Strata Law Review – Nov 2012
I have related my comments directly to the original document – if you need to access it, click HERE.
11, 000 words may seem a bit excessive – but it’s a big issue. Let’s hope some of what I’ve said makes sense to someone.
By Jimmy Thomson (Flat Chat column and website)
Firstly I think this is a very valuable initiative and I hope it leads to some of the changes necessary to make strata living a more attractive proposition for more Australians. I think that while changes to individual aspects of the Act are required, there needs to be a more ‘global’ approach that sets a benchmark against which all decisions – by Executive Committees, strata managers, Fair Trading mediators, and CTTT adjudicators – can be measured.
With that in mind, I think there should be a “mission statement” at the top of the Strata Act that establishes as a legal concept that in strata in NSW, in the event of competing claims, the needs of the community come before the desires of the individual, that community standards take precedence over concepts of individual ownership and that legally established and registered by-laws will be upheld by the CTTT without interpretation or qualification.
This will bring much-needed certainty to a very confused area of public life and remove, once and for all, the applications of ‘my home is my castle’ attitudes to strata living. We are the only country in the Western world where the notion of ownership takes precedence over a necessary sense of community responsibilities and rights. It’s time we grew up.
There also needs to be an over-riding law that any document, the sole intent of which is to disadvantage all or any owners – such as pre-negotiated contracts with unfair terms and conditions – should be considered inequitable and be struck down.
I have addressed the issues in the order in which they appear in the discussion document.
1. Should the law distinguish more between different schemes based on size,
usage, type of construction or other reasons? If so, how?
Size is not the only issue in the differences between strata plans. For instance there are also differences in construction such as high-rise and townhouses, and use such as purely residential, part commercial and short-term rental. The law needs to accept that a one-size-fits-all approach will not work and to encourage the establishment of common sense laws that recognize the differences in strata configurations. Certainly there is value in recognizing the difference between small, mid-sized and large developments, with slightly different laws for each. For the sake of argument, I would suggest that small blocks be defined as those with 29 residential lots or fewer, medium-sized lots be defined as those with between 30 an 99 residential lots and large strata plans be defined as those with 100 residential lots or more.
Because of the distinctly different issues faced by owners and residents, there is also an argument for defining strata plans as town-house style, low-rise, high rise, residential only and mixed use.
2. Should the current laws be combined and if so, how?
The laws should be combined into one document as in the initial proposal described in the discussion paper, provided there is a clear statement, as outlined above, that the needs of the community take precedence over the perceived rights of the individual owner.
3. What examples of unnecessary red tape do you believe should be removed?
I don’t believe that the compulsion to consider a motion at every AGM is the most effective way to make Owners Corporations aware of their responsibilities. But I do think owners should be given the chance to make these decisions at their next AGM and then for those decisions to be noted as part of their by-laws until such times as they are changed.
On the distribution of Executive Committee minutes, I think Owners Corps should be able to choose between sending out hard copies or posting the minutes on to a website that can be accessed by all owners from anywhere in the world.
Anything else that causes confusion or unnecessary paperwork without producing any tangible benefit should be swept away.
4. To what extent should the Government prescribe rules for all schemes?
The government needs to establish a basic set of by-laws that reflect community standards. However, each community should be free to amend those by-laws to suit their own preferences PROVIDED their choices are clear to potential purchasers. The simplest way to do that is via the “mission statement” on the front of each set of by-laws that says something like “the following by-laws (numbered) differ from the Model bylaws. There are also by-laws (numbered) which are specific to this strata plan.” This way the confusion between the standard and model by-laws, whereby many strata residents think the model by-laws supersed the actual by-laws, will be clarified.
5. Should broad principles apply to the making of by-laws?
By-laws should always reflect the prevailing attitudes of the community and allow for people to find a place that suits them rather than have to live by a lowest common denominator set of rules. However, once every five years or so, it should be incumbent on strata plans to place all their bylaws on the agenda of an AGM for review so that changes in community attitudes can be reflected in them. Instead of requiring a 75 percent vote of owners at a meeting, the by-law review might be subject to a simple majority of all owners.
