sessions, Conferences and Free
Online Executive Committee Training modules. In this regard, SCA (NSW) has a
commanding position in relation to the provision of these services.
Recommendation(s):
34. That existing lot owners (including self-managed schemes), via their executive
committees, be provided with more resources in relation to improving awareness.
35. That Fair Trading or equivalent, creates a register of all executive committee’s in
NSW.
36. That the Strata Living and Living in a Community documents be updated and
expanded for the use of lot owners.
37. That, given SCA (NSW)'s sound track record in educating strata managers and lot
owners, SCA (NSW) be a preferred Government facilitator of the provision of
educational and information services to lot owners.
Providing the appropriate resources to prospective buyers of a strata or community lot is not
the role of the strata or community management legislation. The onus cannot be placed on
either a secretary or a strata manager to educate buyers of the nature of this form of title.
Too often, potential buyers telephone a manager of the scheme they are interested in
purchasing into, with very little knowledge of what responsibilities come with that ownership.
A strata manager’s time is often spent discussing the basics with purchasers that otherwise
should be supplied by either the selling agent or the purchaser’s legal representative.
Recommendation(s):
38. It should be mandated that pre-exchange of a contract and settlement, the following
matters are addressed: Written guidance provided to the new owner that outlines
rights and responsibilities of strata/community ownership including a copy of the by-
laws (with the purchaser’s signature as acknowledgement of receiving the guidance).
The contents of the strata records be summarised for a pre-purchase inspection
report arranged by a legal professional. The report to contain a description of the
form of management of the scheme (professional v self) and the implications of this
to be explained by the conveyancing practitioner.
5.2.2 Compulsory training for executive committee members of all schemes or just
large schemes
Executive committee members carry the same or similar responsibilities and liabilities in all
schemes, irrespective of size.
In the context of large schemes, executive committee members make decisions that affect
more owners and assets than in smaller schemes. In this regard, the executive committee
members of large schemes should be encouraged to undertake compulsory training –
regardless of whether or not they have engaged a professional manager. Further, those
executive committee members who receive honorariums (or equivalent) as a result of their
executive committee involvement should not be entitled to the honorarium unless higher
level training is undertaken.
In the context of self-managed schemes, where there is no direct guidance and
management by the strata profession, the executive committee members should be required
to undertake compulsory training.
The funding of such training could be, in part, by way of a special levy attached to the
administrative fund that each scheme is required to hold.
Recommendation(s):
39. In the context of large schemes, it is recommended that executive committee
members undertake training.
40. In the context of self-managed schemes, it is recommended that executive
committee members undertake training.
41. SCA (NSW) should be the preferred Government facilitator of the provision of
educational and information services to executive committee members.
5.2.3 Having new committee members signing a statement setting out their
obligations and responsibilities
SCA (NSW) is of the view that such a requirement should be linked to competency-based
outcomes. This may assist committee members in becoming better informed and therefore
make better decisions on behalf of their scheme. The extent of responsibility that an
executive assumes depends on the form of management of that scheme (self-managed vs.
professionally managed) as well as the level of any delegation to that licensed manager.
Recommendation(s):
42. SCA (NSW) recommends that all owners' corporations:
● submit an annual report to Fair Trading, including: details of the executive,
funds held by the scheme and a copy of the yearly financial statements;
● that Government reviews the compliance by all schemes through random
selection of those lodged annual reports.
5.2.4 Requiring managing agents/Secretaries to supply new owners and tenants with
an up to date set of by-laws within a specified timeframe (e.g. 14 days)
SCA (NSW) rejects this premise. The burden should not be on the strata/community
managing agent or secretary. Once settlement has taken place, it is too late for owners to
learn about the by-laws of the scheme in which they have bought. These documents should
be in the original sales contract so that all owners will know what the responsibilities are for
onsite ownership. Also, the NSW Residential Tenancy Act currently requires that tenants be
provided with a copy of the by-laws at signing the tenancy agreement.
Recommendation(s):
43. It should be mandated within the real property sales laws and the Conveyancing Acts
that the conveyancing practitioner or letting agent provides new owners and tenants
with an up to date set of by-laws within a specified timeframe.
44. That all owners and residents sign a copy of the by-laws at the time of settlement and
at the time of entering a tenancy agreement.
5.2.5 Making it a requirement that schemes review their by-laws at regular intervals
(e.g. every 5 years)
Yes, by-laws should be reviewed at regular intervals.
5.2.6 Expanding the section 109 certificate to disclose more matters likely to be of
material interest to prospective buyers
The timing of the issuing of a s109/26 certificate in the sales process does not educate the
potential purchaser before signing a contract. It is this critical time-frame when prospective
buyers need to undertake due diligence, such as an independent pre-purchase inspection of
the strata/community records (that are not supplied in the contract or obtained from the
selling agent).
Items of material interest that could be included in the s109/26 Certificates are:
balances in administrative and sinking funds;
minuted capital works projects for the forthcoming year; and
unresolved defects.
Recommendation(s):
45. The current s109/26 fee does not compensate or recognise the resourcing
requirements currently undertaken by the strata manager. The fee should be
readjusted to appropriately compensate the resourcing. This fee is then to be borne
by the purchaser at no cost to the scheme or the Government.
5.2.7 Clarifying and simplifying the law dealing with the inspection of records
Currently, s108 of SSMA provides any party the right to inspect the books of a strata
scheme, whilst paying a prescribed fee of $30 per hour for the first hour.
An ambiguity currently exists in relation to what information is to be deemed 'public' and
what is 'private' of the ‘prescribed records’ that may be inspected (e.g. email addresses and
telephone numbers).
The current requirement that the documents must not be removed from the custody of the
owners' corporation (SSMA s108(6)) is restrictive and potentially intrusive to the office of the
secretary/manager. It also presents a potential safety issues for the secretary/manager. This
restriction should be amended in such a way that provides for the protection the integrity of
the records as well as considering the safety issues for the secretary/manager.
5.3 Do you have any other suggestions for how awareness of rights and
responsibilities could be improved? (Q 11)
Further to the response above, selling agents, conveyancers and solicitors must assume
more responsibility in relation to advising prospective buyers of these rights and
responsibilities.
5.4 Which of the following would help to improve participation and in what
ways? (Q 12)
5.4.1 Limiting the numbers or restricting the use of proxies
There are many negative aspects to the practice of "proxy farming". However, lot owner
participation and apathy present just as many, if not more, challenges to a scheme. SCA
(NSW) is reluctant to recommend a limit as to the numbers of proxies any one individual may
hold. However, consideration should be given as to the levels of authority inferred in the
proxy.
Recommendation(s):
46. Consideration should be given as to the levels of authority inferred within a proxy.
47. Consideration should be given to proxies for procedural matters to ensure quorums
are met and resolutions considered. However, with restrictions on non-procedural
matters to prevent inappropriate use or non-disclosure of the intention of use of
proxies.
5.4.2 Introducing a system of pre-meeting postal voting for those who cannot attend
a meeting
A version of this currently exists via the Proxy Appointment Form template (SSM Regulation
Form 2 cl. 26(3)). To further enhance this provision, the Regulations could provide a
template voting form with options of ‘For/Against’ given to each motion so those owners who
cannot attend post these to the secretary to have their specific votes recorded. This is
commonly employed now by some professional managers in NSW and well received by
owners and managers alike, particularly in relation to the transparency of the voting process.
It is similar to Government referendum voting.
5.4.3 Mandating that all owners must vote, with fines imposed if they do not
SCA (NSW) supports the encouragement of voting rather than mandating.
5.4.4 Providing the option of secret ballots on certain issues
SCA (NSW) does not support secret ballots.
5.4.5 Reducing the restrictions on quorum requirements or removing the need for
quorums altogether
SCA (NSW) does not support the requirement of a quorum.
5.4.6 Enabling some form of tenant representation in schemes
SCA (NSW) supports the ability for tenants to represent an owner’s view only via proxy.
Tenants should not be given the chance to nominate themselves to take the place of an
owner and make decisions for an owner without prior consent issued to the executive
committee from the owner.
5.4.7 Calling for committee nominations in advance of AGMs
Currently, some managers voluntarily include a provision on an AGM voting form for owners
to nominate for specific executive positions. The inclusion of instructions on the AGM notice
in relation to the nomination process would be advantageous.
5.4.8 Allowing payments to be made to committee members for attending meetings
SCA (NSW) does not support payments to be made to committee members for attending
meetings.
SCA (NSW) recommends that where payments are made to committee members, key
performance indicators, educational standards and position descriptions are set and agreed
in advance of the appointment of remunerated members.
Recommendation(s):
48. SCA (NSW) recommends that where payments are made to executive committee
members, key performance indicators, educational standards and position
descriptions are set and agreed in advance of the appointment of remunerated
members. Further to honorariums, such measures must be agreed at a general
meeting.
5.4.9 Clarifying the legal liability of executive committee members
SCA (NSW) asserts that the statutory protection for executive committees should be
provided if they act in good faith on behalf of the scheme, further, it would encourage more
owners to nominate.
5.5 Do you have any other suggestions for how participation in schemes
could be improved or owner apathy addressed? (Q 13)
The engagement of a professional strata manager can assist with the facilitation of
appropriate communications to the various owners. However, a broader information
campaign is required to educate owners as to benefits of involvement, particularly in relation
to boosting their investment and improving the community in which they have invested.
Recommendation(s):
49. SCA (NSW) recommends that a broader information campaign is required to educate
owners as to benefits of involvement, particularly in relation to boosting their
investment and improving the community in which they have invested.
5.6 Which of the following would help to improve communication and in what
ways? (Q 14)
Recommendation(s):
50. That six monthly reports on finances and operation be provided to owners for small
schemes and quarterly for large schemes.
5.6.1 Recognising various technological options for distributing information to
those involved with individual schemes
All options should be considered, particularly in relation to boosting owner involvement and
reducing apathy.
Electronic methods of information dissemination provide additional cost benefits to the
schemes. However, SCA (NSW) recognises that some owners may still have a preference
for postal delivery notifications. Therefore, consideration should be given to owners opting to
continue receiving postal notifications, despite the trend toward electronic communications.
Recommendation(s):
51. That the legislation permit the dissemination of levy notices, notices of meetings,
minutes and other communication by electronic means. However, consideration
should be given to owners opting to continue receiving postal notifications.
52. As technology provides, consideration and utilisation of the various options should be
considered.
5.6.2 Enabling teleconferencing, videoconferencing or other means of holding
meetings
Further to the responses above, SCA (NSW) supports this notion.
5.6.3 Providing more certainty as to how correspondence to schemes should be
handled
No, it should not be necessary to mandate a time frame for return of correspondence by a
secretary/manager of a scheme. Good practice demands that correspondence be handled in
an efficient and timely manner. Consideration should be given to the legislation potentially
including a generalised provision rather than a prescriptive one.
In the context of troublesome owners, mediation, rather than determination, should always
be the first option. SCA (NSW) recognises that such matters rely upon the communication
skills of the individual manager.
5.6.4 Reducing the documents required to be sent to owners ahead of meetings
As previously discussed with the use of electronic communications, technology alternatives
should be explored. These could include a member only website or hosted blog/chat sites.
Further, control and access of such mediums should be limited to the strata manager,
executive committees and owners. However, consideration needs to be applied to owners
who elect not to take up electronic mediums.
