There are few things in law reform as lamentable as the toothless tiger. A law that appears powerful or threatening but is actually weak. Ineffectual. Lacking the ability to fulfil its potential.
We've seen a bit of that in strata over the years. Codes of conduct. Regulations about conflicts of interest. Developer funded initial maintenance plans. All laudable. All observed mainly in the breach.
Recent amendments to NSW strata laws, slated to start at the end of this year, may too go the way of the toothless tiger. They are powerful laws designed to enforce OCs to undertake and fund their repair and maintenance obligations. They allow the Department of Fair Trading to issue compliance notices, access premises and undertake invasive testing. They can also enter into enforceable undertakings and impose substantial penalties. Cue the gasps of civil rights lawyers and OC advocates.
But no. These powerful new laws look like being enforced. In recent weeks, this tiger has grown some teeth. Moreover, said tiger has not been afraid to bare them. We can report that DFT has sent letters to some OCs involved in dispute proceedings asking them to update DFT on the steps taken to meet their obligations. The letters foreshadow the new laws, and warn that the ultimate sanction for non-compliance could be an application by DFT for a compulsory appointment of a strata manager to ensure the OCs meet their obligations.
This is a very significant reform. One that might just jolt irresponsible OCs into action. The ones refusing to do maintenance and repairs. The ones constantly looking for a reason to procrastinate, to kick the can down the road to the next group of owners. The ones that won't take advice, then whinge about the special levy.
Apart from the extensive array of investigative powers, enforceable undertakings are the new darling of regulatory enforcement authorities because they are cost neutral to government. Under the terms of the undertaking, the wrongdoer pays for their own investigation, prosecution, and supervision of remedial conduct. Genius.
This is how the game will soon be played -
- Common property falls into disrepair
- Having failed to strike levies in accordance with the maintenance plan the OC is without funds to do the work
- Anger, denial, and bargaining ensue over developers’ defects, special levies, and strata loans. Until someone suggests another report or a third quote - this buys some time, perhaps even enough to sell.
So far, no change to the playbook, right? But wait for what will soon come next.
Next, the most aggrieved lot owner, the one most affected by the neglect, refers the matter to the Commissioner’s office instead of going to the Tribunal. It's now the regulator’s problem. And the last thing the regulator wants on their watch is buildings falling down. See Mascot Towers. For a more terrifying case study, see Champlain Towers.
This reform, singularly, has the potential to turn the tide on years of OC neglect and obfuscation. To force OCs to do work, and keep buildings safe and fit for purpose; this is an enormously important law reform. One that could have ripple effects around the world, where other regulators grapple with the same problems.
Let's see if the newly-toothed tiger bites.
Michael Teys advises strata management businesses on improving profitability through professionalisation and streamlined operating systems.
He has more than 30 years’ experience as a strata lawyer and academic and has owned 11 strata management agencies throughout Australia. He has a Master of Philosophy (Built Environment) and Bachelor of Laws. He lectures and writes widely about strata management issues in Australia and internationally.