The example of barbecues is particularly relevant since many people find it offensive to have the smoke and smell of barbecues pouring into their homes (often when they aren’t there to close windows). It may seem trivial to people who aren’t subjected to these issues but it’s worth noting that the City of New York bans barbecues on balconies by law. Really, we need to grow up a bit and not be so wedded to ‘picket fence’ thinking. If the majority of people in a building don’t want barbecues they should be allowed to say so.
Strata schemes should still be allowed to determine the visiaual appearance of their buildings – within reason. Dictating the colour and style of balcony furniture is taking it too far – but not allowing bamboo fences to be fixed inside balcony glass or household goods to be stored on balconies is quite reasonable. The easies way to do this and cut red tape is to allow strata schemes to set their own standards with guidance from model by-laws.
6. Is there merit in the mission statement idea?
As the person who first proposed this, I have to support the idea. I would add that it should be kept simple, should be subject to regular review and should include a list of by-laws that differ from the model by-laws (as described above). Strata plans that choose not to have a Mission Statement – and they should be allowed to, provided that is an active decision – should still be obliged to note which of their by-laws differ from the Model by-laws so that attention is drawn to the differences.
7. Should the law give more recognition to the personal freedoms of owners?
In a word, no. People have the personal freedom to choose where they live and to choose the kind of building in which they want to live. But once they have made that choice, and if they have chosen strata with all its benefits, then they should be obliged to live by the rules of the community they have chosen. They key to this is information and things like the Mission Statement will make it easier for everyone to make the right choices to begin with, rather than moving into a community and expecting everyone else to adapt to their standards.
The examples given – such as responsibility for maintenance of common property if changes are made to it – only require a simple change in the law. But Owners Corporations should be able to control, for instance, hobby renovators who want to do work on their homes in evenings and weekends when everyone else is trying to relax. That said, this should be something the communities themselves choose and shouldn’t be mandated by government. That’s where the freedom lies – within the community.
8. Are reforms needed to address the competing interests of stakeholders? If so,
what should they be?
WE should certainly get rid of the idea of the priority vote for the reason, as stated, that it is never used. However, we should also recognize the different levels of ‘investment’ of stakeholders. The developer’s investment ends when they have sold their last apartment, the investor is, as stated, primarily interested in making a profit and the resident owner makes a double investment of their money and their time spent in the building.
The first change I would make would be to require the developer to attend all AGMs and any executive committee meetings as requested until such times as their obligations regarding defect rectifications had been fulfilled.
I would forbid non-resident owners from serving as office-bearers on the executive committee.
I would also establish a mechanism whereby in a close vote (either by show of hands or a poll vote) the votes of resident owners were given an additional 20 percent weighting.
9. What terms or provisions in the current law do you believe should be
rewritten in plain English?
I think the whole Strata Act should be reviewed with a view to making its contents as clear as possible in simple English. I also think that there are specific terms that are confusing and misleading. I have countless people who write to my column and website and complain about “the strata”. When I ask if they mean the strata manager, the executive committee, the chair or secretary, the building manager or the Owners Corporation, they often have no idea.
The very term Owners Corporation can be pejorative in a dispute between an owner and the other owners collectively, giving the sense of a faceless corporation taking on a poor defenceless individual, when often it’s a selfish owner trying to get an unfair advantage over his or her neighbours.
So I would start with the most commonly used terms and simplify them. The Owners Corporation should be renamed The Owners and the Executive Committee should be renamed the Community Council. The Strata Manager should be called the Administrator, the Building Manager should be called exactly that and we should do away with the term caretaker completely, replacing it with Resident Manager. This way we avoid the confusion of overlapping terms (except in the latter two cases where they have similar functions) and replace them with titles that actually reflect what the individuals and groups do.