5.6.5 Giving schemes the flexibility to make documents available on their website or
on request from owners
Please refer to the above response.
5.6.6 Requiring minutes of meetings to be made available within a specified time
after the meeting (e.g. 14 days)
Good practice demands that minutes be distributed in an efficient and timely manner, but
prescription is not necessary. Consideration should be given to the ability of minutes to be
distributed electronically.
5.6.7 Making it clear when contact details can be given to executive committees and
owners/residents
Section 108 of the SSMA currently provides for the inspection of strata records without the
need for approval by individual owners. The opportunity exists for this section to include
requests in writing by any owner for the contact details of other owners of the scheme. A fee
should be payable to the manager/secretary and the information supplied in writing. Some
agency agreements already provide for a manager to supply this information at a cost.
Consideration needs to be given in relation to privacy and whether owners opt in or opt out
of such mechanisms.
5.7 Do you have any other suggestions for how communication in schemes
could be improved? (Q 15)
The executive committee should be encouraged to circulate a bulletin/newsletter to owners
at no less than six (6) monthly intervals if there has been at least one executive committee
meeting in that period.
The traditional role of a noticeboard is an inappropriate way for displaying all but the simplest
of notices (e.g. lift shutdown, etc). Electronic bulletin boards would be a timely application for
the latter.
5.8 Which of the following would help to improve transparency and in what
ways? (Q 16)
5.8.1 Requiring any person with a conflict of interest to declare that interest and not
participate in any discussion or voting on the matter
SCA (NSW) upholds the use of good governance. In this regard, all conflicts of interest
(potential or real) should be declared and noted in the minutes. The attendees can then
make an informed decision as to the inclusion of the conflicted person in any discussion and
vote.
SCA (NSW) supports maintaining the existing disclosure of conflicts of interest and
abstaining from motions where a conflict may exist.
5.8.2 Restricting the ability of certain persons (e.g. non-owners or more than one co-
owner) from being elected to executive committees
No restrictions should be imposed, however, tenants and multiple co-owners should be
excluded. Conflict or potential conflicts could occur.
5.8.3 Making the managing agent automatically a non-voting committee member
SCA (NSW) does not support this proposal.
5.8.4 Requiring office bearers be elected at each annual general meeting
Yes, this is good governance and also provides for the rotation of office bearers.
5.8.5 Imposing a minimum number of committee members (e.g. three)
SCA (NSW) does not support this proposal.
5.8.6 Limiting the period of time any individual can continually hold the same office
(i.e. Chairperson, Secretary or Treasurer)
SCA (NSW) does not support this proposal as it is not always practical with small schemes.
However, SCA (NSW) recognises some merit for medium to large schemes, particularly in
relation to overcoming deadlock or power struggles.
5.8.7 Requiring motions to be accompanied by an explanatory note and to identify
the person who submitted the motion
Yes, it is good governance that non-procedural motions be accompanied by a short optional
explanatory note as well as identifying the person who submitted the motion. The
explanatory note could contain relevant information such as: an explanation, justification,
and costing (if applicable) to assist with the decision-making by non-attending owners.
Further, the person submitting the motion should be obliged to speak to the motion.
5.8.8 Prohibiting or requiring the disclosure of commissions
Yes, this is currently required by legislation and is also good governance to disclose
commissions.
5.8.9 Imposing further restrictions on the length of contracts associated with
schemes
The length of contract terms should be appropriate and commensurate with the service
contracted. However, consideration should be given to reducing contract terms, as such
measures may increase the competitiveness of the contracting party. Roll-over provisions
should remain but for a shortened term.
Owners must be mindful of the pending expiry of the initial term so they can take advantage
of the clauses for termination.
Recommendation(s):
53. SCA (NSW) recommends that a contracts registry should accompany general
meeting papers.
5.8.10 Streamlining the levels of consent required to make decisions
Yes, please refer to the answer immediately below.
5.8.11 Providing greater clarity over who can make what decisions in schemes
The hierarchy of decision making powers of the owners' corporation v executive committee
must remain.
The SSMA Schedule 2 cl. 34(g) and 34A currently require for a motion to be placed on the
agenda of a general meeting to determine if decisions are to be made only by the owners'
corporation (thus limiting the powers of the executive committee). These are effective if the
manager utilises the motion effectively.
Recommendation(s):
54. More emphasis is required educating owners in relation to allowing the executive to
have no limitations to their powers and/or restricting the powers of the executive.
55. SCA (NSW) recommends a review of clarity as to who can make what decisions in
schemes, i.e. where delegations exist where the executive committee can make
resolutions, the legislation should be clear in this regard.
5.8.12 Requiring all or some schemes to have accounts audited
SCA (NSW) refers to section 4.1.2.
5.8.13 Giving owners a right to request and receive copies of any documents relating
to expenditure
SCA (NSW) upholds the use of good governance. Currently, many strata managers employ
such a system of providing copies of quotes and contracts to the secretary/treasurer. Section
108 SSMA of the currently permits an owner to inspect the books, so education of owners
and their rights under this provision would be worthwhile.
5.9 Do you have any other suggestions for improving transparency within
strata and community schemes? (Q 17)
SCA (NSW) asserts that the updating of conveyancing laws and regulations for selling
agents to ensure that prospective buyers into strata and community schemes are given full
disclosure of the rights and responsibilities of owning such property.
Recommendation(s):
56. Further education of selling agents via their Certificates of Registration and Licensing
courses in relation to strata/community title is required.
57. The registration of a scheme with Fair Trading.
58. The registration of a scheme's office bearers with Fair Trading.
59. The lodgement of a scheme's annual report with Fair Trading.
5.10 Which of the following would help to improve accountability and in what
ways? (Q 18)
5.10.1 More clearly defining the role of managing agents, executive committees and
office bearers
Yes. The SCA (NSW) Agency Agreement specifies what duties of the executive are
delegated, by authority, to the agent. Further, the SCA (NSW) Agency Agreement has been
formulated in conjunction with the OCN. This is a precise and clear document that
summarises the hierarchy and establishes the protocol for the management of the scheme.
Recommendation(s):
60. The SCA (NSW) Agency Agreement should become the industry benchmark.
5.10.2 Holding agents directly accountable for their actions
This depends on the level of delegation provided to the agent on appointment. When an
agent acts under direct instruction or through delegated authority, and does so in the best
interests of the scheme that a ‘reasonable person’ would do, there should not be any cause
for owner complaints or legal action.
Making agents directly accountable undermines the Agency Agreement and delegated
authority. However, if the agent negligently or fraudulently acts, he/she should be
accountable. No protection from the agent’s PI insurance would be forthcoming under such
scenarios. PI insurance should be mandatory to safeguard consumers and to continue to
professionalise the industry.
Recommendation(s):
61. The SCA (NSW) recommends that PI insurance should be mandatory to safeguard
consumers and to continue to professionalise the industry. That the minimum be
$10M.
5.10.3 Providing an easier process for schemes to terminate the services of agents
SCA (NSW) supports this proposal and proposes a mechanism that allows for a termination
of agreements where a substantiated breach or misconduct or significant underperformance
issues are identified.
SCA (NSW) encourages the education of lot owners in respect to the execution of long-term
contracts and availability of an effective Fair Trading dispute resolution mechanism.
5.10.4 Making professional management mandatory for large schemes
SCA (NSW) supports self-managed schemes, however, asserts that these schemes comply
and administer their schemes to the same standards as applied to professional strata
managers.
Further, should large schemes be self-managed, SCA (NSW) refers to the recommendations
as set out in section 5.2.2 of the submission.
5.10.5 Introducing a Code of Conduct for executive committees or requiring them to
act with due care, skill, honesty and for the benefit of all owners
SCA (NSW) supports good governance and this proposal.
5.10.6 Giving the CTTT more options before appointing a compulsory agent
Before the appointment of a compulsory agent, consideration should be given to the
following optional steps:
opening all executive positions for re-election;
compulsory mediation (where applicable); and
providing the ability for owners to appoint a managing agent from a nominated list.
5.10.7 Requiring executive committees to prepare brief annual reports
SCA (NSW) supports good governance and this proposal. Owners should be provided with
information surrounding the management of their scheme throughout the year, including:
the financial assessments and position (tracking to budget and actual);
the executive committee’s goals/projects and achievements throughout the year; and
the level of participation (attendance) by each member of the executive committee.
5.11 Do you have any other suggestions for how to improve accountability? (Q
19)
There needs to be measures to ensure that expenses are properly controlled and owners
receive value for money from service providers. The default position should be that if 10% of
the expenditure of the total budget is exceeded then the executive committee must revert to
a general meeting for budgetary approval. Further, that if the scheme so chooses, they can
vote to remove or alter such a threshold.
6. Managing the Built Environment
6.1 Do you support the introduction of an alternative process for terminating
strata schemes? If so, how many lot owners would need to agree to
initiate the process? (Q 20)
Yes, please refer to SCA (NSW)'s discussion paper, Community Renewal.
In the context of lot owner agreement, SCA (NSW) is yet to nominate an appropriate
percentage that might initiate the process, however, we reiterate that an effective, equitable
and transparent process must be implemented.
6.2 Should any alternative process accommodate only collective sale or
should the process be more flexible, to enable co-operative
redevelopment of the scheme? (Q 21)
The process should be flexible enough to accommodate both a collective sale and the
cooperative development of a scheme. The model described in SCA (NSW)'s discussion
paper, Community Renewal accommodates both situations using a strata renewal plan.
6.3 Should the meaning of common property be changed? If so, which
approach do you favour? (Q 22)
The definition of common property should not be changed. However, SCA (NSW) asserts
that there is still substantial confusion surrounding the definition of common property and
who is responsible. SCA (NSW) has developed a document called Who’s Responsible. This
document acts as a guide to both strata managers and owners as to who is responsible for
certain aspects of a scheme.
The determination of who is responsible for maintaining a part of a lot should not be made by
reference to the strata plan (whose primary function is to create the boundaries of strata lots)
but by statutory strata management means such as appropriate clauses in a Strata
Management Act and by-laws.
Recommendation(s):
62. SCA (NSW) recommends that the NSW Government, in conjunction with SCA
(NSW), funds further development and the distribution of the Who’s Responsible
document for the education of both owners and strata managers.
6.4 Should owners be responsible for all internal repairs within their lot
and/or work which only benefits or affects them? (Q 23)
SCA (NSW) asserts that wherever possible, practical solutions should be sought in relation
to community living.
In the event that minor modifications were to be undertaken, and that these modifications
would not impact the owners' corporation or other lot owners, then lot owners should be
allowed to undertake such minor modifications. In doing so, consideration of liability,
insurance and other issues is required.
In the event that modifications will impact either the owners' corporation or other lot owners,
then the current system should prevail, that is permission should be sought.
In relation to this issue, SCA (NSW) is aware of some legislative inconsistencies that require
consideration, including:
the Residential Tenancies Act 2010 permits a tenant to recover the cost of urgent
repairs from the landlord, but where the premises comprise a strata lot, case law
suggests that the landlord cannot recover the amount from the owners' corporation;
and
section 186D of the Environmental Planning and Assessment Regulation 2000
provides that owners' corporation consent is not required to install a smoke or heat
alarm, but this is in tension with section 65A of the SSMA and it is doubtful whether a
provision such as section 65A can be varied by a regulation under another Act.
