Birth Notice – Twin strata laws delivered of the NSW parliament Tuesday, 27 October 2015; Both houses and bills are well

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Good Evil Twin

The most significant strata law reform packages ever delivered of a government of this country have been delivered safely through both houses of the NSW parliament.

To be named the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015, the twin laws came in at 117 and 141 pages respectively and contain 90 new features. The laws are expected to become operative on 1 July 2016.

One twin will become the bad twin and the other the good twin. ‘Development’ will be the black knight, ‘Management’ will be the white knight.

Development introduces the concept of the forced sale of real property upon a 75% resolution of owners and will be misunderstood. The forced sale provisions will scare people initially although in reality it’s not nearly as scary as it looks. In the detail there is quite a lot of consumer protection.

The more endearing of the twins, ‘Management’, will make life easier for many. Online voting, simplified renovation approval processes and kinder by-laws will make living and investing in strata easier and more pleasant. Management will have however pack a solid punch when developers and strata managers abuse owners with improper disclosure and conflicts of interest.

Like all newborns, there will be sleepless nights and teething problems but both bills are expected to mature into productive and useful members of society.

Let’s hope everyone plays nicely in the meantime.

Sometimes being responsible means pissing people off too

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Opening of 2015 NSW Parliament

If the mark of good law reform is that all stakeholders are a little pissed off, then the new strata laws introduced last night to the NSW parliament is on the money. After 15 years in gestation, strata is about to get a bit harder for everyone; developers, owners corporations and strata managers alike. Mercifully, strata lawyers seemed to have been spared.

Developers are probably the hardest hit. They have to deliver an initial maintenance plan before settlement, put 2% of sales on deposit for building defects claims, fund a defects report in the first two years and become liable for understated estimates of future levies. For good measure they can’t become the strata manager for at least 10 years. The big boys won’t like that.

For strata managers the reforms are all about more disclosure. There must be annual disclosure of insurance and other commissions. Gifts and ‘soft dollar’ benefits from strata suppliers are out. Free training by lawyers and donations by banks and insurers to the manager’s annual seminar are also in scope.

Strata committees, as they will now be known, have tougher duties of disclosure and due diligence but they get immunity from personal liability for anything done in good faith. The twist is that the liability for their negligence or breach of statutory duties gets passed on the owners corporation as a whole so no-one is off the hook.

The headlines about this reform will focus on the historic attempt to allow owners to force co owners to sell their home and investment properties if 75% of owners by number, not voting entitlements, so decide. This is ground breaking: a first for any Australian parliament that has been more than 12 years in gestation. I’m proud to be one of the co-creators of ‘Renewal Plans’ that will safeguard all owners in these tricky situations (Teys, M and Russell, P, 2000, Renewing Our Strata Titled City: The Beginning of a Better End).

While renewal plans will be the focus of the media and the lobbyists as they try to increase the required level of support from 75%, it’s the more mundane matter of repairs and maintenance that will in practice be the most significant of the 90-odd reforms. Owners corporations become liable in damages to its members for breaches of statutory duty if they don’t maintain and keep common property in good and serviceable repair.

This is set to bring an end to the procrastination and ineffectiveness owners corporations and their strata managers, who are running around in ever-decreasing circles trying to avoid the inevitable responsibility and expenditure required to fix cracks and leaks.

Claims for breach of statutory duty rather than contests over strata renewal plans will be the real strata lawyer’s picnic and will fund many renovations and trips to Aspen. Just wait and see.

Michael Teys is the author of ‘Growing Up: How Strata Title Bodies Might Learn to Behave’, a specialist strata lawyer and the founder of Block Strata. You can follow him at www.michaelteys.com and on Twitter @michaelteys.

*The title quote is sourced from Colin Powell on the topic of leadership

Heartbroken self-managers need a hand in small strata

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It wasn’t the work or even the legal liability that stopped Robert (name changed) from managing his own strata, it was the lies and broken promises from his fellow owners. As the kids say, he was just over it. And so ended another successful but very one-sided term of self-management of a red brick strata scheme.

