The six most important reforms to NSW strata law that you won’t find in the Daily Telegraph

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All the fourth estate has been talking about is dogs, smoking, and redevelopment; but I think they’ve missed the point. I’ve identified six reforms that are much more likely to impact strata owners, committees and managers.

The three reforms that will be the most challenging for strata professionals will be:

  1. The right of owners to sue for failures to attend to repairs and maintenance,
  2. Allegations by troublemakers that committees have not exercised due care and diligence,
  3. And a surprise sleeper – that by-laws must be registered within six months – this has caught out many in other states.

And the three reforms that will do the most good are:

  1. Repair and maintenance damages for affected owners – the threat of this will stop committees procrastinating and will save grief for owners and strata managers alike,
  2. Telephone meeting participation – if offered by strata managers, this will bring more engagement and improve quality of life for managers who will have to attend less meetings at night,
  3. And the ability to delegate owners’ repairs to a committee – as long as this is done properly and not by email.

As for the other 90 or so reforms, they’ll initially be irritating, then they will become the norm. Ultimately they won’t change anything; people will continue to have disputes and muddle through as best they can, and buildings will still leak and crack.

It’s the little things that will bring big buildings down for the better

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While standing before a group of strata owners last night discussing a very big and important redevelopment I was reminded of a lesson I learned when I was a young competitive swimmer.

My coach pulled me out of the pool one morning to talk to me about my stroke and a particular technique I had let slip. As he made his point he pulled at my googles that were still on my head and screamed ‘LTMD’ as he released them and they snapped back onto my face.

LTMD stands for ‘Little things make the difference’ – I got over the shock and the pain of his brutality but I have never forgotten his message.

In redeveloping strata for owners corporations who see value in upgrading rather than merely repairing their ageing buildings and underdeveloped sites, I’ve found it’s not the legal process, the feasibility studies or the debt finance arrangements that carry the vote when it comes down to committing to the work and relocating while the work is done. It’s the little things.

It’s the colour of the carpet, the arrangements for parking and garbage bins in the upgraded common areas, how long people will be out of the building, how they will pay rent while they’re out and keep up with their mortgage and occupancy costs. I’ve learned that little things are not trivial things. It’s these things that matter and get the crowd behind the proposal or not.

That’s why I’m predicting on the eve of new laws applying to strata in NSW, developers will rarely use the renewal processes we have read so much about in the lead up to commencement; they simply won’t have the patience for the little things.

Strict rules on capital works plans could sink strata schemes and inspectors

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Sinking fund forecasts have been something of a joke to date.

It’s something you’ve had to have, and you’re required to think about them when setting levies but there’s been no sanction for ignoring them. So when the admin fund budget goes up, in the never-ending quest to keep levies the same as last year, the balancing amount has been the sinking fund levy. It comes down a bit, and hey presto the figures work.

Well that’s about to change. The tiger now has teeth.

Capital works plans, as they will be known, must be implemented, so far as practicable.

This brings us to our friends in the USA where similar provisions have led to new owners suing the owners corporation for not implementing the plan when funds have not been saved progressively for replacements and renewal.

The proviso, ‘so far as practicable’, will be used in defence but it won’t cut it when the reason is to keep the levies the same as last year when the price of just about everything else in the world is going up.

The first to be bitten might just be strata inspectors who fail to notice that difference between the amount in the capital works fund and the recommended closing balance in the study.

Strata managers’ lives are on the line as NSW law reform approaches

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This is my fourth preparation for major strata law change; one in Queensland, one in Victoria, the most recent in the ACT and in 22 days, Australia’s largest strata market, New South Wales.

There is something about this one that’s different. The others were met almost with indifference by the industry, certainly by the the body of owners. Change happened, people got on with it and ultimately nothing really changed.

On the lead up to this commencement the NSW strata market is restless. Strata managers are scrambling to fix month-to-month contracts before commencement day otherwise they will terminate even against the will of the parties six months later. Meetings are being called by strata managers using delegated powers to lock in long term contracts without allowing strata committees to test the market. There will be applications lodged later to set these aside.