Recommendation(s):
63. The concept of ‘implied exclusive use’ could be integrated into the strata legislation.
This term could apply to fixtures and parts of the building within a lot but also fixtures
that are on common property but service only one lot. Examples include an external
hot water service for a lot (situated on common property) and an air conditioner
(situated on a roof or external wall but servicing only one lot). If such components of
a building were classified as ‘implied exclusive use’ (i.e. the lot owner is the sole
beneficiary and therefore the one responsible for maintenance), then it would resolve
disputes that regularly occur. Legislation could be amended such that the beneficial
lot owner is responsible for the item as well as the area of common property the item
occupies, such tiles on common property walls and floors.
64. Complementary to that above is the concept of ‘maintenance by-laws’. Recently two
memoranda have been registered at LPI that stipulate whether an owner or the
owners' corporation is responsible for maintaining a component of the building. An
owners' corporation can now adopt these memoranda. Further, the matters
addressed in the memoranda are also addressed in a set of ‘model maintenance by-
laws’, which can then be incorporated into the strata management regulations and
are applicable to existing and future Strata Plans. Provisions could be made that if an
owners' corporation does not agree with the allocation of maintenance responsibility,
then a special resolution could be passed to assign a specific party the maintenance
responsibility. Further, it could be mandated that a maintenance by-law cannot be
repealed without another by-law being made, which addresses the responsibility of
maintenance.
65. SCA (NSW) recommends tailoring the Who’s Responsible document for individual
strata plans to clarify responsibility between owners and owners' corporations.
As raised in the discussion paper, LPI and Fair Trading receive over 500 calls each week
regarding the maintenance of items within a strata scheme. SCA (NSW) estimates a further
75 calls per week. It is essential that the legislation is more definitive as to who has
responsibility of maintaining the various parts of a strata building.
6.5 Should the absolute obligation to maintain common property be changed
to take account of the age and life of the scheme and the funds available?
(Q 24)
The current liability associated with the failure to repair and maintain the common property
expressed by the courts in NSW as “absolute” is not necessarily adopted in other states
(Victoria & Queensland). Absolute does not allow reasonable steps taken by owners'
corporations. However, SCA (NSW) does recognise that the owners' corporation must
maintain the property regardless of issues such as funds and building age.
6.6 Should owners or occupants be responsible for any damage to common
property they cause? (Q 25)
Yes, currently whilst the owners' corporation has an obligation to maintain common property,
it is not prevented from taking action against an owner or occupant who has damaged
common property. However, this can be a costly and often inconclusive exercise.
It is necessary that the obligation to repair common property continues to rest with the
owners' corporation. To relieve the owners' corporation of that obligation could lead to further
building deterioration and a loss of building amenity for other lot owners. However, the
owners' corporation needs to have a right to indemnification from lot owners in respect to
any damage they or their tenants cause.
Recommendation(s):
66. Recovery action needs to be taken (as with all future strata dispute matters) through
the CTTT and any award of damages should be added to the levy account of the lot
owner concerned. (The lot owner investor would rely upon the provisions of their
lease in respect of recovery from their tenants). Further, there needs to be a
mechanism to pass on the excess.
6.7 Should the law about common property for pre 1974 strata schemes be
changed? (Q 26)
SCA (NSW) in principal agrees to a uniform application to the adoption of common property
to pre-1974 plans. Further, there needs to be a review of the current legal mechanisms and
then adoption to legislation.
6.8 Should the process for owners wanting to renovate or make changes to
their lot be simplified and/or clarified? (Q 27)
SCA (NSW) endorses model by-laws for works and renovations.
Recommendation(s):
67. That there be a mandatory by-law in relation to lot owner works and renovations and
the by-law sets out a prescribed procedure that provides a certainty of process to the
owner and owners' corporation.
68. That SCA (NSW) should be consulted in developing such a by-law.
6.9 Could easy-to-read guidelines be produced giving information to owners
on what they can and cannot alter/renovate? What would the content of
these guidelines be? (Q 28)
Yes, as noted in Q27 above, there needs to be a distinction drawn between works with little
impact on other lot owners and those with potentially significant impact.
Guidelines would assist in highlighting the distinction between what is permissible without
further permission (but with regard to by-laws and rules) and what requires specific
permission. The guidelines would also provide details of the processes to be followed to
ensure compliance and be structured as follows:
do you or do you not need permission(?);
notification procedures;
rules relating to carrying out work (access/clean up/hours etc);
information to be provided where an application required;
timeframes for applications;
consequences of non-compliance;
helpful hints for typical works; and
by-law references.
Recommendation(s):
69. SCA (NSW) recommends tailoring the Who’s Responsible document in the context
on what owners can and cannot alter/renovate for individual strata schemes.
6.10 Which of the following would help address overcrowding and short-term
rentals in schemes and in what ways? (Q 29)
This problem has no single solution and requires a multiple faceted approach.
6.10.1 Enabling schemes to make and enforce by-laws to deal with the issue
The current position whereby schemes are prevented from creating by-laws that restrict an
owner’s dealing with their lot needs to be modified to allow restrictions on the number of
occupants. Since schemes can make by-laws controlling the number of pets per lot, they
should be able to make by-laws controlling the number of occupants within defined limits.
6.10.2 Giving the CTTT power to prohibit certain letting arrangements for a lot where
there is a proven pattern of anti-social behaviour
This would assist but may be of limited use depending on the level of proof required in
respect of anti-social behaviour.
6.10.3 Introducing a law setting the maximum number of persons per bedroom
This would have a similar effect as setting a maximum at the development consent stage but
would apply to all existing strata schemes. The law would only be as good as its
enforceability and would in practice need the owners' corporation to police it in the first
instance. However, to the extent that such a law was accompanied by a right of entry for a
council officer or other authorised person to inspect, then it would be useful.
6.10.4 Giving local councils more power to deal with such matters
As noted above, the law would only be effective if authorised officials had a power of entry
and inspection.
Recommendation(s):
70. SCA (NSW) asserts that there should be an expansion of powers in relation to the
access of fire compliance and overcrowding.
6.11 Do you have any other suggestions for how the issues surrounding
overcrowding and short-term rentals could be addressed? (Q 30)
Measures to make it easier for schemes to recover from lot owners the costs of damage to
common property through the CTTT also have a part to play in building an effective regime
to control overcrowding.
6.12 Do you think that a maintenance schedule prepared by the developer
would be useful? (Q 31)
SCA(NSW) does not support the notion of seeking a maintenance schedule from the
developer unless that schedule came without encumbrances such as being an override to
statutory warranty protection for the owners. However, it is essential that the developer
provides the scheme with all service manuals, plans and specifications relating to the
scheme.
Recommendation(s):
71. SCA (NSW) does not support the notion of seeking a maintenance schedule from the
developer, further an experienced managing agent should be involved early on to set
realistic levies.
6.13 Should defects be a compulsory agenda item for discussion at the first
AGM? (Q 32)
Yes, at the first AGM a discussion in relation to defects should occur and that this agenda
item should continue for the first two (2) years of a scheme.
Recommendation(s):
72. SCA (NSW) recommends that a preliminary report be obtained at the first year and
reviewed, if necessary, for the second and third years of a scheme.
6.14 Should the law set clear rules for voting on action regarding defects? (Q
33)
Yes, as noted above there should be no entitlement to vote on defects by the developer,
builder or any person associated with them, as there would be a clear conflict of interest in
their voting.
Recommendation(s):
73. SCA (NSW) recommends that when an owners' corporation undertakes major works
it is mandatory that they consider hiring an independent project manager to act on
behalf of the owners' corporation in relation to addressing the defects.
6.15 Should any other changes be made to the strata laws to more adequately
deal with defects? (Q 34)
Yes, there needs to be provisions that ensure that a scheme does not miss out on the
opportunity to lodge a claim under the Home Building Act (HBA) building warranty
provisions. That is, schemes need to commission independent defect inspection reports in
time to be able to lodge claims within the current statutory two (2) and five (5) year warranty
periods. The two (2) year warranty period may expire soon after the first AGM and that
scenario has been considered in Q32 above. With respect to the five (5) year structural
warranty period, provisions should be inserted into the strata/community laws to protect and
alert owners of the requirement to hold a general meeting three (3) months prior to the expiry
of that deadline. At this meeting, owners (excluding any builder or developer interests) would
resolve to commission a building condition report to identify defects and to serve same on
the builder/developer prior to the expiry of the warranty period.
6.16 Should land be able to be added to a community scheme, precinct
scheme and a subsidiary neighbourhood or strata scheme? If so, should
land be able to be added only as association or common property or
should land also be able to be added as a separate lot? (Q 35)
Yes, there would appear to be no practical disadvantages in allowing the addition of new
ownership lots. Consideration needs to be given to the new lot entitlements.
6.17 Should a mechanism be introduced to enable amalgamation of subsidiary
neighbourhood schemes with a community scheme? If so, what kind of
resolution should be required? (Q 36)
SCA (NSW) chooses not to comment at this stage.
7. Managing Money
7.1 Should initial unit entitlements for strata schemes be based upon a
valuation from a qualified valuer as it is for community and staged strata
schemes? (Q 37)
The current requirements for the initial unit entitlements for a strata scheme are not
satisfactory. This is supported by multiple CTTT orders in relation to the re-allocation of unit
entitlements for many strata schemes. Currently, the CTTT is obliged to re-allocate the unit
entitlements based on their relative real estate (market) value.
SCA (NSW) asserts that the legislation be changed such that the initial unit entitlements
(UoE) for a strata scheme are certified by a qualified valuer. If UoE are to be used as the
basis for determining levies, then a qualified valuer should be used to set those UoE.
Developers and surveyors drawing the strata plan may not have the appropriate
qualifications or experience in setting market values.
Someone with specific and local market knowledge is essential. This infers that within each
geographical region, a valuer with specific and local market knowledge will be required. The
legislation for both strata and community schemes should prescribe the rule that UoE be
initially set by a qualified valuer with knowledge of the regional market in which the scheme
is to be built.
The current strata legislative absence in this has lead to many problems for schemes that
have had UoE assigned based on square metres without consideration of the value of the
apartment within the building. For example, the same sized apartment on the ground floor
has a lower market value than one on the top floor with a view - but may be assigned the
same UoE.
Stipulating how UoE are to be assigned will overcome this problem.
Recommendation(s):
74. SCA (NSW) recommends the use of a qualified valuer for assigning the initial UoE to
a scheme. Further, the valuer should possess specific and local market knowledge,
having consideration for lot size when establishing a UoE.
7.2 Should more flexibility be given to schemes to determine levies other
than on the basis of unit entitlements? (Q 38)
SCA (NSW) agrees with the principal of flexibility.
7.3 How could the process of reallocating unit entitlements be improved?
Would you support the ACT model being adopted in NSW? Should the
procedure for revising unit entitlements in community schemes be
expanded to precinct scheme, standalone neighbourhood schemes and
strata schemes? (Q 39)
In the event that a reallocation of UoE occurs, the process could be improved by special
resolution from the owners' corporation where a substantiated and significant difference in
the UoE has been identified by a registered valuer (SCA (NSW) suggests that a 10%
differential is a significant difference).