I have taken the terms singled out in the discussion paper and made my own suggestions, based on the idea that the titles should give a clear indication of their functions. Terms like ‘by-laws’ on the one hand sound like an aside and on the other, sonund like they are the law, when they are neither. The term ‘unit entitlements’ skews the perception from responsibility to rights.
|Terms currently used in NSW||More appropriate terms|
|Owners corporation||The Owners|
|Executive committee||Community Council|
|Strata managing agent||Administrator|
|Sinking fund||Future fund|
|Strata roll||Owners list|
|Initial period||start-up period|
|Unit entitlements||Voting shares|
|Common property||Community property|
10. Which of the following would help to improve awareness and in what ways?
More information resources (e.g. factsheets, targeted brochures, template
forms, sample documents and an email newsletter)
You can take a horse to water … the problem with providing any information is getting the consumer to consume it. A much more effective method is to get the prospective owner or tenant to ask questions.
The first step would be to make it a legal requirement for all potential purchasers or tenants to be asked a form question by the selling or rental agent – something like:
“Are you aware that in strata you have certain rights, responsibilities and obligations that may restrict your lifestyle in ways different from living in a free-standing house?”
Potential purchasers would be asked: “Are you aware that, as an owner you have to obey by-laws and pay levies, as decided by the majority of your neighbours, and failure to obey these by-laws could lead to financial penalties?”
Prospective tenants would be asked: “Are you aware that as a tenant you also have to obey the community’s by-laws and failure to do so could lead to your eviction?”
In either case the residents would be asked to sign a statement covering the same ground and stating that they had received a copy of the by-laws for their building.
There should also be a questionnaire that asks pertinent questions such as, are you aware of any restrictions on pets or parking in your building. The key is not to provide the answer but to prompt the new resident ask the relevant questions.
The Mission Statement would also help in focusing people’s attention on the significant areas for them but you can’t expect new owners and tenants to assimilate huge amounts of information especially at a time when their mind is focused on the practicalities of buyiong or renting a new home.
Compulsory training for executive committee members of all schemes or just
I would make training compulsory for office-bearers in medium-sized schemes (30 to 99 lots) and for all committee members in large schemes (over 100 lots). In both cases the lot owners would be given one full year to get up to speed after which they would not be allowed to stand for election until such times as they had done so.
Having new committee members signing a statement setting out their
obligations and responsibilities
Yes, but I would go further – prospective committee members who should also be prepared to stand up at an AGM, state who they are, what their experience is and why they are standing for election.
Requiring managing agents/Secretaries to supply new owners and tenants
with an up to date set of by-laws within a specified timeframe (e.g. 14 days).
As outlined above, this should be provided at the time of signing a sales or rental contract
Making it a requirement that schemes review their by-laws at regular
intervals (e.g. every 5 years)
Yes, as described previously.
Expanding the section 109 certificate to disclose more matters likely to be of
material interest to prospective buyers
The Section 109 Certificate should note home many disputes requiring legal advice have been undertaken in the previous 18 months and how many have been concluded. There should be serious penalties for the Strata Manager and/or Executive Committee secretary for deliberately fudging or not disclosing ongoing or upcoming disputes.
12. Which of the following would help to improve participation and in what ways?
Limiting the numbers or restricting the use of proxies:
Proxy farming is out of control in this state and, lack of participation being what it is, an owner (usually the chair) only needs 25 percent of votes to be able to run a building as a personal fiefdom, choosing their own EC, blocking motions they don’t want, forcing through motions they support and freeing themselves up from spending limitations. The effect on the other owners is more likely to be switching off than mounting a campaign against them.
A combination of the Queensland and South Australian systems that allowed a strictly limited number of proxies plus a postal vote would cover both those who wanted to express their preferences without needing to hear any discussion and those who wanted someone to hear the discussions then vote on their behalf. The practice of seeking proxy votes should be banned without removing the ability to encourage people to participate.
