The NSW government’s much-heralded changes to the Strata Titles Act – the first significant overhaul since 1973 – are now a reality.
They took four years of planning and four Fair Trading Ministers to reach parliament and will hopefully transform the development and management of the state’s strata schemes for the better.
According to the Department of Fair Trading, there are around 75,000 strata schemes in NSW representing $350 billion in assets. Approximately two million industry professionals, strata owners and residents in strata-titled townhouses and units have the potential to be affected by the changes to the current laws.
For managing agents, the new legislation will have a significant impact as it will put more pressure on them to perform and deliver a higher level of customer service when the legislation comes into effect (anticipated to be on 1 July 2016.) Historically, managing agents have been on rolling contracts; some have been engaged with buildings for up to 15 years.
The Department of Fair Trading responded to complaints from owners who consistently raised concerns about the difficulty of dismissing managing agents despite poor performance. The Strata Schemes Management Bill will limit the length of the appointment of a managing agent to one year for the first year and three years thereafter.
The changes also require that the contract with the managing agent must also be included in the meeting agenda of the executive committee once a year, and the committee is required to assess the performance of the agent. It is likely that, as part of the process of considering the reappointment, committees will put the contract out to tender. While price is clearly a factor, the trend we are seeing is the demand for a high level of customer service.
Knowledge of sustainability needed
Included in the customer service requirements will be the need for expertise in sustainability. Strata-titled properties have been the “forgotten sector” when it comes to government programs and incentives, but that is changing and owners and residents are demanding and getting more. They want to know about the state or local council programs that can provide energy auditing services, funding, rebates or other support.
We are seeing increasing number of executive committees expecting their strata managers to advise on “green strata” initiatives to reduce the use of electricity within their building and deliver a more sustainable footprint. This has the potential to be a factor in the awarding of contracts in the future.
Changes to repairs
The way that repairs are dealt with will also change. To help offset the costs of repairing defects as well as to ensure the burden of rectification is not unfairly imposed on new owners, the proposed reforms will see developers lodging a security bond equal to two per cent of the contract price of the building works.
If it is not paid out, the bond will be refunded no later than two years after the completion of building work or within 60 days of the final inspection report – whichever occurs first.
Measures have also been introduced to prevent building defects going unnoticed until after statutory warranty periods are over. These include requiring developers or the strata scheme to arrange for building inspections between 12 to 18 months after completion of works. The owners’ corporation, who can refuse to approve the appointment on any grounds, must approve the appointment of the inspector. There has to be complete transparency around the appointment of inspector to prove he has no connection with the developer. The developer is also responsible for all costs of obtaining an inspection and report.
Building defects and rectification works must also be included on the agenda for every general meeting of the owners’ corporation during the warranty period.
Other changes include: requirements for managing agents to disclose all third-party commissions, nominal gifts, and benefits; modernising the management of strata schemes, with options to email documents (instead of posting them) and teleconference general meetings (which could improve voter turnout); the ability for chairpeople to declare that a quorum has been established by people present if no quorum is established beforehand; and the requirement for developers to compensate owners if they have deliberately misled purchasers over levy estimates.
Matthew Wrigley, a former builder, is managing director of Perpetual Strata Management.