strata law

‘Thanks for your email, we’ll get back to you in 3 – 4 days’, said no successful strata manager ever!

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The point’s been made loud and clear before today: there’s an urgent need for change in strata management practice and it’s not because the government has finally set the commencement date for new strata laws in NSW. It’s because of the automatic replies I got to my email announcing that my new strata management agreement was ready for sale.

First came, ‘Thanks for your email, we’ll be back to you within 3 – 4 days.’ Next I got, ‘We try to answer our emails within 24 hours but some strata managers get up to 150 emails a day so that’s just not always possible’.

I’m not having a go at strata managers. I’ve walked in your shoes. Indeed, on one level I applaud the honesty of these statements, but let’s be clear – this is no way to build a business today. I’d go so far as to say the reason clients aren’t leaving these firms in droves is simply that they don’t know how and they suspect they will get this everywhere they go. They might be right about that.

There’s nothing new about any of this. Managers and their advisors have been wrestling with this problem for at least a decade. What’s new is that on Friday we learnt that there’s just 20 weeks left until new laws start that will massively compound this problem. There are 39 new provisions about strata management alone to be digested.

Coincidently, on the same day we also learnt the market leader for strata management in the country has signed a 10-year deal to ditch their in-house software for the only true cloud-based strata software company in the market. I’ve used that software and it’s good. The client portal is particularly good, and guess what? It reduces email and telephone traffic because it’s a really easy to use portal where people can get what they want, when they want it, and share information.

And there’s more. As it happens the new strata laws put an end to ‘rollover’ contracts by 31 May 2017; strata management agreements for new building can’t go longer than 1 year and the disputes tribunal has the power to terminate and rewrite strata management agreements.

Let’s join the dots then… strata managers are over worked already, there’s once-in-a-generation reform coming, the market leader is changing to software with a superior client interface, and law reform will lead to provider churn like never before.

Times are truly changing.

What might happen when strata buildings fall into the sea?

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Pacifica Collapse

The sky has barely cleared on the northern beaches of Sydney, where it seems the risk of this perfect storm has been well understood for some decades, and the blame game has already begun.

For strata-titled apartment blocks in the Northern Beaches at risk there’s an additional element to this all too familiar, post-catastrophe witch hunt. A Coastal Zone Management Plan, adopted by the Warringah Council in 2014, made owners responsible for protecting their property from the impact of coastal processes. It also noted that new developments needed to demonstrate both a low risk of erosion damage and measures to be taken to avoid it, such as piled foundations. In the case of a strata apartment block covered by such a plan, the entity responsible is the owners corporation.

The owners of the properties concerned will say the council is to blame, the council will say the owners are responsible, the insurers will say their policies don’t cover the risk and in any event land is not insured. Who knows where this might all end but with so much potentially at stake, if a strata apartment building fell into the sea or was condemned as uninhabitable be sure of this; the plaintiffs’ lawyers will cast the net for defendants wide and leave no stone unturned looking for someone to pay.

While lawsuits against strata committees of owners corporations are rare, the events of the last 72 hours raise the horrifying prospect that the defendants of last resort in this type of case might just be the strata committee members of any owners corporations that were involved.

Right now in New South Wales there is no immunity for strata committee members for personal liability for things done or not done in the exercise of their duties. There is also no doubt that at common law strata committee owners owe a duty of good faith to the entity they serve, to be honest, reasonable and prudent in all they do. Immunity has been foreshadowed in laws proposed to begin later in the year but that doesn’t help today.

Strata committee members will likely be covered for directors’ and officers’ liability but these policies are peppered with exclusions for circumstances and risks known or that ought reasonably to have known and where full disclosure has not been made or the appropriate remedial action taken.

When North American strata lawyers visit Australia for strata law conferences they are always staggered that our owners corporation are not limited liability entities and that strata committee members assume personal liability for their volunteer work. This is why.

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 and on Twitter @michaelteys.

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

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