Strata Reforms [NSW] Update 8: Legislation Housekeeping

Let’s Marie Kondo these strata laws ….

Marie Kondo’s first rule of tidying is to set your intention and to commit the time and effort required so you can approach the task with a can-do attitude, energy, and motivation so that at the end you’ll experience the joy of being with the things you want. So, let’s apply some of that to fix up the little messes in NSW strata law.

You know the problem: you change one thing to make some improvements in strata laws, but miss something that unexpectedly causes a different problem. It happens regularly but often never gets resolved.

Over the years, I’ve come across anomalies in the NSW strata laws that have been for a long time or were created during the previous reforms. Others have emerged as Courts and Tribunals have considered and identified them in the strata laws. 

As this series of articles about my views on NSW strata law reforms get close to the end, I’m looking at fixing apparent errors or anomalies in the existing laws. 

So, here’s my list of 12 things that need attention.

I’m sure there are more too.

1.   Consent to repeal common property rights by-laws

After changes to the mechanics of by-law making were made in the 2015 strata law reforms, we’ve ended up in an odd situation regarding the repeal of common property rights by-laws that arises as follows.

• S 142 of the strata laws defines what is a common property rights by-law is and includes any changes to such a by-law.

• S 143(1) of the strata laws says that a common property rights by-law can be made only with the written consent of the owner or owners getting benefits under the by-law.

• S 133 of the strata laws defines a change to by-laws to include the repeal

• S 141 of the strata laws say that any by-law can be changed with a special resolution, but does not require written consents for common property rights by-laws.

So, whilst benefitted owners must give written consent to making a common property rights by-law, they can be changed or repealed without the owner’s consent.

This is different from the previous position and probably isn’t intended.

So, I suggest that the strata laws re-instate the need for written owner’s consent to common property rights by-law changes or repeals.

2.    Strata committee size when there’s a tenant representative

The 2015 strata law reforms created opportunities for a tenant representative to be appointed to the strata committee [s 33 and reg 7 of the strata laws] but it’s not clear how the nomination of a tenant representative affects the size of the strata committee.

S 30(1) of the strata laws allows the strata building to determine the size of the strata committee and limits the size of the strata committee to 9 members.

Reg 9 of the strata laws set out the process for setting the strata committee size and electing members.

But since tenant representatives are not elected but are nominated, it’s unclear how strata committee size is affected by a tenant representative.

If the committee size is set at 5 members and 5 members are elected to it, then a tenant representative probably increases the strata committee size to 6.

But, what if the committee size is set at 9 members, 9 members are elected to it, and a tenant representative is nominated: 

• Does the strata committee size become 10 [which is not permissible]?

• Does the tenant representative replace one of the elected members so there are only 8 of them?

• And, if the tenant representative replaces an elected member, which one?

So, I suggest that this confusing situation in the strata laws needs clarification in relation to strata committee size and membership.

3.    Limits on owners representatives

Owners may appoint agents to receive notices and documents for them under s 155 of the strata laws but only in situations where there’s:

• intellectual impairment,

• physical impairment,

• illiteracy,

• an inability to read or write English sufficiently well, or

• absence from the lot.

But, why have such limits? 

Surely, if an owner wants to appoint an agent then surely, they should be able to.

So, I suggest that the strata laws remove any limits on the ability of owners to appoint agents.

4.   Notice of owners improvements

A strata building’s damage policy must cover, amongst other things, ‘owners’ improvements and owners’ fixtures forming part of the building’ [s 161(3)(a) of the strata laws]. 

This includes all kinds of finishes and equipment like kitchens, built-in wardrobes, internal wall tiling, and finishes.  And, where a strata owner renovates their apartment the new improvements and fixtures are also covered.

But, since most owners don’t tell the strata building about these kinds of works and since the 2015 changes many of them don’t need approval, they are not notified to and therefore included in the damage policy coverage amounts.  What you don’t know about you can’t value for replacement.

Many years ago, the NSW strata laws required owners to notify the strata building if they made improvements exceeding a specified value.  It got lost in the 1996 amendments and never found its way back.

But, it’s a good idea and fits neatly with my suggestions for a better and graduated regime covering alterations I proposed in Strata Reforms [NSW] Update 7: Building Structure Issues.

So, I suggest that the strata laws require strata owners to notify the strata building if they install or make improvements that exceed $5,000 in value.

5.   Limits on meeting dates, times & places

A strata building can hold a general meeting of the owner or a strata committee meeting on any day, at any time, and in any place.

Whilst that freedom is typically not abused, it could be.

BTW, your next general meeting is at 11:00 pm on Christmas Eve at Rotary Park, 1 Darling Street, Bourke.  It’s a nice place but not that convenient.