Given the response to Q37, some strata schemes with UoE that do not match this new form
of allocation, should be provided compensation for the costs of reallocation. However, the
legislation should mandate that no individual lot owner has the right for compensation for any
perceived disadvantage due to the previous allocation of UoE.
Such an implementation should see a reduction in applications to the CTTT.
7.4 Should notices for AGMs contain more details about proposed levy
increases? If yes, what additional information do you suggest? (Q 40)
AGM notices are currently required to contain an ‘estimate’ that outlines how much money is
required for actual and expected expenditure for the administrative and sinking funds (ss.75
& 76 SSMA). While these provisions do not specify that a budget be actually provided, this is
the common practice of professional managers.
Self-managed schemes or schemes that do not present this detail to owners should provide
a detailed budget with comparative levy contributions from the previous year.
Currently, some strata managers/secretaries provide commentary in relation to budgetary
items (e.g. state-wide electricity tariff rises), this is valuable information for owners and ought
to be best practice.
Recommendation(s):
75. The legislation should provide the flexibility of supplying a narrative on the cause and
justification for material increases to the budget.
7.5 Should the law require periodic levy notices to be issued? (Q 41)
SCA (NSW) agrees that the law require periodic levy notices to be issued. Further, we note
that this does not affect the accrual of interest nor impact on the requirement of levies to be
paid.
7.6 Is more regulation over the initial setting of levies by developers
required? (Q 42)
Please refer to the response to Q37. SCA (NSW) recommends the use of an experienced
strata manager in the setting of initial levies.
Recommendation(s):
76. SCA (NSW) recommends the use of an experienced strata manager in the setting of
initial levies.
7.7 Should developers be liable for budget shortfalls in the initial period? (Q
43)
No, during this period the developer should not be liable for any shortfalls in the initial period.
Recommendation(s):
77. SCA (NSW) recommends the use of an experienced strata manager in the setting of
budgets in the initial period.
7.8 Should the law allowing discounts for early payment of levies be
removed? (Q 44)
No, the existing regime should prevail.
7.9 Should a strata management statement be required to disclose the
method of allocating the shared expenses and/or be certified by a
quantity surveyor? (Q 45)
Yes.
7.10 Should the penalty interest rate on outstanding levies be raised? If so,
what should the figure be? (Q 46)
No, in the current economic climate 10% represents a significant premium over the cost of
funds and the penalty element is significant. Indeed, funding a scheme from owner arrears
paying 10% is financially more to the scheme’s benefit than funding it from surplus funds
invested at current low interest rates.
The period of grace that operates in NSW is a useful tool in minimising disputes and
neutralising arguments about whether a levy payment was “one day late” and should be
retained.
7.11 Should schemes be required to take recovery action within a certain
time? If so, what should the timeframe be? (Q 47)
Yes, once a levy is more than three (3) months in arrears, the owners' corporation should be
able to take debt collection action to recover those monies. Further noting the discretion of
the owners' corporation.
7.12 Should the CTTT be given jurisdiction to deal with outstanding levies? (Q
48)
Yes, the CTTT jurisdiction should be able to handle all civil strata matters in a way similar to
the way it does in its other divisions, as it has staff that would be expected to have strata
familiarity. Outstanding levies should be recovered through the CTTT.
7.13 What hardship provisions (if any) should be introduced? (Q 49)
The legislation should provide for hardship provisions in relation to payment of levies. The
CTTT can consider this in its ruling in relation to the timing and means of payment.
7.14 Should the recovery of expenses for outstanding levies be limited to
reasonable expenses or built into the penalty interest rate? (Q 50)
The penalty interest rate (currently 10%) is not adequate to cover the usual legal costs
associated with debt collection.
It is preferable to allow for the recovery of reasonable expenses and ensure that penalty
elements are reflected in the interest rate charged. This means that a levy debtor who
exercises delaying tactics is appropriately impacted by a time-based penalty. However,
reasonable expenses must be included in legislation and must be set on a full recovery basis
having regards to the administrative costs e.g. the strata manager’s time, postage,
application fees and other incurred costs.
7.15 Should owners who owe levies continue to not have voting rights? Do
you support any other practical punishments or deterrents and if so
what? (Q 51)
Yes, the current legislative approach should be retained.
7.16 Should a minimum period of arrears (e.g. two levy payments) be required
before loss of voting rights or other punishments are imposed? (Q 52)
No, the existing regime should prevail.
7.17 Should schemes be able to seek orders that tenants pay rent to them to
cover debts owed by investor owners? (Q 53)
Yes, as noted in Q51 above. Penalty interest rates (with or without an escalating rate scale)
are an appropriate time-based penalty. As a time-based penalty it should be applicable to all
arrears – subject to the existing one (1) month grace period – but for administrative reasons
and to avoid contention over trifling sums, it should not be imposed on amounts of, say,
$100 or less.
Yes, in theory it might be possible to obtain judgement against a debtor owner and a
garnishee order over the rent payable by the tenant or held by a letting agent, this is an
extended process and may be of little help to a scheme with an overseas or otherwise hard-
to-serve owner.
There is also considerable equity in the notion that there is a close connection between the
rent received by the owner and levies payable for services enabling the owner to earn that
rent. It is therefore appropriate that orders be available providing for the payment of rent
directly to a scheme by the defaulting owner’s agent or tenant.
7.18 Should sinking funds remain compulsory? Should schemes be able to
carry forward budget surpluses instead? (Q 54)
Yes, sinking funds should remain compulsory, otherwise owners would always choose the
cheapest contributions and possibly face special levies when capital works are required.
Surpluses in the administrative fund (AF) should be allowed to be transferred to the sinking
fund, if approved by majority resolution. At present, the SSMA permits a transfer (loan) from
the administrative fund to the sinking fund provided the monies are repaid within three (3)
months (s. 68(3)). This provision would not be necessary if owners could utilise excess
monies in the administrative fund to help bolster the sinking fund when needed.
Recommendation(s):
78. Surplus monies in the administrative fund should be allowed to be transferred to the
sinking fund, if approved by majority resolution and where contributions to the sinking
fund forecast would not be adversely impacted. Section 68(3) should be removed
from the SSMA as it requires those transferred funds to be repaid within three (3)
months of disbursement.
79. The owners' corporation (particularly the treasurer) requires greater training in
relation to budgets.
7.19 Should the law dictate contributions to sinking funds? If so, how? (Q 55)
A link should be established between the sinking fund plan and the sinking fund budget. At
present the plan is just a plan and there is no legislative requirement for the sinking fund
budget to follow this plan. That needs to change.
Sinking fund budgets need to be a reflection of the sinking fund plan. Where circumstances
have changed since the plan was drawn up and different expenditure amounts are
appropriate, then this needs to be highlighted in the budget presented, shown as a departure
from the plan, and reasons given. There will always be a need to depart from the sinking
fund plan but the variances must be made clear in the budget that goes to owners for
approval.
This will require an improvement in the quality of sinking fund plans so that they do not take
a generic “cookie cutter” approach to maintenance expenses, but focus on the maintenance
costs relevant to the particular scheme.
Furthermore, the starting point for forecasting maintenance expenditure will need to be more
accurately defined by reference to a condition report prepared at the same time as the
sinking fund plan. Unless the condition of the building and its services are correctly
assessed, any expenditure needs that are identified in the sinking fund plan are likely to be
unrealistic. With these links and safeguards in place, appropriate contributions to the sinking
fund can be determined.
7.20 Have the 10 year sinking fund plan reforms been successful? Should they
be retained and expanded to the community scheme sector? Are any
refinements needed to make them more effective? (Q 56)
Yes, sinking fund plans have been an effective budgeting mechanism and useful educational
tool in informing owners in relation to the budgeting of a scheme. The sinking fund plan
concept should be applied to the community scheme sector – but only if Lot 1 Association
Property is sizable to warrant potential future capital improvements. The 2m² letterbox is an
example of a Lot 1 that would not warrant a sinking fund plan. Many community managers
educate their community owners with the advantage of having a quantity surveyor prepare a
sinking fund plan so that they feel reassured that their sinking fund contributions will be
adequate to cater for future capital improvements to Lot 1.
Recommendation(s):
80. A 10-year sinking fund plan should become the supporting tool for preparation of the
sinking fund budget.
81. The requirement to prepare and implement a sinking fund plan should be extended to
the community scheme sector.
7.21 Should the requirement for valuations every 5 years be kept or changed?
(Q 57)
The policy objective should be to prevent grossly inappropriate insurance cover. This can be
done by keeping the valuation frequency at 2-3 years and providing for annual indexation of
insured values by the change in the construction costs or other appropriate index. Given the
margin for error that exists in valuations this would provide a comparable and acceptable
basis for insurance in the intervening years between valuations.
7.22 Should insurance and valuation details be on the notices for each AGM?
(Q 58)
Yes, this information can be shown concisely and provides an appropriate assurance to
owners.
7.23 What items should the law require to be covered by scheme insurance
policies? (Q 59)
SCA (NSW) recommends that the law should retain the current existing compulsory covers
and further expand coverage in the following areas:
Recommendation(s):
82. Lot owners' fixtures and fittings should remain within the scope of strata law as these
items are intended to remain permanent attachments to the overall structure of the
building and could lead to angst of lot owners who assume it forms part of the
building. Removing this cover would only produce minimal premium savings.
83. Mandate the compulsory purchase of ‘office bearers’ cover to protect executive
committee members for strata plans, with a minimum level of $1M or greater.
84. As advocated in the discussion paper that provision for loss of rent and temporary
accommodation should become compulsory through changes to strata law.
85. Compel both parties in two (2) lot schemes to insure their property with the one
insurer to avoid unnecessary practical complications if a major loss, or total loss were
to occur and a lack of consistency in coverage.
86. Commence the 18 month term stipulated in the Strata Schemes Management
Regulations 201 (REG) 12 (b) from the last day of the damage policy instead of the
current date to allow more time for the assessment and reinstatement of damaged
strata buildings. Otherwise another unnecessary risk of underinsurance.
87. Require lot owners in community schemes to use the same insurance company for
common walls to avoid potential disputes on who is responsible for paying claim.
88. It should also be a legal requirement to insure for alternative accommodation for
owners for the period during which a building cannot be occupied. Cover of this type
is already widely taken out by schemes.
89. Terrorism cover is currently unavailable to buildings worth in excess of $50 million.
Access to the relevant insurance pool needs to be provided for large residential
schemes.
7.24 Should schemes be encouraged or required to have a higher insurance
excess? (Q 60)
Yes, this practise should be made available as an option to mitigate rising premium costs
and encouraging owners' corporation's to adopt risk management practises in the interests
of saving money and or loss for injury or damages.
Out of every premium dollar, a sizeable portion of total costs are associated with operating
expenses (including the processing of very small dollar value claims) and reinsurance costs,
so if we can find ways to reduce the premium it in turn helps lower the compounding costs of
Fire Services Levy, GST and Stamp Duty which are on top of the base calculation.
However, the amount of excess should be voluntary, not prescribed by the legislation.
Insurance providers should offer a choice of excess on renewal documents. Owners need to
be cognisant that higher excesses will eliminate claims of small monetary amounts before
they decide.
7.25 How could the law give schemes more flexibility over their insurance
requirements? (Q 61)
The current law states the owners' corporation is required to insure for full replacement and
reinstatement value, there should be enough flexibility to allow an excess to be carried, as
referred to above.