The other area of restlessness is outstanding maintenance and repairs. For procrastinating strata committees there is growing awareness that the game is almost up. Long suffering owners with mould and water penetration are gearing up for legal action come 30 November 2016 when they get a statutory right to sue their owners corporation for damages. Strata committees facing these actions are looking for scapegoats; but this won’t help because their liability will be strict and absolute. If something is broken and not fixed they will be liable unless action is being taken against a builder or developer and the repairs are not affecting health and safety.These two reforms will be game changers for strata managers.

Those that manage these matters well will prosper. Those that don’t will die.

A case of reform for reform’s sake

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face-1430523_640The first iteration of the strata laws of NSW in 1961 was delightfully short. It did all the important work you want a piece of legislation to do and left everything else to common sense. There were disputes, for sure, but the records reveal they were over matters of importance not pernickety matters of procedure.

The simple days of the sixties are long gone and round after round of law reform has attempted to save the people from themselves, with ever increasingly complex rules and procedures for most everything, including how we might have a dispute. This comes to us in the 2016 strata law reforms in the form of a provision for the establishment of an internal disputes resolution procedure.

By the new law, our strata corporations may establish a voluntary process for resolving internal disputes. It’s not compulsory and, as if to denude it of any force at all, the relevant section counters that whether or not one engages in such a process has no impact on other mediation or dispute resolution procedures. Bravo – so here’s something you might want to do but if you don’t it doesn’t matter.

Experience from other states and territories where this has been tried with a little more authenticity – because it’s compulsory – is that if you create these processes they become used and not always for good.

We should be all about dispute resolution, but let’s not create forms and procedures where none are necessary.

New strata laws don’t fix the old and broken inspection process

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One of the great lost opportunities of the reform of NSW strata laws is the laws relating to the inspection of records by purchasers and other interested parties.

Presently in a city of 4.5 million people strata inspectors drive from office to office looking at bundles of papers that are often out of date and irrelevant to the key questions that purchasers need to know. This is not the fault of strata managers nor strata inspectors, it is simply that the process of inspecting minutes and carefully composed letters has been replaced by electronic communications and these are too voluminous to present and to be read in the time available for a strata inspector to do a search and for an acceptable fee.

The real information that purchasers need apart from the accounts and levy details of the lot concerned might usefully be confined to this list:

  • Rules about pets
  • Unremedied building defects
  • Outstanding common property repairs and maintenance
  • Status of any litigation
  • The latest insurance certificate of currency
  • The latest AFSS
  • A comparison of the sinking fund balance against the forecast balance in the last report
This information, if usefully provided in one page, would do more for understanding of strata rights and responsibilities than anything else sought to be achieved by the new laws.
Like all matters of law reform we are not limited to the ways our legislators prescribe things to be done. If we were brave we would produce strata inspection reports this way without requiring legislative approval to do so.

Strata committee members are in the firing line thanks to new strata laws

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Strata committee members will feel the pinch from two new strata laws; the duty to exercise due care and diligence in everything they do and the right of lot owners to sue for damages if they suffer loss because of a failure to attend to repairs and maintenance of common property. These provisions, more than any others in the new strata laws, will impact on the ability to get good people to serve as office bearers.

The damage will be done in the making of the claims rather than their prosecution to finality. Indeed, history would suggest most threats will not go the distance. Plaintiffs lose interest in pursing their claims for justice when heat of battle subsides and the prosecution becomes taxing on their time and money.

The accusations will get old quickly and good people will want to protect themselves and their reputations from the claims. No matter how weak a threatened claim might appear as soon one is made the owners corporation insurer will have to be advised. This will take time and money, but there’s an even bigger cost that will be paid.