So, I suggest that the strata laws be reviewed to consider imposing limits on meeting dates, times, and locations, or at least, give express order powers NCAT to prevent meetings that are unreasonably scheduled.

6.   Levy notices

Actual written notification to strata owners is required for special levies [strictly non-periodic contributions] before strata owners are liable to pay them.

But, written notice is not required for regular/quarterly levies to the administrative and capital works funds.  It’s enough that they are determined at a general meeting to trigger liability.

But, given that strata buildings are strictly not required to send general meeting minutes to strata owners until convening the next general meeting, they might know about them for some time.

So, I suggest that the strata laws require that all levies [contributions] must be notified to strata owners before they are liable to pay them.

7.   Only full or zero interest allowed on overdue levies

A strata building can decide to reduce the statutory 10% interest on overdue levies to zero under s 85(3) of the strata laws.

But, it can’t decide on a different interest rate between zero and 10%.  Why?

So, I suggest that the strata laws permit strata buildings to decide to reduce interest on overdue levies anywhere below the statutory amount.

8.   Strata & building manager transfers

There are a few unusual provisions for arrangements with strata managers and building managers that no-one seems to know what to do with.

S 51 of the strata laws allows a strata manager to transfer functions to another strata manager with general meeting approval.

S 69 of the strata laws allows a building manager to transfer functions to another strata manager with general meeting approval.

But, it’s not clear if that’s meant to cover the temporary or partial transfer of functions or it extends to cover the replacement of the strata manager or building manager; effectively a novation of their appointment.

So, I suggest that the strata laws clarify the purpose of these transfer provisions [including any limits].

9.   Committee elections by electronic voting

Regulation 14(1)(b) of the strata laws prevents the use of electronic or other pre-meeting voting for the election of the strata committee.

It’s an artificial restriction that simply complicates the adoption of electronic voting and pre-meeting voting. 

So, I suggest that the strata laws remove the restriction on the use of electronic or pre-meeting voting for strata committee elections.

10. Ability to set a new financial & AGM cycle

A strata building is to hold an annual general meeting once each financial year [s 18 of the strata laws].

But ‘financial year’ is not defined in the strata laws.

S 92 of the strata laws require financial statements for reporting periods that are within 2 months of the next general meeting, which must be the financial year.

So, strata buildings have ‘floating’ annual general meetings and financial cycles that are not always 12 months long.

Although everyone seems to cope with this, it makes no sense to me and is just another unnecessary uncertainty and variable for strata stakeholders.  Shouldn’t they just work on a calendar or financial year cycle?

So, I suggest that the strata laws permit strata buildings to determine an annual cycle for their financial year and annual general meeting [and to change it from time to time].

11. Inability to seek penalties for breaches of NCAT orders

The 2015 strata laws created a problem for penalties that arose because the power to seek penalties for NCAT order breaches ended up in s 77 of the Civil and Administrative Tribunal Act 2013 and needed the permission of an ‘authorised official’ in the Minister’s office.

But, that’s now been fixed under the recently passed the Strata Schemes Management Amendment (Sustainability Infrastructure) Bill 2021.

Hurrah!

12. Lot boundaries in 1961 Act buildings

Finally, let’s get very esoteric on one of my favourite unresolved strata title issues.

Strata buildings that were registered under the original strata laws [the Conveyancing (Strata Titles) Act 1961 had different boundaries [that’s up to 1 July 1974]. 

In many cases, the boundaries of the lots in those plans were the centreline of a separating wall, floor, or ceiling, so that there was no common property as we know it now in many parts of the building. 

But, when the Strata Titles Act 1973 started it operated to shift some but not all those boundaries from the centreline of the wall, floor, or ceiling to the inner, upper or lower surface of the wall, floor, or ceiling like we understand boundaries today.

However, boundaries that were specified on a strata plan stayed where they were.

So, some boundaries shifted and others didn’t. 

So far so good.  But, the esoteric problem that’s unresolved is what happens when a 1961 Act strata plan specifically notes some boundaries of a lot as the centreline [as some did] but doesn’t say anything about other boundaries of the same lot.

• Do they all stay the same as they were under the old laws [since there’s a specified boundary for that lot]?

• Do they all change to the inner, upper or lower surfaces [since there are deemed boundaries that seem to be picked up by the transitional provisions]?

• Do only some change and others stay where identified, in which case what happens at the intersection of the differently treated boundaries [remember that there a plenty of intersection given the 3 dimensions of the lot]?

I’ve run a few cases on the issue and never got a satisfactory outcome.

You can find the relevant transitional provisions in Part 10 of Schedule 8 of the Strata Schemes Development Act 2015.

So, I suggest that the strata laws clarify what happens to 196 Act lot boundaries in mixed application situations.

Mar 08, 2021

Francesco ...