Everything that’s wrong with NSW’s Common Property Memorandum
Or, why the easy way out is a bad idea for strata buildings …
In 2015, the NSW strata law changes introduced a short-form way of trying to clarify who’s responsible for different parts of a strata building: the strata corporation or strata owners. But, like so many tempting shortcuts, it’s poorly considered and done, it doesn’t work, it’s very messy, and, it should be abolished …
[7.5 minutes estimated reading time, 1464 words]
Introduction
In my 2021 submission to the Government about the proposed changes to NSW strata laws [which you can read about in Strata Reforms [NSW]: Stage 1 Wrap Up], I said that ‘the NSW Common Property Memorandum should be abolished’
I was referring to a mechanism added to NSW strata laws in 2016 that allows strata buildings to adopt a written statement that specifies whether the strata corporation or strata owners are responsible for different parts of common property. It was intended to simplify the allocation of those responsibilities for non-technical, unskilled, or inexperienced strata stakeholders.
In this article, I’ll explain, critique, and, debunk, the effectiveness and usefulness of the NSW Common Property Memorandum to support my view and recommendation about getting rid of it.
What is the NSW Common Property Memorandum?
Since the 2015 amendments to NSW strata laws, strata buildings in that state have been able to adopt a prescribed Common Property Memorandum under section 107 and regulation 27 of the strata laws that can prescribe and modify responsibility for common property items from the default position under the law [effectively allocating responsibility to lot owners instead of the strata building].
You can read more about NSW strata corporations’ maintenance responsibilities for common property in my recent article Strata Improvements 06: Fixing What’s Broken in Strata Buildings.
The Common Property Memorandum must be adopted in a strata building’s by-laws [so needs a three quarter majority vote].
But, the Common Property Memorandum that can be adopted is restricted to a prescribed form that was Gazetted on 30 November 2016 which you can read here, plus any changes approved under the by-laws that exclude [but not add] items to the memorandum. So, it’s fairly restricted.
It’s a superficially attractive idea since it means that rather than having to find the strata plan, interpret it, and, sometimes actually look at the strata building, to determine who owns and is responsible for different parts, you can find a quick and easy answer about things in the memorandum.
But, like all quick and easy solutions, the Common Property Memorandum creates its own new and different problems.
So, what’s wrong with the Common Property Memorandum?
There are many problems with the NSW Common Property Memorandum: conceptually, in the way it’s drafted, and, when applying it in practice.
Here are a few.
A NSW strata building’s obligations to maintain, repair, and replace common property under section 106 of the strata laws are subject to the provisions of a Common Property Memorandum. That must mean that those obligations don’t apply to things a Common Property Memorandum says are strata lot owners’ responsibility.
This is a significant change to the very strict obligations that have been imposed on strata buildings about common property by strata laws and repeated Court and Tribunal decisions over more than 50 years. And, I suspect making these changes by adopting the Common Property Memorandum is usually based on very little consideration by strata buildings or strata owners about the impact of the changes.
It’s just bad thinking and decision making to change things you don’t understand to something you haven’t carefully considered.
Unlike decisions by strata buildings section 106(3) of the strata laws to exclude specific items of common property from their obligations to maintain, repair, and replace them, there is no qualification on avoiding that obligation if it affects the safety or appearance of the strata building under the Common Property Memorandum.
That means even if the maintenance, repair, or replacement of something affects safety or other strata owners, it’s out of the strata corporation’s control and depends on strata owners’ willingness to do the necessary work promptly and correctly.
I’m sure many strata owners wouldn’t be happy to find that out when things go wrong.
There’s an internal inconsistency in section 107 of the strata laws. That’s because section 107(3) refers to the Common Property Memorandum applying to ‘items that are not common property’ but, under section 107(2), the Common Property Memorandum can only apply to common property.
I know that’s a bit formal and technical, but it suggests poor basic thinking in the drafting.
The prescribed Common Property Memorandum gazetted by the NSW government refers to many items in strata buildings that are not common property, contrary to the provisions of section 107(2) which limits its application to common property.
For instance:
Item 4(b) – keys, security cards, and access passes’: which are personal property and not common property.
Item 6(a) - internal (non-common property) walls: which are by strata laws definitions lot property and not common property.
Item 9(a) – window cleaning; which is a service [and not common property] and is covered also covered by a standard by-law in the NSW strata laws.
Where the Common Property Memorandum prescribes that the strata building is responsible for a common property item [which are about half of the listed items], the Common Property Memorandum is just restating the existing strata law position in relation to that matter as it affects the strata corporation.
So, if it’s just a dumbed down version of what already applies, why not simply put it into an information sheet for strata stakeholders.
Conversely, where the Common Property Memorandum prescribes the strata owner is responsible for an item that is not common property [which are the other half those listed items], the Common Property Memorandum is just restating the existing law and position in relation to that matter as it affects strata owners.
Since other strata building by-laws can override the Common Property Memorandum, the memorandum is going to be wrong on its face in any strata buildings that have created such by-laws, since they override it.
So, in those strata buildings, the Common Property Memorandum will confuse [or worse, mislead] strata stakeholders who read and rely on it.
The Common Property Memorandum ignores how strata building insurance operates to cover many lot owners’ fixtures that are not common property and will apply to repair or replace them in many circumstances.
Some of the Common Property Memorandum provisions allocating responsibility to lot owners are poorly described, considered, or wrong in some cases.
For instance:
Item 1(a) – awnings, decks, pergola, privacy screens, louvres, retaining walls, planter walls, steps, or other structures within the cubic space of a balcony or courtyard and not shown as common property on the strata plan: which can only be understood by reference to the strata plan and application of the boundary deeming provisions under the strata laws.
Item 1(b) – that part of a tree within the cubic space of a lot: which also needs referencing to the strata plan and boundary deeming provisions, but also, to where parts of the tree are located.
[NB: Amusingly, that means that if there’s a large tree whose roots extend below or outside a lot courtyard and its branches and canopy extend above the courtyard’s upper boundary, some of the tree will be the lot owners’ responsibility and some will be the strata building’s responsibility – Ha Ha Ha!].
Item 4(b) - door locks additional to the original lock (or subsequent replacement of the original lock): which requires knowledge of the history of lock changes in the strata building by the strata corporation and strata owners.
There are many more examples like this in the Common Property Memorandum which I could go on about.
Conclusions
In my view, the problems I’ve outlined mean that the NSW Common Property Memorandum is a bad idea that doesn’t work at all, or, as intended.
It has conceptual faults in how it addresses strata corporation and strata owner responsibilities for parts of the building, structural inadequacies in the way it’s assembled and drafted, internal inconsistencies, and, it creates practical problems when applying it.
Rather than trying to write simple universal rules for building structures to apply to all strata buildings when they are uniquely built, configured, and subdivided, each strata building’s long standing uniquely complex boundary, ownership, and responsibility structures should prevail.
And, strata buildings and their stakeholders should take the time to identify the common and lot property in the building, capture changes that are made to the building structures, clarify the ownership of the existing, new, or changed structures, identify who has, assumes or has been allocated ongoing responsibility, and the extent of that responsibility.
So, I suggest that any new NSW strata laws [whenever they come] abolish the Common Property Memorandum.
October 12, 2023
Francesco ...