Property 101: NSW strata reform legislation

GUEST OBSERVER

There has been extensive strata reform in NSW over the past few years. 

From 30 November 2016, the new strata legislation dealing with residents living or working within strata schemes will come into force.
 
Background
While previous legislation in NSW endeavoured to adequately juggle the rights of individual unit owners with the need to balance the quiet enjoyment and use of common property areas, there was ever increasing pressure from various agencies and the general public to create a modern framework, to more adequately cover current day to day issues.
 
What are the Changes?

There are over 90 changes that will affect at least 2 million industry professionals, and approximately one quarter of the NSW population as either strata owners, or persons living or working in strata titled units or townhouses.  While 90 legislative changes does seem a little daunting for those living, working, or administering strata complexes, extensive education measures are being undertaken to inform all members of the community about the workings and affect of the new strata laws.
 
This e-brief endeavours to summarize a few of the main changes, as follows: 

• Model By Laws are introduced, including smoking and keeping of pets; 
• Greater participation in the decision making process by lot owners; 
• Unanimous support is no longer needed for sale of strata schemes; and 
• Less restrictions over owner renovations.   

Model By Laws

The new legislation introduces Model By Laws being suggested by-laws that an owners corporation can choose to adopt, or use to amend their current enforceable by-laws, if agreed between lot owners.
 
The Model By Laws specifically include such matters as smoking being a nuisance, a greater breadth of permission for the keeping of animals within strata schemes (as opposed to automatic prohibition), and greater action against persons using common property (visitor) car spaces (including Owners Corporations establishing agreements with local council).
 
Also, an Owners Corporation can choose to adopt a Common Property memorandum. The memorandum is designed to help lot owners of the strata complex to articulate and delineate whether the owners corporation or lot owner is responsible for the maintenance, repair or replacement of any part of the common property.
 
These measures are endeavouring to reduce day to day grievances between lot owners.
 
Greater participation in decision making process and voting

The new legislation is incorporating the use of new forms of electronic medium by allowing a strata scheme to adopt social media, video and teleconference to hold meetings. Voting will also be able to occur electronically and through secret ballots.

Strata schemes will also be able to choose to distribute papers by email (rather than traditional forms of issuing notices etc).
 
Further, for schemes with more than 20 lots, the changes to voting have been refined to reduce the influence of a controlling minority obtaining the acquiescence of the majority, as the legislation limits the proxy votes able to be held by one person to 5% of voting members. 

These changes generally make the voting regime more adaptable and fairer. 

Unanimous support no longer required for sale of strata lots  

Intense development in Sydney suburbs and growth corridors meant that change was required to the sale of apartment blocks to necessitate a rapidly growing population, and the desire to develop premium land within Sydney’s central hub.  
 
The current law allows for the termination or winding up of a strata scheme under circumstances where there is unanimous support from all owners. This is particularly burdensome.
 
Under the new strata reforms, only 75% of lot owners have to agree to the termination of their strata scheme which subsequently forces the remaining 25% of owners to agree to the collective sale of their apartment blocks. Lot owners will receive at least the market value of their lot (plus other costs in relation to moving).
 
Of course, these sorts of changes underpinned by the philosophy of ‘market forces’, also come with a myriad of concerns for some lot owners, especially the elderly or those unsophisticated property owners. In this regard, Fair Trading (NSW) is to establish a Strata Renewal Advice and Advocacy Program to provide free advice for residents needing assistance in respect to these changes.
 
Less restrictions over owner renovations

Currently, basically all changes to a lot require approval from both the Owners Corporation (and/or local government authorities), primarily because many of the changes to a lot also effect changes to the Common Property of the strata complex.
 
The strata reforms now provide a clearer method of approval for owner renovations, by waiving restrictions for minor, cosmetic changes to lots, and allowing such cosmetic changes to be able to be made without approval.
 
However, renovations with a more general impact (such as installing timber floors) will require a general approval of 50% of owners, and those unit renovations with lasting impacts (such as waterproofing and/or adding to the structural part of a lot) will still require approval with a special resolution, being 75% agreement of lot owners. 
 
How does this effect you?

NSW continues to modernise strata law to fit the reality of living and working in high density community apartment blocks. The new laws incorporate traditional ideas of ‘home ownership’, incorporating additional layers of regulation to help preserve harmonious apartment living.
  
The ACT laws, particularly for mixed use developments, are currently under review.  It will be interesting to see if the ACT follows.
  

Stephanie Lynch is partner,  Property Team, Meyer Vandenberg Lawyers and can be contacted here.

Germaine Orreill is associate, Property Team Meyer Vandenberg Lawyers and can be contacted here.