Providing the option of secret ballots on certain issues
Only Poll votes should be by secret ballot so that this doesn’t become the default position for all votes. Thus, anyone who wanted a secret ballot on an issue could call for a Poll vote. Secret ballots are cumbersome and time consuming so a process would have to be evolved to allow them to proceed without extending meetings unreasonably.
Enabling some form of tenant representation in schemes
Schemes with more than two-thirds of residents who are tenants should be required to retain one seat on their Executive Committee for a tenants’ representative, elected by the Executive Committee members.
Calling for committee nominations in advance of AGMs
Yes, and they should be required to present a statement of who they are, what they do, what their experience is and why they are standing for office which can go out with the agenda of the AGM.
Allowing payments to be made to committee members for attending
Yes, but only if they can show that they have completed an accredited strata or Executive Committee training course and on a fixed rate based on the number of units in the building.
Clarifying the legal liability of executive committee members
Executive committee members should be personally liable for any decisions they make where they have been informed that they may be in breach of Strata law and have chosen not to ascertain whether or not this was the case, and adjusted their decisions accordingly.
13. Do you have any other suggestions for how participation in schemes could be
improved or owner apathy addressed?
Owners should be sent proxy/postal voting forms and fined for not returning them. However, they can chose not to fill them in, as long as they return them.
Groups of owners should be able to register panels of proxy-carriers who can make a statement about their philosophies regarding the running of the building. Owners can then ascribe their proxy votes to a panel so that there are alternatives when nominated owners have exceeded their proxy caps.
Schemes should be assisted in setting up simple websites on which residents can discuss issues, not necessarily run by the Executive Committees. Straw polls and information services would be part of the picture, keeping everyone informed and involved.
14. Which of the following would help to improve communication and in
• enabling teleconferencing, videoconferencing or other means of holding
Yes – but with the proviso that non-residents can’t be office-bearers. You can’t chair a meeting via Skype.
• providing more certainty as to how correspondence to schemes should be
See comment (below) on availability of documents via a website.
• reducing the documents required to be sent to owners ahead of meetings
See comment (below) on availability of documents via a website.
• giving schemes the flexibility to make documents available on their website
or on request from owners
All documents sent to or by the Executive Committee should be available for password controlled access on a website. Owners who don’t have a computer should be able to request print versions of the material
• requiring minutes of meetings to be made available within a specified time
after the meeting (e.g. 14 days)
Yes but they have to be meaningful (see comment below on content of minutes).
• making it clear when contact details can be given to executive committees
Executive committee members should be given an email address based on the strata plan’s website where they can be contacted by residents. Residents contact details should be made available to owners via a password protected log-in on the strata plan’s website.
15. Do you have any other suggestions for how communication in schemes could
Meeting minutes should carry the sense of a discussion – who was in favour and a summary of what they said and who was against and a summary of what they said. Also the vote in favour or against a motion should be recorded. If necessary, the Owners Corp can hire a minutes secretary. Decisions made where the basic details of a discussion are not properly recorded should be liable to be struck out in a challenge to the CTTT.
16. Which of the following would help to improve transparency and in
• requiring any person with a conflict of interest to declare that interest and
not participate in any discussion or voting on the matter
This would only be effective if there was a financial penalty for non-compliance.
• restricting the ability of certain persons (e.g. non-owners or more than one
co-owner) from being elected to executive committees
This might preclude people with valuable information and experience from participation. Perhaps non-owners and co-owners could be restricted to voting only on matters that had no direct financial implications.
• making the managing agent automatically a non-voting committee member
Only for large schemes – attendance at meetings would be a considerable financial imposition on small and medium-sized schemes.
• requiring office bearers be elected at each annual general meeting
This almost implies granting office-bearers executive powers and could lead to excessive politicking and lobbying. Keep things the way they are.
• imposing a minimum number of committee members (e.g. three)
Agreed but I also think we need to look at increasing the size of the committee for larger schemes. It should be an add number based on a maximum of one seat per 15 lots.