7.26 Should the cost of insurance be shared only on the basis of unit
entitlements? (Q 62)
For residential strata schemes that have levies determined by UoE and that is based on the
size of the lots (see Q38), then insurance is one of those costs borne by the
strata/community to be shared. Owners need to remember that had they lived in the
alternative Torrens Title house, their insurances would be payable by themselves, based on
the replacement cost of their particular dwelling. That sum insured is determined by many
factors, one of which is the size of that dwelling. Levies that are based on UoE (that are set
by the size of a lot) are therefore appropriately allocated.
If the UoE were set by a formula other than considering the size and replacement cost of the
lot, then this common expense might need to be shared on some other basis than UoE.
For commercial strata schemes, insurance is driven by occupation of the lot and exposure
hazards associated with this.
There is an increasing trend toward mixed-use schemes and it would be more equitable to
split on occupancy and not just lot entitlement size.
7.27 Is there a need to increase the minimum public liability cover for
schemes? If so, what should be the amount? (Q 63)
Yes, the current requirement of $10M is out of step with current commercial practice and
does not reflect the cover needed to protect against an adverse award of damages.
$20M should be mandated in the Regulations as a minimum and reviewed at no longer than
five (5) years intervals.
7.28 How do the laws around accounting records need to be modernised (if at
all)? (Q 64)
Accounting records need to be defined by function not form given the options available for
recording accounting information electronically. The legislation probably should not need
prescribe computerisation (although that would be the ideal), however, make
recommendations through the Regulations and templates of good practice to encourage and
educate treasurers in carrying out the bookkeeping that will be necessary to produce these
documents in the recommended fashion.
Required accounting records need to be defined, not by a description of the record (e.g.
receipt book, cash book), but by reference to the information they are required to disclose
and used to ultimately report to owners (e.g. levies received, levies in arrears by individual
lot owner, balances in funds, expenses paid and payable, actual versus budget allowances
for each expense item). Again, by providing templates of good practice in the Regulations,
the legislators will greatly assist treasurers in better fulfilling their fiduciary duties.
Recommendation(s):
90. That all accounting records are to be capable of verification via audit when required.
7.29 Do you support a simplified set of financial statements? (Q 65)
No, many lot owners do not understand financial statements and many are not interested.
Nevertheless, the answer lies not in reducing the amount of financial information but in
making it clearer.
With current accounting software the production of detailed and timely information for
schemes of any size is not a burden. The important issue is to determine how this
information should be distributed and in what form it should be presented.
The information made available will differ depending on its purpose:
for owners at AGM;
for owners on request during the year; and
for the executive committee.
Improving the message to owners:
Where the current financial statements fall down is that they do not deliver any message to
owners. The most important message is to explain how the scheme has performed against
budget.
Clearly it is not necessary to distribute detailed reports on expense and levy transactions to
all lot owners. However, these reports have a purpose and need to be available for those
who want them.
Information in annual financial statements:
Full annual statements consisting of balance sheets, statements of financial position and
statements of income and expenditure need to show not only current figures and historical
comparatives but also the amounts budgeted for each item in the current year.
Recommendation(s):
91. The financial statements presented to owners at the AGM should be prescribed in
the legislation, namely:
● Statement of income and expenditure for each fund (if cash-basis accounting
method) or surplus and deficit statement (if accrual-based accounting);
● A balance sheet including:
● Statement of balances in each fund at the beginning of the year and
end of year, reconciled by the operating surplus/deficit for the period
and any levies in arrears/advance;
● Cash balances held at bank (this might be in a cheque account, a
cash reserve account, fixed deposit, some other investment, or in the
agency’s trust account);
● List of liabilities or debts outstanding at end of year.
● The amounts in arrears or advance;
● Separate advice as well as a note in the financial statements that highlight
any income tax liability.
● The inclusion of a solvency statement/declaration, including the requirement
by the treasurer (this function can be delegated to the strata managing
agent) to sign and declare a schemes solvency.
Statement frequency:
Financial statements should be prepared at least quarterly and provided to the executive
committee for management purposes. Refer below for the basis of accounting.
Detailed reports on levies and expenses for the period together with an analysis of debtors,
cash and liabilities need to be available for management purposes.
Accounting basis:
Currently most schemes use a hybrid system of accounting for levy income on an accrual
basis and expenses on a cash basis. Some larger more sophisticated schemes may use
accrual accounting.
A full accrual accounting system whereby expenses are adjusted for amounts paid in
advance or still to be paid provides a more accurate picture of performance. It does,
however, require more resources in the preparation of accounts.
In the interest of practicality, schemes should have the option of accounting on either a cash
or accrual basis during the course of the year with a requirement that the annual financial
statements presented at the AGM be adjusted to an accrual basis. Only in this way will
owners be given a true picture of performance against budget.
7.30 Are annual financial statements sufficient? Should the law require or
recognise the ability of schemes to request statements on a more regular
basis? (Q 66)
No, although full annual financial statements - if prepared in a meaningful way - can be an
adequate tool for keeping owners informed. However, financial statements need to be
available on a more frequent basis to the executive committee for management purposes
and to interested owners if they request them.
As a minimum, the legislation should mandate the content of the quarterly reports to the
executive committee and half-yearly financial management report to owners as:
1. a list of receipts from sources other than levy contributions (e.g. bank interest,
insurance claims, interest penalties for late levies);
2. a list of payments from each fund, aggregated for that reporting period and compared
with the budgeted amounts for each expense item;
3. balances in each fund as at the beginning and end of the reporting period –
reconciled by net receipts; and
4. a narrative by the treasurer/manager explaining any expense item that appears to be
or is likely to exceed budgetary allowances plus any plans for major expenses in the
forthcoming reporting period (i.e. second six months). Many recipients of financial
reports are not accounting literate and are more likely to read the narrative and
understand the financial aspects of the scheme than try to decipher figures merely
presented in tables.
There should be the flexibility in the style or format of these reports, with the Regulations
providing a template of good practice. Some treasurers may wish to modify, expand, or
supply narrative commentary on the financial reports each reporting period, depending on
scheme type or size. Good governance dictates that it is highly desirable to keep owners
fully informed.
8. Managing Disputes
SCA (NSW) members are committed to:
1. Education not litigation, and
2. Negotiation and mediation not litigation.
8.1 Should internal dispute resolution mechanisms be recognised in the law?
(Q 67)
Yes, we agree that the internal dispute resolution mechanisms be recognised in the law and
should be outlined in the regulations.
The Act to refer to the power of the Minister or the Commissioner to determine strata sector
dispute resolution mechanism from time-to-time in response to the needs of lot owners and
their executive committees and the needs of the Government.
Recommendation(s):
92. Regulations should oblige complainants to first exhaust the internal dispute resolution
mechanism before resorting to the CTTT, excluding urgent interim orders (e.g.
providing the executive committee with an application that it is intended to file with
the CTTT prior to filing with an opportunity with 30 days to discuss the matter).
8.2 Should attendance at mediation be made compulsory? (Q 68)
Yes. SCA (NSW) asserts that:
if a party lodge a complaint, then that party must attend in person; and
cost penalty must apply if either party fail to attend in person.
Non-attendance devalues the mediation process and attending in person is more likely to
facilitate a negotiated, compromised outcome.
8.3 If mediation is unsuccessful should parties be able to apply for a CTTT
hearing without needing to go through the Adjudication step? (Q 69)
The hearing process has a role but its role can only be useful if parties attend in person to
put their case in the presence of an adjudicator qualified in strata matters. Strata complaints
filed with Fair Trading must be dealt with by a strata specialist. These specialists must exist
at all levels – mediation, arbitration and CTTT hearing.
Unpaid costs orders (subject to appeal) prevent further complaint applications being filed
until paid.
Recommendation(s):
93. Strata complaints filed with Fair Trading must be dealt with by a strata specialist.
These specialists must exist at all levels – mediation, arbitration and CTTT hearing.
8.4 Should legal representation be limited to where a proven need is shown
or the dispute is over a specific amount (e.g. $10,000)? (Q 70)
There should be dedicated strata experts at both the mediation and arbitration stage to drive
a resolution in relation to the dispute.
Recommendation(s):
94. There should be dedicated strata experts at both the mediation and arbitration stage
to drive a resolution in relation to the dispute.
8.5 Is there merit in establishing a ‘duty advocate’ like information service at
mediation sessions and CTTT hearings? (Q 71)
Yes, parties should be able to seek the advice of a duty advocate on basic strata law matters
in the same way as they might seek the advice of a Chamber Magistrate.
Recommendation(s):
95. Parties should be able to seek the advice of a duty advocate on basic strata law
matters in the same way as they might seek the advice of a Chamber Magistrate.
8.6 Should mediation for strata and community schemes be a free service? If
so, how should dispute resolution services be funded? (Q 72)
No, a modest fee should apply for mediation with a significant penalty for a failure to attend
without reason. Likewise a modest fee would be payable in respect of arbitration. CTTT
hearings should be fully funded by a filing fee with access to costs orders by the parties.
8.7 Should the jurisdiction of mediation and the CTTT be broadened to cover
the majority of disputes which arise in strata and community schemes? If
so, should such jurisdiction be exclusive? What types of matters would
be inappropriate for mediation and the CTTT to handle? (Q 73)
It is appropriate for all strata matters to be exclusively dealt with within the same jurisdiction,
the CTTT, where there should be a repository of knowledge on strata matters. The
jurisdiction of mediation and the CTTT should be broadened to cover the majority of disputes
which arise in strata and community schemes. The exceptions may be in respect of appeals
against CTTT decisions and matters involving criminality.
8.8 Should the procedure around cost orders and interim orders be clarified?
(Q 74)
Yes, arbitrators and tribunal officers should be given as much freedom as possible to deal
with the matter before them and as they deem appropriate. Cost orders should be available
in this division of the CTTT as they are in its other divisions.
8.9 Should there be a process to reject applications about trivial matters or
where the same matter has been contested before? (Q 75)
Yes, there must be a process to reject applications that are either trivial or where the matter
has been decided previously. This will require the competent recognition of precedents.
Yes, for matters determined as trivial with costs orders in favour of Fair Trading and
the responding party(ies).
Yes, for matters determined contested before but it must be reviewed by the Fair
Trading officer who heard the prior application(s) to determine that the issue has
indeed been previously decided.
If so, then costs orders to be awarded in favour of Fair Trading and respondent party(ies).
8.10 Which of the following would improve the level of compliance? (Q 76)
8.10.1 Streamlining the number of offences
Yes, the offences as set out in the Regulations should relate only to those matters were
enforcement is practical and be supported by a regime of penalty notices as applied in other
jurisdictions.
There needs to be a distinction between minor breaches of an administrative nature and
serious breaches where lot owners and/or the owners' corporation suffers loss. Further, any
penalty needs to reflect such breaches.
8.10.2 Increasing the penalties that can be imposed
Yes, the current quantum of penalties needs to be substantially increased to provide for any
deterrent with the value of these penalties being subject to indexation.
8.10.3 Enabling penalty notices to be issued
Yes, these should be subject to appeal to the CTTT where costs follow the event.
