The NSW Fair Trading Minister, the Hon Anthony Roberts, initiated the Strata Laws Review earlier this year. OCN prepared a submission based on the input of many of our members and a discussion at the March 2012 General Meeting. The submission is in three parts: Improving Strata Living and Governance in NSW, Improving and Enhancing Strata Legislation, and OCN Strata Renewal Model.
Read more for our submission and a summary of our recent follow-up discussion with the Minister’s office. The Government’s discussion paper to be released during the next few months will provide further opportunities for OCN comment. In the meantime, please post any further comments on our Forum under the Legislation heading.
Strata Review - OCN Submission – Key Points
Strata ownership and strata living in NSW is now well-established but in many ways problematic:
Owners in new strata schemes are exposed to major building defects and long-term building management agreements, put in place at the behest of developers, which are contrary to their interests. Lack of consumer protection in this area exposes owners to unacceptable costs and is giving strata ownership a bad name.
Due to its minimalist style, the Strata Act is not an effective governance instrument for guiding Executive Committees managing the operation of strata schemes. Some provisions regulating the operation of strata schemes are ineffective and open to abuse. Combined with a general lack of appreciation of the nature of strata ownership this often leads to mismanagement and unnecessary disputes in strata schemes.
Ambiguities in the Act lead to confusion and misinterpretation of its intent, resulting in unnecessary complexity and cost in the operation of strata schemes. NSW Fair Trading does not have the power to definitively clarify the Act and CTTT decisions are sometimes arbitrary and ignore practical consequences. This results in excessive legal cost for owners and owners corporations and excessive dispute resolution costs for government.
The unanimous agreement required to terminate or renew strata schemes is unattainable in practice, resulting in strata schemes that are no longer viable to operate.
The measures needed to address the problems and deficiencies would deliver high impact benefits to the public at relatively low cost and generate political goodwill for the government:
A public awareness and education campaign to improve the level of understanding of strata ownership, strata living and strata management.
An overhaul of the building construction approval and certification process to ensure that when an Occupation Certificate is issued for a new strata building, prospective purchasers can assume that it is essentially free from defects. In the exceptional cases where defects are uncovered by owners, building insurance should cover rectification costs for 10 years for structural defects and 5 years for non-structural defects.
Reshaping and augmenting the Strata Schemes Management Act:
As an effective governance instrument that provides guidance for the organisation and operation of various types and size of strata schemes
To prevent long-term service contracts to be implemented in new schemes before the new owners, independent of the developer, gain effective control of the scheme
To streamline general meeting voting and procedures, and other governance arrangements, in strata schemes
To clarify the boundary between lots and common property and the intent of the Act by defining terms where ambiguities exist (e.g. section 65A of the Act)
To implement more realistic provisions for the termination or renewal of strata schemes that would require agreement by 80% of lot owners (rather than 100%) for strata schemes consisting of more than 4 lots.
To address the numerous items outlined in OCN's submission and others.