• limiting the period of time any individual can continually hold the same
office (i.e. Chairperson, Secretary or Treasurer)
Yes – three years is enough for anyone – although they should be able to start again after a gap of one year.
• requiring motions to be accompanied by an explanatory note and to identify
the person who submitted the motion
Yes – and there should be an opportunity, via a website, for any owner to respond with arguments for and against the motion.
• prohibiting or requiring the disclosure of commissions
All commissions, gifts and discounts must be declared. There should be a financial penalty for not doing so.
• imposing further restrictions on the length of contracts associated with
Contracts agreed on and validated at the initial AGM should be for no more than two years to allow for settling in. This applies especially to on-site management contracts. Thereafter, contracts should be renewed on an annual basis at the AGM.
• streamlining the levels of consent required to make decisions
In the first instance, all decisions should be subject to approval by a simple majority of all owners either in person, proxy or postal vote. Failing to reach a simple majority of all owners, the vote should be a simple majority of resident owners (in person, by proxy or by postal vote) plus any non-resident owners voting in person.
• providing greater clarity over who can make what decisions in schemes
The current system works reasonably well except that the EC should not be able to countermand a decision previously made at a general meeting without holding another general meeting to do so. EC members who vote to do so should be personally responsible for the financial consequences of any actions carried out in contravention of the Owners Corp’s clearly stated wishes.
• requiring all or some schemes to have accounts audited
Medium and large schemes only.
• giving owners a right to request and receive copies of any documents relating
Yes. But it should be at their own expense to prevent one owner harassing strata managers by constantly demanding information.
17. Do you have any other suggestions for improving transparency within strata
and community schemes?
Executive committee members should not be allowed to hide behind so called rights to privacy. All votes taken at an EC meeting should be minuted with a note of who voted for and who voted against the motion.
Also, there should be a standard set of ‘standing orders’ established for ECs to adapt and adopt to suit their own circumstances. These rules for the running of meetings should embrace all the changes a suggested above, including the way votes and minutes are handled and how summaries of verbal contributions are recorded.
Executive committees should be allowed (or be compelled by a vote at a general meeting) to record the audio of their meetings and post the audio file to the strata’s website so owners and residents can hear their discussions.
18. Which of the following would help to improve accountability and in what ways?
• more clearly defining the role of managing agents, executive committees
and office bearers
• holding agents directly accountable for their actions
• providing an easier process for schemes to terminate the services of agents
• making professional management mandatory for large schemes
• introducing a Code of Conduct for executive committees or requiring them to
act with due care, skill, honesty and for the benefit of all owners
Yes to both – and they should have to sign a document to that effect when they first take office.
• giving the CTTT more options before appointing a compulsory agent
Yes – and that includes appointing a compulsory agent to chair and/or act as secretary or treasurer where an Executive Committee needs help to function properly rather than need to be set aside for serious failures.
• requiring executive committees to prepare brief annual reports
Yes but only for medium and large schemes
19. Do you have any other suggestions for how to improve accountability?
There has to be clear financial penalties for willful neglect of the committee members’ and strata professionals duties. It’s all very well saying you must do a, b and c but without sanctions the Owners are faced with accepting the situation or taking the tortuous route to having a compulsory manager appointed. The potential of being fined will force EC members to address their responsibilities and attend to them diligently.
Strata professionals should face clear professional sanctions – up to and including loss of licence to operate – for failing to carry out their duties properly.
20. Do you support the introduction of an alternative process for terminating strata schemes? If so, how many lot owners would need to agree to initiate the process?
I support this idea but it has to be a two-tier approach. I would favour allowing extinguishment by the agreement of 75 percent of owners in strata schemes over 15 years old or where projected repairs and maintenance cost more than 3 percent of the insured value of the building. If the building is less than 15 years old or projected repairs are less than 3 percent of the insured value of the building, extinguishment should be permitted by the vote of 90 percent of owners.