Recommendation(s):
96. Fair Trading should enable the collection of penalties (to be issued for ongoing
breaches) on behalf of and payable to owners' corporations and enforceable by
Officers of Fair Trading.
8.10.4 Requiring or encouraging schemes to appoint a committee member as a
‘compliance officer’
We do not support the appointment of a compliance officer. This would personalise
enforcement in an unacceptable manner and be divisive. Compliance should remain the
responsibility of the executive committee as a whole.
Executive committee's should consider including the following items on an agenda:
review of the financial reports to the budget;
review of risk management, including WH&S plan;
review of the schemes ‘compliance’ (to be outlined in the Regulations and Fair
Trading ‘Best Practice’ papers published); and
review and approval of ‘Annual Report’ filed with Fair Trading including sign-off on
Act and Regulation Compliance, WH&S report and other matters made compulsory
in the annual report.
8.11 Should schemes be able to issue their own fines for by-law breaches? (Q
77)
Yes, SCA (NSW) supports the notion of providing executive committee’s the power to
impose fines for definable and ongoing breaches of by-laws such as unauthorised parking or
carrying out works without permission. There needs to be a mandated procedure for
communication of warnings with fines only imposed after a warning has been ignored. A
system of fines for ongoing and repeat offences should be considered.
Fines should be recoverable from lot owners as if they were levies. Tenants would need to
be the subject of any fines regime with the landlord lot owner being responsible in the event
of non payment by the tenant. The tenant’s lease would need to provide for the recovery of
such fines by the landlord.
Fine imposition should be by simple majority decision of the executive committee and be
subject to appeal to the CTTT; costs follow the event. The executive committee may
approach the CTTT for orders.
Unpaid fines should be added to the lot owners levy statement.
8.12 Should it be mandatory for a scheme to enforce its by-laws? (Q 78)
SCA (NSW) supports the current enforcement regime against the backdrop of a strata
specialised CTTT.
8.13 What other changes to the system of enforcing by-laws would you like to
see? (Q 79)
Major areas of governance should continue to be the province of by-laws. The requisite
special resolution for a change of by-laws should be retained. Upon change of a by-law or
the passing of a new by-law, a new consolidated version should be registered. This ensures
that the by-laws are clear to users and not a historical narrative of amendments.
By-laws should include reference to penalties applicable to their breach. Minor areas of
governance, such as the regulation of pool hours, and matters pertaining to the management
of the scheme may be dealt with through scheme rules.
Unlike rules currently made by executive committee’s these Rules would need to be
enforceable in the same way as by-laws. However having regard to their lesser significance
and the need for flexibility rules would need to be passed by ordinary resolution in general
meeting.
8.14 What do you think should be done, if anything, about parking in
schemes? (Q 80)
Many parking problems stem from the inadequacy of the supply of both visitor and
residential parking spaces. The supply issues need to be addressed In LEP’s and DCP’s
and the notion of residents needing to keep a car even if they do not need it on a daily basis
taken account of.
By-laws should explicitly provide for parking spaces to be let or sold only to other lot owners,
something which is currently done in an incomplete manner by covenants in development
approvals.
Legislation needs to restrict visitor parking to “bona fide visitors” including an established
definition.
By-laws should also provide for permits for longer / more frequent stays to be issued by the
executive committee or their strata manager.
Owners' corporation’s should be permitted to apply to the police for an identity check on any
vehicle left on common property, including visitor parking, for over 14 days, cumulatively or
concurrently, a measure that is made necessary in the case of long-term parkers from
outside the scheme.
Recommendation(s):
97. There should be a standard definition as to visitor and subsequently the assigned
parking rights.
8.15 What do you think should be done, if anything, about pets in schemes?
(Q 81)
By-laws should determine what type of pet, if any, can be kept in the scheme and the
maximum number per lot. “Pet free” buildings should not be prohibited. The choice of by-law
should rest with owners. By-laws should specify the standards of behaviour required of pet
owners (cleaning up, noise, leashing).
Owners' corporation's should have the power to levy fines for behavioural breaches. The by-
law should contain a provision whereby after a set number of breaches, pet ownership is no
longer permitted.
Recommendation(s):
98. In the event that a scheme elects to allow, not allow or limit pet ownership, then the
CTTT should support such by-laws, noting no retrospectivity.
8.16 What do you think should be done, if anything, about noise in schemes?
(Q 82)
Due to the practical difficulties involved in noise measurement noise needs to be controlled
by reference to type (music and time of day). Noise tolerances will differ between buildings
and should be regulated by enforceable rules passed by a simple majority of members in
general meeting.
Recommendation(s):
99. In the event that a scheme has passed by-laws to allow certain types, levels and
volumes of noise transmissions, then the CTTT should support such by-laws, noting
no retrospectivity.
8.17 What do you think should be done, if anything, about smoking in
schemes? (Q 83)
Control of smoking in schemes should follow current community standards. By-laws should
ban smoking on common property except for any designated smoking area, if available.
Protection of neighbours should be afforded by requiring smokers to have regard to the
amenity of their neighbours, not throw cigarette butts from balconies or discard on common
property.
Recommendation(s):
100. In the event that a scheme has passed by-laws either allowing, disallowing or
partially allowing smoking, then the CTTT should support such by-laws.
8.18 What do you think should be done, if anything, about flooring in
schemes? (Q 84)
The challenge is to stipulate and enforce mandated standards for sound transmission that
provide owners with a level of sound insulation comparable to that the building was designed
to – usually with carpets and in excess of any BCA standard.
Recommendation(s):
101. By-laws should stipulate that at all times owners must ensure that they do not make
undue noise so as to cause inconvenience to other owners or occupiers.
102. By-laws should provide that this original standard be maintained by reference to
values and for any work involving a change of floor covering type to be supported by
test results provided to the owners' corporation within 14 days of completion of work.
103. By-laws need to set out action that is required of the lot owner, should their floor fail
to comply with test results.
8.19 What do you think should be done, if anything, about washing in
schemes? (Q 85)
This is a matter that should be dealt with by means of enforceable rules determined by a
simple majority of members in general meeting. Such rules might allow for drying within the
confines of a lot.
Recommendation(s):
104. By-laws relating to the maintenance of the appearance of a scheme should only be
applicable to conspicuous hanging out of laundry over a balcony (that washing be
confined to the lot boundary).
8.20 Do you agree with any of the above reform proposals? (Q 86)
SCA (NSW) makes the following comment in relation to the reform proposals above:
8.20.1 Developer documents at handover
Recommendation(s):
105. Developers should prepare documents in triplicate. One set to the local council
(copies available for a fee), second set to NSW Government to be scanned (copies
available for a fee) and a third set provided to the strata managing agent or secretary
of the owners' corporation. First and second sets to be handed over at time of
registration of the strata plan.
106. These documents should include those documents as defined in the Regulations and
further include (but not limited to) as built plans, compliance certificates, etc.
8.20.2 Empowering schemes to deal with abandoned goods
Recommendation(s):
107. The owners' corporation should be empowered to pass such a by-law, including the
removal of abandoned cars, NSW Police authorised to provide to strata managing
agent or secretary of the owners' corporation the registration details of cars believed
to be abandoned on the common property. The owners' corporation after
'reasonable' enquiry, to have personal property (including motor vehicles) removed
without liability to the members of the owners' corporation, executive committee or its
strata managing agent or the contractor retained by the owners' corporation or strata
managing agent to remove the property (an indemnity).
108. Executive committee empowered to undertake 'reasonable' cost recovery from the
responsible lot owner.
8.20.3 Authorise schemes to enter lots to trim trees
Recommendation(s):
109. Yes, if a lot is in the scheme. No, if in another scheme or the tree is on another
property as remedies already exist in the law.
8.20.4 Remove the cap of 9 Executive Committee members
Recommendation(s):
110. SCA (NSW) recommends the maintenance of the current regime.
8.20.5 Who is the 'controlling officer' in a scheme for OH&S purposes?
Further to the clarifications in the WH&S laws, SCA (NSW) supports the new legislation.
8.20.6 Expand the info to be kept on a strata roll to include details of all licenses,
loans and an index
SCA (NSW) does not believe that the strata roll requires expansion in relation to the above.
8.20.7 Enabling legal notices to be served on the managing agent
Recommendation(s):
111. SCA (NSW) is in agreement that legal notices can be served on the managing agent,
providing that the change of address process is simplified, cost effective and not
onerous.
8.20.8 Clarify the circumstances when a scheme can restrict owners or residents
from accessing common property
Recommendation(s):
112. The access to common property should only be restricted as a result of matters
relating to safety or security.
8.21 Do you have any other suggestions for how the existing law regulating
strata and community schemes could be improved? (Q 87)
SCA (NSW) makes the following comments in relation to further improvements to the
existing laws:
standardise procedures for scheme administration by the owners'
corporation/association when the scheme is a victim of a disaster and some or all of
the lots cannot be occupied;
regulate to change effect of old strata laws applicable due to registration date of
plans (e.g. old dividing wall rule) to make all schemes the same;
compulsory provision in all vendor contracts of strata/community lots, including:
o section 109/26 certificate;
o all registered by-laws;
o all executive committee/owners' corporation/association adopted ‘House
Rules’;
o the scheme annual report (if prescribed by legislation);
o any current executive committee, building manager, managing agent notices;
and
o education documentation from Fair Trading on nature of strata/community
living, rights and obligations and need for lot owner contents insurance.
9. Conclusion
After 50 years of operation in NSW it's not surprising that strata has manifested legacies that
relate to the regulatory landscape, governance, the built environment, money and the
handling of disputes. However, these legacies are not insurmountable and SCA (NSW) has
provided more than 100 different recommendations that address the legacies before us,
please refer to Appendix A. Table of Recommendations.
SCA (NSW) urges the NSW Government to adopt our recommendations. Further, we are of
the view that our recommendations:
adequately protect lot owners, strata managers and strata service providers;
provide fair, accessible and practical democratic processes to lot owners;
raise the level of transparency and accountability;
increase the operational efficiencies of schemes (taking into account different types
of schemes);
encourage self-governance; and
are future orientated.
SCA (NSW) takes this opportunity to reiterate that whilst our response to the Strata &
Community Title Law Reform Discussion Paper is a thorough one, it only addresses the
aspects raised by Fair Trading within the Discussion Paper. SCA (NSW) asserts that the
NSW Government should consider our current response in conjunction with previous policy
documents and submissions, specifically:
opportunities to consolidate tribunals in NSW (Inquiry), 2011;
2012 Policy Position: Improving NSW Communities;
SCA Community Renewal, 2012;
submission to the Reform of the Home Building Act 1989, 2012; and
submission to the Property Stock and Business Agents Amendment (Professional
Indemnity Insurance) Regulation 2012.
SCA (NSW) recognises and supports self-managed schemes, typically administered by
volunteer residents. Most office bearers govern with the best of intentions, however, they do
so in a complex environment. Further, SCA (NSW) is concerned that many volunteers do not
have the necessary resources or knowledge to appropriately and adequately discharge their
obligations on behalf of the tens of thousands of people living under strata titled
arrangements. The administration of self-managed schemes must be undertaken with the
same governance, robustness and consumer protections as managed schemes. The
absence of such management presents clear risks to the tens of thousands of people living
under self-management.