Anyone that has been the subject of a spurious claim will know that no matter how weak the accusation they hurt, particularly when you are a volunteer. Strata managers should get used to hearing good people say; ‘I don’t need this in my life.’

Children no longer – new by-law provisions will let us all grow up

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Sometimes in law reform it’s the smallest of changes that have the biggest impact. That might be the case with the new model by-laws for residential schemes. They provide some very good new rules to live by and owners corporations could do worse than adopt them in their entirety.

In keeping with the new law that by-laws must not be harsh, unconscionable or oppressive the Government’s new model, compared with previous versions, shows signs of moving towards reasonableness, which we might not be accustomed to in the nanny state that is New South Wales.

For example, under the new model by-laws children are allowed to play on common property without supervision except where it may be dangerous. Previously children were out of luck unless there was an adult was around. That might have been fine for three-year-olds but many a 12-year-old thinks they are beyond supervision in the backyard and most reasonable parents would agree.

This small change brings strata back to society’s norms where responsible people know what’s safe and what’s not, and as children enter their early teens they are free to roam further from their nest as a normal part of learning and developing independence. Bravo regulators.

The new model by-laws can be found here, and you can read my summary of the new by-law provisions here.

The fate of your strata scheme could be decided with emojis

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New forms of communication interest me. Oxford Dictionaries named  its 2015 word of the year. Really.

Embracing this new form of communication I have devised a method of voting in strata title owners corporations by emoji which, incidentally, is permissible under Regs 14 and 15 of the Strata Schemes Management Regulation 2016 [NSW]. It addresses every common response to meeting motions; except for the one you give in response to the strata manager asking for a higher fee as it’s not suitable for younger readers.

Yes

No

Abstain

Need more details

I can’t afford the levy

Not this bloke again

Pet approved

Pet denied

Say what?

Dear God please let this meeting end

In all seriousness, the ability to vote in new ways could be a boon for owners, but with laws so broad they allow emoji votes, we have to ask where this puts underpaid strata managers and legal professionals coming to grips with new legislation. As anyone who’s tried organising a meeting knows, you won’t get everyone to agree on a venue; let alone whether or not to do it online, whether tenants can participate or the content of the explanatory notes that will now accompany motions.

Compared to that farce, emoji voting seems pretty logical.

From a misplaced mat to a $170k lawsuit – the danger of breaching duties of care

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Damages of $171,500 plus costs have been awarded against a Mosman owners corporation for a breach of its duty of care to a resident who tripped on a frayed floor mat Left in a lift for more than a day after somebody had moved in.

The owners corporation’s duty of care owed to the resident was held to be a duty including the known potential risk of damage and injury caused by removalists using the building’s lift. The performance of this duty included ensuring compliance with the building’s code of conduct for moving, checking the adequacy of the mat used to protect the lift floor and ensuring it was safe for residents to go to and from their apartments while removals were occurring.

The award of damages here will no doubt be paid by the owners corporation insurer but will likely increase the building’s future premiums and excess. But there’s more to money in these cases. The incident involved a long-term resident of the building who was 88 years of age. Her injuries were serious and the findings against a member of the committee and the caretakers was damning to say the least.

The assistant caretaker was criticised for leaving work when the move was incomplete even though the building rules provided for an extra fee to be paid for out of hours moves.

A member of the executive committee who saw the mat in the lift after the move but before the accident was criticised for his personal failure to arrange for the mat to be removed in circumstances when he was aware from previous incidents that the mat remaining in the lift constituted a danger to lift users. He was also criticised for not minuting the accident.

The current caretaker, who at the time was the cleaner and who put the mat out on the day in question, was found ‘not to be a witness of credit’.

The resident that was moving in was found ‘not to be impressive and appeared self-conscious and embarrassed’.

All these people have to continue living and working together and it won’t be pleasant after what’s happened. The lessons are these; be careful but if you aren’t then being forthright in dealing with the consequences will result in everyone being better off.

(Case reference – Allen v SP 54664 [2016] NSWDC 217)

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