21. Should any alternative process accommodate only collective sale or should the
process be more flexible, to enable co-operative redevelopment of the scheme?
Owners should be able to enter partnership with developers to obtain the best outcome for all parties. Local councils should also be encouraged to be actively involved at the earliest stages to ensure proposals are achievable within the prevailing planning laws.
22. Should the meaning of common property be changed? If so, which approach do
Taking the “memorandum” as a starting point in the definition of common property, there needs to be a transitional period during which anything that is currently common property but will become lot owners responsibility is audited and if it fails within two years of the transition, should be repaired by the Owners Corporation. After that, it is the owner’s responsibility.
23. Should owners be responsible for all internal repairs within their lot and/or work
which only benefits or affects them?
Only if the failure or damage is their fault or due to wear and tear. If, however, the damage is caused by another lot owner or a failure of Common Property, the repairs must be paid for by the Owners Corporation or the other lot owner. If the other lot owner refuses or fails to pay the Owners Corp should be able to pay for the repair then retrieve the cost of the repair form the other lot owner as a debt.
24. Should the absolute obligation to maintain common property be changed to
take account of the age and life of the scheme and the funds available?
No – this seriously undermines the concept of collective community responsibility.
25. Should owners or occupants be responsible for any damage to common
property they cause?
Absolutely and without exception. In the case of failure to pay, the cost of repairs should be added to their levies as a debt.
26. Should the law about common property for pre 1974 strata schemes be
27. Should the process for owners wanting to renovate or make changes to their lot
be simplified and/or clarified?
Yes, but they have to include restrictions on times and durations, especially for noisy work. Hobby renovators can cause considerable distress and nuisance when their renovations are carried out in their free time (which is often other people’s time off too).
The Owners Corp and/or EC should be allowed to establish by-laws that clearly state the processes and restrictions on times of renovations and there should be mechanisms that allow them or the strata manager to intervene immediately when noisy work commences without permission.
It is not enough for renovators to merely “inform” the owners corporation. A system of seeking permission which must not be unreasonably refused would allow the Owners Corp to impose conditions to minimize the impact on other owners.
28. Could easy-to-read guidelines be produced giving information to owners on
what they can and cannot alter/renovate? What would the content of these
These should be posted on strata plans websites or printed as a separate section of the by-laws. They would include what areas can be worked on without permission, what areas require permission, what work can only be done by professionals and rules on the removal of rubbish and the transportation of materials. Strata plans should be allowed to develop their own rules, based on a core set of mandatory principles that address OHS and fire safety issues.
29. Which of the following would help address overcrowding and short-term rentals
in schemes and in what ways?
• enabling schemes to make and enforce by-laws to deal with the issue
Yes, but this is only part of the solution. The problem is gaining access to units to prove how many people are sleeping there without intruding on bona fide residents’ privacy.
• giving the CTTT power to prohibit certain letting arrangements for a lot where there is a proven pattern of anti social behavior
Yes, but the question is, how do you prove the pattern.
• introducing a law setting the maximum number of persons per bedroom
Yes, but how do you prove that the law is being breached?
• giving local councils more power to deal with such matters
Yes, but it’s more like making them obliged to properly investigate and giving them the power to do so.
30. Do you have any other suggestions for how the issues surrounding overcrowding and short-term rentals could be addressed?
Firstly, there should be a law that a maximum of two persons over 12 years old per bedroom is allowed. Then there should be a law that prohibits the installation of locks on internal bedroom doors. Now that you have established a benchmark for acceptable occupancy, you have to provide a simple way of proving whether or not it has been breached.
Owners’ Corporation should be able to apply to the CTTT for permission to monitor traffic to and from an apartment by whatever means necessary to establish how many people may be living in it. Tampering with monitoring equipment will be taken as a sign of a potential breach.