As previously identified, education is the key to the success of strata for the next 50 years
and beyond. All the stakeholder living and operating within the strata sector must be
educated with respect to governance, transparency, professionalism, dispute resolution,
handling money and all other aspects of strata.
SCA (NSW) has a robust track record, established over many years, in the provision of
quality education to professionals in the strata sector as well as the delivery of consumer
awareness seminars. This is evidenced by member and public attendances at various event
and educational forums. In this regard, SCA (NSW) calls on the NSW Government to place
education funding front and centre on the strata landscape.
SCA (NSW) is firmly of the view that the NSW Government should invest heavily in
education funding. That this investment should be directed to the SCA RTO for the
Accreditation of strata managers in NSW and to SCA (NSW) for the ongoing provision of
education and information to lot owners.
SCA (NSW) again thanks Fair Trading for the opportunity to contribute to this review. We
trust our views and recommendations will be of benefit and assistance Fair Trading in its
deliberations. Should Fair Trading require any further information in relation to this
submission, SCA (NSW) would welcome the opportunity to further discuss any of the
matters raised herein.
10. Appendix A. Table of Recommendations
Fair Trading Question
Related SCA (NSW) Recommendation(s)
1 1. Executive committee education and information levels, particularly for large schemes, should be addressed in any new legislation.
2. That consistent with residential strata schemes, commercial/industrial/retail and mixed-use schemes engage the services of a licensed strata managing agent.
3. The classification of large lot schemes for the purpose of special or additional legislative rules needs to be reviewed, and consideration of a financial criterion (of annual budgets) rather than lot quantity be included in the new legislation.
4. Retain the optional nature of auditing under the SSMA for both managed and SMSs. SCA (NSW) asserts that audits should commence at the same threshold that GST is required.
5. As commonality applies, the Strata Schemes Management Act and the Community Land Management Act should be merged. Further, the obligations of an owners' corporation operating within the Retirement Villages Act requires further clarification and certainty for all stakeholders.
6. The revised legislation for both strata and community scheme management and development should have consideration for the different types of schemes:
● Very small 2-3 lots v large – under self-management v professional management;
● Residential v Commercial/retail/industrial v Mixed-use v Retirement village v Holiday parks etc – professionally managed
● Horizontal v Vertical development – self managed v professional
● Building Management Committee (BMC) 7. Templates of good practice could also be included in the
Regulations/Schedules with differentiation based on the four criteria highlighted above.
8. Changing of the AGM date should be allowed. 9. Office bearer liability insurance should be compulsory. 10. Postal address change could be to strata manager or secretary with
executive committee approval. 11. Allow the vacancy on the executive committee to be filled by a
resolution of the executive committee.
2 12. Combining the various forms of legislation as follows will remove substantial duplication as well as red tape:
● Strata Schemes Development Act and Community Land Development Act; and
● Strata Schemes Management Act and Community Land Management Act.
3 13. Retain the requirement for insurance to be sought only from Federal Government approved companies. There is minimal public advantage in securing insurances with companies that fail to provide the minimum mandatory insurance;
14. Standardise the notice period for all meetings across strata and community schemes (e.g. 14 calendar days) and accelerate the uptake of electronic communication for notices, minutes and other
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related communications; 15. Special levies to be paid into the appropriate fund: i.e. the owners'
corporation should be able to determine if a special levy is for either the administrative fund or the sinking fund depending on the nature of the works needing additional funding;
16. Allow matters to be decided by the owners/association at a general meeting by special resolution i.e. changing the financial year and the date of the AGM;
17. The requirement of filling a vacancy on an executive committee meeting should remain to ensure they have a quorum for a subsequent meeting. The wording should be altered to read that the “executive committee” may appoint a person, instead of the ‘owners' corporation’ must appoint a person. There should be no appointment time limit;
18. Convening general meetings – It is presently too difficult to requisition a general meeting. Clause 31 of Schedule 2 of the SSMA requires that a requisition be made by the holders of 25% of the unit entitlements, which can be impractical, particularly in relation to a larger scheme;
19. Blocking decisions to be made by the executive committee - It is presently too difficult to block a of decision of the executive committee at a future meeting. Clause 11 of Schedule 3 of the SSMA requires that a notice signed by one-third of the unit entitlements be provided to the secretary prior to a meeting at which only 72 hours notice is required to be given. This is often completely impractical, particularly in relation to a larger scheme;
20. Governance requirements – In our view, the requirements in this area are unnecessarily restrictive, e.g. section 18 of the SSMR presently requires that each ballot paper be completed and signed by each voter, which is impractical where there are large numbers of proxies;
21. SSMA: Section 52 - Section 52 deals with the grant of exclusive use rights and/or special privileges and provides for this to be effected by a by-law approved by special resolution and having the consent of the owners of the “lots concerned”. This presents a number of issues, precluding certainty as to the validity of such arrangements, in particular:
● what is a “special privilege” if not an exclusive use right or licence?
● who is an “owner concerned”? The case law conflicts on this, variously suggesting a lot owner whose use of common property is adversely effected (potentially being all lot owners), and the lot owners to whom the rights are granted.
● why is the consent of an owner concerned required if given the broader meaning referred to in paragraph (b)? Why should a section 52 by-law potentially require unanimous consent, when other more substantial transactions, e.g. a subdivision, do not?
22. SSMA: Section 65A - Section 65A requires a special resolution for the purpose of approving works by an owner adding to or altering common property. However, it makes no provision for retrospective approval nor does it provide any practical solution in relation to works which have already been carried out. In such situations, it can be very difficult to reach a solution with an owner who has carried out such
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works, let alone at a general meeting of owners, who in any event lack power to approve retrospectively. Such situations can involve very minor works.
23. SSMA: Section 65B – section 65B deals with the grant of a licence to use common property to a lot owner, requiring a special resolution. However, the absence of reference to a non-owner casts doubt on whether, either:
● the owners' corporation may grant a licence to a non owner without a special resolution being required; or
● the owners' corporation has no such power, leading to a widely held view that an owners' corporation must pass an “empowering by-law”, empowering it to grant licences to non- owners, before granting such licences. This would be at odds with provisions such as sections 25 and 26 of the SSFDA, which permit much more significant rights to be granted to non owners, where the right will be the subject of a registered dealing.
● this needs to be clarified if owners' corporation's and others dealing with them are to have certainty regarding such arrangements.
24. Decisions reserved to the owners' corporation in general meeting – Substantial delays can be experienced obtaining owners' corporation resolutions, if they can be obtained at all, taking into account notice requirements, owner apathy, quorum requirements and the requirement of a special resolution in many cases. Further, action frequently needs to be taken, in order to protect the interests of the owners' corporation more quickly than is possible for an owners' corporation. For example:
● Section 80A of the SSMA effectively precludes expenditure in excess of 10% over a predetermined amount, without a further resolution of the owners' corporation in general meeting. However, this is in tension with the owners' corporation's other obligations, e.g. its obligation to maintain common property under section 62 of the SSMA. This is compounded by section 80B, which refers to quotations, rather than estimates, the former often being unavailable. That the owners at the AGM opt whether to comply.
● Section 65B of the SSMA provides that a special resolution is required for an owners' corporation to grant a licence to use common property to a lot owner. This can hinder an owners' corporation's arrangements with owners and occupiers of lots to an unwarranted extent, especially in a commercial or mixed-use scheme.
25. Contracts for sale should contain: copies of the by-laws or Management Statement of the scheme; copies of the strata plan or deposited plan (already required); copies of the Strata Living or Living in a Community booklets of Fair Trading; a recommendation that purchasers undertake a thorough pre-purchase inspection of the books and financial records.
26. The obligation rests with the owners' corporation to provide the relevant updated material.
27. That there be an option for the vendor to undertake the same.
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28. Allow 3-lot community schemes with Lot 1 of <2m² (and no other community property) to be exempt from the current insurance requirement.
4 29. The Acts that evolve from this review should outline the basic and common rules to be applied by all schemes in such things as:
● naming the scheme, address of the scheme, the Common Seal (basic fundamentals);
● calling meetings, chairing, documenting and disseminating minutes;
● role of executive positions; ● role of caretakers; ● duty of managing agents; ● duty of owners' corporations to maintain the built structures
and duty of individual owners to do the same in their community scheme;
● what funds are required to operate all schemes and some basic rules such as separation, loans, transfers between financial reporting of funds management, its frequency and basic content of reports procedures for inspections of records and legal certificates for the sales process dispute resolution procedures
The Regulations would outline the varying principles as well as rules and exemptions to those rules for specific scheme types.
5 30. The needs and variations of individual schemes are too great for the legislation to reasonably satisfy. Therefore, a blend of prescription and a principles-based approach to by-laws is required such that a balance between regulation and flexibility is achieved. There is merit in the legislation providing both a basic list of by-laws in model by-laws (as currently exists) for developers to select, as well as depicting some broad guidelines or principles to assist owners establish new or modify existing by-laws.
31. The creation of elective or discretionary model by-laws that deal with more complex management issues, i.e. a generic works by-law, definition of a visitors by-law and short-term letting requirements by-laws.
6 32. There are merits in providing an indication to a purchaser as to what style of owner/occupant currently exists and to question whether or not a purchaser may wish to become part of that community. Substantial consideration as to the content and intent of a mission statement is required as any statement may have both a positive and negative effect on a potential vendor’s sale.
7 33. Strata living is by definition one that necessarily requires the community consensus to prevail. In other words, community rights should come before the personal freedoms of owners.
10 34. That existing lot owners (including self-managed schemes), via their executive committees, be provided with more resources in relation to improving awareness.
35. That Fair Trading or equivalent, creates a register of all executive committee’s in NSW.
36. That the Strata Living and Living in a Community documents be updated and expanded for the use of lot owners.
37. That, given SCA (NSW)'s sound track record in educating strata
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Related SCA (NSW) Recommendation(s)
managers and lot owners, SCA (NSW) be a preferred Government facilitator of the provision of educational and information services to lot owners.
38. It should be mandated that pre-exchange of a contract and settlement, the following matters are addressed: Written guidance provided to the new owner that outlines rights and responsibilities of strata/community ownership including a copy of the by-laws (with the purchaser’s signature as acknowledgement of receiving the guidance). The contents of the strata records be summarised for a pre-purchase inspection report arranged by a legal professional. The report to contain a description of the form of management of the scheme (professional v self) and the implications of this to be explained by the conveyancing practitioner.
39. In the context of large schemes, it is recommended that executive committee members undertake training.
40. In the context of self-managed schemes, it is recommended that executive committee members undertake training.
41. SCA (NSW) should be the preferred Government facilitator of the provision of educational and information services to executive committee members.
42. SCA (NSW) recommends that all owners' corporations: ● submit an annual report to Fair Trading, including: details of
the executive, funds held by the scheme and a copy of the yearly financial statements;
● that Government reviews the compliance by all schemes through random selection of those lodged annual reports.
43. It should be mandated within the real property sales laws and the Conveyancing Acts that the conveyancing practitioner or letting agent provides new owners and tenants with an up to date set of by-laws within a specified timeframe.
44. That all owners and residents sign a copy of the by-laws at the time of settlement and at the time of entering a tenancy agreement.
45. The current s109/26 fee does not compensate or recognise the resourcing requirements currently undertaken by the strata manager. The fee should be readjusted to appropriately compensate the resourcing. This fee is then to be borne by the purchaser at no cost to the scheme or the Government.