The red brick blocks of Sydney are fairly simple things. Built to withstand a nuclear attack they are as strong as some might say plain. Usually they are six homes side by side on the ground with a shared driveway and minimal gardens. Sometimes they might have a floor or two above but hardly ever a lift. They also come in packs of two, four and ten.

At one point in the sixties or seventies Robert thought he was up for managing this themselves. It couldn’t be much harder than what he managed at work.  Have an annual meeting, strike a budget, collect the levies four times a year and pay the gardener every once and a while, more in summer. There was the insurance but a broker handled that.

Each year when the owners gathered there was a vote of thanks, never a gift of a bottle or two but there was that sense of satisfaction that came to a volunteer of a job well done that kept him coming back. But things changed.

Strata laws got more complex, councils got funny about fire safety, things needed replacing, owners wanted air conditioning and floating floor boards and people got ruder. The last straw; more changes to the strata laws. You see, more consumer protection comes at a price and our friend is sure he’s not going to be the only one to pay for it.

So this red brick block will now get a professional strata manager. There will be more paper and rules than before, and of course there’ll be the cost but it will be shared evenly and at least when our mate leaves someone will be left in charge.

A bottle of wine for Robert with the vote of thanks might have been the cheaper option but that’s the way of the world.

If you manage a small block and want to discuss options for full or partial management of your strata call Block Strata on (02) 9562 6500 now for a free no obligation inspection and management plan.

Chris Irons @ Griffith 2015 – Getting the wrinkles out of strata disclosure

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I always feel for public servants asked to speak at industry conferences. Theirs is a world of policy, process and politics and ours is one of strategy, outcomes and the bottom line. One is no more right nor wrong than the other, there’re just different.

Inevitably then the public servant presenter can’t say as much as he or she may like and the audience wants. That was probably the case for Chris Irons, Commissioner for Body Corporate and Community Management (Queensland) speaking at the Griffith University Strata Title Conference, September 2015.

The Commissioners paper, ‘Strata title ownership and requisite knowledge – How to get disclosure and education right’, traces the history of statutorily prescribed disclosure and warning statements on land and unit sale contracts in Queensland noting it began with little, grew too much and has pulled back to less. He argues that this might be due to a changing need for paper information in a more electronic world and that the ultimate effectiveness of this disclosure and information regime might be the demands on his offices services which he says remain fairly constant year to year.

The paper doesn’t offer any empirical evidence to support these conclusions. However, the Commissioner does record some of the most basic questions his team are asked suggesting the regime hasn’t quite hit the mark for example, ‘I didn’t know I was part of the strata – how do I get out?’ Welcome to our world Commissioner.

The paper promoted me to check the current Qld warning statement for property buyers. It talks about cooling off and getting legal and valuation advice, all of which is sound but rather unremarkable particularly in terms of understanding the strata condition. I would go more with this –

When you buy this property you become part of the body corporate and have to pay your share of the common property expenses. With this type of property there are restrictions on your proprietory rights. It’s different from owning a free-standing house so if you’re not good with sharing go and live on a farm. That’s all!

New laws will tease tenants with a false sense of relevance

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The cultural divide in Australia between owners and tenants will be widened by proposed laws for NSW allowing tenants limited rights to participate in meetings of owners corporations.

By these proposals a copy of the agenda of each meeting is to be provided to tenants on the owners corporations roll, and tenants will be entitled to attend strata meetings.

Some owners will be object to this reform merely on economic grounds. Strata managers usually charge by the page or in some cases, unbelievably, by the email so the more they send they more they are paid. The tenants’ objections will be far more personal.

The right of attendance given to tenants by the proposals is insignificant having regard to the limitations attached. Unless specifically resolved by an owners corporation on a case by case basis:

• Tenants will be entitled to be seen but not heard.
• Tenants will be asked to leave when financial matters are being debated.
• Tenants will not be entitled to see any documents sent with the agenda.

