New strata laws are tightening the screws on developer appointments

By November 4, 2015 Uncategorized No Comments

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The screws on developers and strata managers have been tightened by new strata laws that will apply to buildings now being constructed in New South Wales.

From 1 July 2016 a ‘person connected with the developer’ can’t be appointed as strata manager until after 10 years from the registration of the plan.

It’s not uncommon for major developers to own or control strata management companies that are appointed to manage their buildings. They might do this to secure future income from strata management or, more sinisterly, to control what happens on site during the time that building defects are being resolved.

Income from strata management is to developers as significant as strata schemes are to the cosmos, so let’s be adults and conclude the driver here is control; control at a time when defects emerge, conflicts are unearthed and levy estimates are tested against commercial realities.

Connected persons includes relatives and employees. No surprises there but interestingly the definition also includes someone ‘engaged’ by the developer.

Strata managers are ‘engaged’ by developers all the time, sometimes formally, sometimes informally, sometimes for a fee and sometimes for a favour, the price for which is a contract with the owners corporation made when the developer has control of the voting.

Strata management contracts to favoured managers have traditionally been for terms up to three years, long enough for the managers to distance themselves from the developer and form trusted relations with the new owners. The sting for strata mangers who covet such positions is all first term contracts must now run for just one year.

The murky dynamics of this important relationship in the life of any new owners corporation just became a little clearer.

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