12 46. Consideration should be given as to the levels of authority inferred within a proxy.
47. Consideration should be given to proxies for procedural matters to ensure quorums are met and resolutions considered. However, with restrictions on non-procedural matters to prevent inappropriate use or non-disclosure of the intention of use of proxies.
48. SCA (NSW) recommends that where payments are made to executive committee members, key performance indicators, educational standards and position descriptions are set and agreed in advance of the appointment of remunerated members. Further to honorariums, such measures must be agreed at a general meeting.
13 49. SCA (NSW) recommends that a broader information campaign is required to educate owners as to benefits of involvement, particularly in relation to boosting their investment and improving the community in which they have invested.
Fair Trading Question
Related SCA (NSW) Recommendation(s)
14 50. That six monthly reports on finances and operation be provided to owners for small schemes and quarterly for large schemes.
51. That the legislation permit the dissemination of levy notices, notices of meetings, minutes and other communication by electronic means. However, consideration should be given to owners opting to continue receiving postal notifications.
52. As technology provides, consideration and utilisation of the various options should be considered.
16 53. SCA (NSW) recommends that a contracts registry should accompany general meeting papers.
54. More emphasis is required educating owners in relation to allowing the executive to have no limitations to their powers and/or restricting the powers of the executive.
55. SCA (NSW) recommends a review of clarity as to who can make what decisions in schemes, i.e. where delegations exist where the executive committee can make resolutions, the legislation should be clear in this regard.
17 56. Further education of selling agents via their Certificates of Registration and Licensing courses in relation to strata/community title is required.
57. The registration of a scheme with Fair Trading. 58. The registration of a scheme's office bearers with Fair Trading. 59. The lodgement of a scheme's annual report with Fair Trading.
18 60. The SCA (NSW) Agency Agreement should become the industry benchmark.
61. The SCA (NSW) recommends that PI insurance should be mandatory to safeguard consumers and to continue to professionalise the industry. That the minimum be $10M.
22 62. SCA (NSW) recommends that the NSW Government, in conjunction with SCA (NSW), funds further development and the distribution of the Who’s Responsible document for the education of both owners and strata managers.
23 63. The concept of ‘implied exclusive use’ could be integrated into the strata legislation. This term could apply to fixtures and parts of the building within a lot but also fixtures that are on common property but service only one lot. Examples include an external hot water service for a lot (situated on common property) and an air conditioner (situated on a roof or external wall but servicing only one lot). If such components of a building were classified as ‘implied exclusive use’ (i.e. the lot owner is the sole beneficiary and therefore the one responsible for maintenance), then it would resolve disputes that regularly occur. Legislation could be amended such that the beneficial lot owner is responsible for the item as well as the area of common property the item occupies, such tiles on common property walls and floors.
64. Complementary to that above is the concept of ‘maintenance by-laws’. Recently two memoranda have been registered at LPI that stipulate whether an owner or the owners' corporation is responsible for maintaining a component of the building. An owners' corporation can now adopt these memoranda. Further, the matters addressed in the memoranda are also addressed in a set of ‘model maintenance by-laws’, which can then be incorporated into the strata management regulations and are applicable to existing and future Strata Plans.
Fair Trading Question
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Provisions could be made that if an owners' corporation does not agree with the allocation of maintenance responsibility, then a special resolution could be passed to assign a specific party the maintenance responsibility. Further, it could be mandated that a maintenance by-law cannot be repealed without another by-law being made, which addresses the responsibility of maintenance.
65. SCA (NSW) recommends tailoring the Who’s Responsible document for individual strata plans to clarify responsibility between owners and owners' corporations.
25 66. Recovery action needs to be taken (as with all future strata dispute matters) through the CTTT and any award of damages should be added to the levy account of the lot owner concerned. (The lot owner investor would rely upon the provisions of their lease in respect of recovery from their tenants). Further, there needs to be a mechanism to pass on the excess.
27 67. That there be a mandatory by-law in relation to lot owner works and renovations and the by-law sets out a prescribed procedure that provides a certainty of process to the owner and owners' corporation.
68. That SCA (NSW) should be consulted in developing such a by-law.
28 69. SCA (NSW) recommends tailoring the Who’s Responsible document in the context on what owners can and cannot alter/renovate for individual strata schemes.
29 70. SCA (NSW) asserts that there should be an expansion of powers in relation to the access of fire compliance and overcrowding.
31 71. SCA (NSW) does not support the notion of seeking a maintenance schedule from the developer, further an experienced managing agent should be involved early on to set realistic levies.
32 72. SCA (NSW) recommends that a preliminary report be obtained at the first year and reviewed, if necessary, for the second and third years of a scheme.
33 73. SCA (NSW) recommends that when an owners' corporation undertakes major works it is mandatory that they consider hiring an independent project manager to act on behalf of the owners' corporation in relation to addressing the defects.
37 74. SCA (NSW) recommends the use of a qualified valuer for assigning the initial UoE to a scheme. Further, the valuer should possess specific and local market knowledge, having consideration for lot size when establishing a UoE.
40 75. The legislation should provide the flexibility of supplying a narrative on the cause and justification for material increases to the budget.
42 76. SCA (NSW) recommends the use of an experienced strata manager in the setting of initial levies.
43 77. SCA (NSW) recommends the use of an experienced strata manager in the setting of budgets in the initial period.
53 78. Surplus monies in the administrative fund should be allowed to be transferred to the sinking fund, if approved by majority resolution and where contributions to the sinking fund forecast would not be adversely impacted. Section 68(3) should be removed from the SSMA as it requires those transferred funds to be repaid within three (3) months of disbursement.
79. The owners' corporation (particularly the treasurer) requires greater
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training in relation to budgets.
56 80. A 10-year sinking fund plan should become the supporting tool for preparation of the sinking fund budget.
81. The requirement to prepare and implement a sinking fund plan should be extended to the community scheme sector.
59 82. Lot owners' fixtures and fittings should remain within the scope of strata law as these items are intended to remain permanent attachments to the overall structure of the building and could lead to angst of lot owners who assume it forms part of the building. Removing this cover would only produce minimal premium savings.
83. Mandate the compulsory purchase of ‘office bearers’ cover to protect executive committee members for strata plans, with a minimum level of $1M or greater.
84. As advocated in the discussion paper that provision for loss of rent and temporary accommodation should become compulsory through changes to strata law.
85. Compel both parties in two (2) lot schemes to insure their property with the one insurer to avoid unnecessary practical complications if a major loss, or total loss were to occur and a lack of consistency in coverage.
86. Commence the 18 month term stipulated in the Strata Schemes Management Regulations 201 (REG) 12 (b) from the last day of the damage policy instead of the current date to allow more time for the assessment and reinstatement of damaged strata buildings. Otherwise another unnecessary risk of underinsurance.
87. Require lot owners in community schemes to use the same insurance company for common walls to avoid potential disputes on who is responsible for paying claim.
88. It should also be a legal requirement to insure for alternative accommodation for owners for the period during which a building cannot be occupied. Cover of this type is already widely taken out by schemes.
89. Terrorism cover is currently unavailable to buildings worth in excess of $50 million. Access to the relevant insurance pool needs to be provided for large residential schemes.
64 90. That all accounting records are to be capable of verification via audit when required.
65 91. The financial statements presented to owners at the AGM should be prescribed in the legislation, namely:
● Statement of income and expenditure for each fund (if cash- basis accounting method) or surplus and deficit statement (if accrual-based accounting);
● A balance sheet including: ● Statement of balances in each fund at the beginning
of the year and end of year, reconciled by the operating surplus/deficit for the period and any levies in arrears/advance;
● Cash balances held at bank (this might be in a cheque account, a cash reserve account, fixed deposit, some other investment, or in the agency’s trust account);
● List of liabilities or debts outstanding at end of year. ● The amounts in arrears or advance; ● Separate advice as well as a note in the financial statements
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that highlight any income tax liability. ● The inclusion of a solvency statement/declaration, including
the requirement by the treasurer (this function can be delegated to the strata managing agent) to sign and declare a schemes solvency.
67 92. Regulations should oblige complainants to first exhaust the internal dispute resolution mechanism before resorting to the CTTT, excluding urgent interim orders (e.g. providing the executive committee with an application that it is intended to file with the CTTT prior to filing with an opportunity with 30 days to discuss the matter).
69 93. Strata complaints filed with Fair Trading must be dealt with by a strata specialist. These specialists must exist at all levels – mediation, arbitration and CTTT hearing.
70 94. There should be dedicated strata experts at both the mediation and arbitration stage to drive a resolution in relation to the dispute.
71 95. Parties should be able to seek the advice of a duty advocate on basic strata law matters in the same way as they might seek the advice of a Chamber Magistrate.
76 96. Fair Trading should enable the collection of penalties (to be issued for ongoing breaches) on behalf of and payable to owners' corporations and enforceable by Officers of Fair Trading.
80 97. There should be a standard definition as to visitor and subsequently the assigned parking rights.
81 98. In the event that a scheme elects to allow, not allow or limit pet ownership, then the CTTT should support such by-laws, noting no retrospectivity.
82 99. In the event that a scheme has passed by-laws to allow certain types, levels and volumes of noise transmissions, then the CTTT should support such by-laws, noting no retrospectivity.
83 100. In the event that a scheme has passed by-laws either allowing, disallowing or partially allowing smoking, then the CTTT should support such by-laws.
84 101. By-laws should stipulate that at all times owners must ensure that they do not make undue noise so as to cause inconvenience to other owners or occupiers.
102. By-laws should provide that this original standard be maintained by reference to values and for any work involving a change of floor covering type to be supported by test results provided to the owners' corporation within 14 days of completion of work.
103. By-laws need to set out action that is required of the lot owner, should their floor fail to comply with test results.
85 104. By-laws relating to the maintenance of the appearance of a scheme should only be applicable to conspicuous hanging out of laundry over a balcony (that washing be confined to the lot boundary).
86 105. Developers should prepare documents in triplicate. One set to the local council (copies available for a fee), second set to NSW Government to be scanned (copies available for a fee) and a third set provided to the strata managing agent or secretary of the owners' corporation. First and second sets to be handed over at time of registration of the strata plan.
106. These documents should include those documents as defined in the
Fair Trading Question
Related SCA (NSW) Recommendation(s)
Regulations and further include (but not limited to) as built plans, compliance certificates, etc.
107. The owners' corporation should be empowered to pass such a by-law, including the removal of abandoned cars, NSW Police authorised to provide to strata managing agent or secretary of the owners' corporation the registration details of cars believed to be abandoned on the common property. The owners' corporation after 'reasonable' enquiry, to have personal property (including motor vehicles) removed without liability to the members of the owners' corporation, executive committee or its strata managing agent or the contractor retained by the owners' corporation or strata managing agent to remove the property (an indemnity).
108. Executive committee empowered to undertake 'reasonable' cost recovery from the responsible lot owner.
109. Yes, if a lot is in the scheme. No, if in another scheme or the tree is on another property as remedies already exist in the law.
110. SCA (NSW) recommends the maintenance of the current regime. 111. SCA (NSW) is in agreement that legal notices can be served on the
managing agent, providing that the change of address process is simplified, cost effective and not onerous.
112. The access to common property should only be restricted as a result of matters relating to safety or security.
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