If the purpose of these proposals is to unite our strata communities, then they fail miserably. Tenants won’t come to a show to be relegated to the cheap seats without a program and to suffer the indignity of being removed when matters of finance are raised.

This is a policy so compromised in the making that it perhaps unwittingly will set owner/tenant relations back 50 years, ironically to a time of segregation when King had a dream and Kennedy thought what unites us was far greater than what divides us.

Not in strata my friends, not in strata.

Online voting will make for lonely convenience in strata

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I voted online at the last election but, strangely, I had to be out of the state to do that. Still, it worked, and one would think soon we will all be logging on and casting away.

There are rituals about voting that are threatened by this advancing technology. The local state school election day cake stall and sausage sizzle will soon be things of the past. Political party hacks won’t have to stand in the sun all day taking snide looks and comments from those declining their how-to vote-cards, the scrutineers will miss out on a good day’s pay for crossing out names, and we won’t have to line up at a cardboard booth for the nation to decide.

Proposed laws for voting online for strata communities will change rituals too. Some will be missed, some not so much. No longer will you have to be present personally or by proxy to participate in a meeting. Proxy farming will be curtailed. You will be able to cast your vote in writing and in other ways adopted by the owners corporation and approved by government regulation. The specific details for this have not yet been released but voting online, by apps and using social media should be in the mix.

Participation levels in strata affairs should rise if these proposals become law. No longer will you have to go out at night, fight the traffic and find a park to vote on your strata issues. The sometimes laborious task of counting votes will be faster and more accurate. We will all get home earlier but like all reform this one will not be without its consequences too.

Firstly, those of us that care enough to engage won’t meet as many of our fellow owners because most will vote with their keyboard, and the already too lonely corridors and foyers of apartment buildings will become that much more isolated. Secondly, in the absence of live debate and presentations strata entities will probably be more likely than they already are to vote on price, not quality. That happens when there is nothing else for the decision maker to go on and no one believes all that stuff in the propaganda about quality and service.

When we can vote by a click of a button on the bus on the way home strata communities that care about community and quality will have to find new and better ways of meeting, forming relationships and making decisions on the true merits of a proposal rather than merely the bottom line.

New strata legislation will fall on Chicken Little by-laws

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Such is the unrestrained nature of our owners corporations’ by-law making powers that presently in New South Wales you can make a by-law requiring people in strata units to eat pizza each Wednesday night, according to Australia’s leading strata law academic, Dr Cathy Sherry of UNSW. Proposed new laws  will require by-laws must not be ‘harsh, unconscionable or oppressive. A by-law like the one used by Cathy to make her point may or may not be ‘harsh, unconscionable or oppressive’ depending on your views about personal liberty, and perhaps being force feed pizza.

The point is we are about to go from a regime where by-laws, particularly those imposed by the original developer, may be broad and expansive to one where they are subject to limitations; limitations that have been the subject of considerable judicial interpretation but will still cause confusion in their application to strata living. Australian courts have determined that ‘unconscionable’ means something more than merely being unfair or hard commercial bargaining, it means being against conscience as judged against the norms of society and herein lies fertile grounds for argument. What crosses the line might be clear to me but not my neighbour.

‘Chicken Little’ by-laws that would have us believe the ‘Sky is Falling’ or other disaster is imminent if renovations are made to a unit will fail this new test. These rather hysterical by- laws provide for hefty bonds to be paid to secure possible damage to common property and all manner of expensive consultants’ reports and supervision by interfering strata committee members with too much time and not enough purpose in their lives. Mercifully these by-laws that are stopping people from modifying their units for the frail aged will fail the new test because they go beyond what is reasonably necessary to protect the legitimate interests of strata members. There are building codes, development approval conditions and certifying authorities for that.

This reform should be welcomed and will be sweet revenge for Henny Penny, Goosey Loosey, Ducky Lucky and all that have been stymied by fear mongering.

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