Based on evidence gathered, the Owners Corp can apply to the CTTT for an Overcrowding Exclusion Order which permits them or their agents to enter an apartment at any time to see how many people are living there. I
If it is proved that the unit is overcrowded, the owners can be given one warning to return it to normal occupancy. If they breach the law again, they should be forced to sell the apartment by auction within 30 days of the order. If owners have breached safety issues (like putting locks on bedroom doors and constructing illegal partitions), they should be subject to criminal charges.
The secret to this is to make the solution to the problems fast and easy and the options for all parties transparent. Clearing rooms for the duration of an inspection and then filling them up again has to be nipped in the bud. This is not just a community issue – it’s a life and death, health and safety issue, as recent incidents have shown.
31. Do you think that a maintenance schedule prepared by the developer would be
32. Should defects be a compulsory agenda item for discussion at the first AGM?
33. Should the law set clear rules for voting on action regarding defects?
34. Should any other changes be made to the strata laws to more adequately deal
All of these questions are nibbling round the edges of a problem that requires a reality check and a radical re-thinking of the issues. Here’s what we know – most if not all new buildings have defects. This is a proven fact. However experience has told us that developers are reluctant to concede this either on a case by case basis or as a general philosophy – and that points to a fundamental lack of honesty, transparency and fairness at the heart of the apartment building and purchasing business.
As a result, many potential apartment buyers are fearful of finding themselves in a situation where they are either locked in financially crippling battles with developers or even their own neighbours to get what they paid for. Buying new properties or off the plan is too much of a gamble for the very people that you need to be making these purchases.
So let’s cut the crap and be honest with each other. Nobody wants to spend hundreds of thousands of dollars on legal fees just to get what they paid for in the first place (with no guarantee that will be achieved). Likewise, nobody wants to feel they have been cheated in the single biggest purchase or investment many have made in their entire lives.
So let’s get everyone together and agree that one percent of the purchase price of every new strata unit will be put into a defects fund. When that Owners Corporation is established, they can pay for defect rectification from that fund. If defects don’t cost as much as the fund, the excess goes into the Sinking Fund for future repairs and maintenance. If the defects cost more than 10 percent over the amount allocated, the Owners Corp has the right to pursue the developer for full rectification of all defects while the developer is listed for five years on a register of excessive defects.
Good developers who build to the highest standards will prosper and can even market the fact that there will be so few rectifications required that they will effectively be handing owners a fund that guarantees repairs and maintenance for the next few years. Bad developers will be exposed, named and shamed if you like, but at least their buildings can be rendered habitable while the process of claiming for full defect rectification proceeds.
This is a win-win for the whole industry and brings certainty to an area where consumer confidence is less than zero. Having spoken extensively to many people at all levels in the strata world, I am yet to encounter one who doesn’t think this is a good idea. Even lawyers – who would be the ones to suffer most – concede it would be a huge boost to the strata industry.
I suggest Fair Trading starts now by bringing industry leaders and community leaders together to thrash out a policy that works for everyone and could be a model for the future of strata building around the world.
35. Should land be able to be added to a community scheme, precinct scheme and
a subsidiary neighbourhood or strata scheme? If so, should land be able to be
added only as association or common property or should land also be able to
be added as a separate lot?
36. Should a mechanism be introduced to enable amalgamation of subsidiary
neighbourhood schemes with a community scheme? If so, what kind of
resolution should be required?
These are complex questions that would seem to apply as much red tape as they remove. I would suggest applying the simple test of do either of these things benefit the community rather than the individuals, and if so, they should be permissible with a 75 percent vote of the Owners.
37. Should initial unit entitlements for strata schemes be based upon a valuation
from a qualified valuer as it is for community and staged strata schemes?
38. Should more flexibility be given to schemes to determine levies other than on
the basis of unit entitlements?
This pre-supposes a fair and equitable system of governance which is not yet operating in strata in NSW. There are too many cases already of a powerful paper majority taking advantage of a minority to shift the burden of payments away from themselves. Any move away from a standard system of allocating costs would be open to abuse.
39. How could the process of reallocating unit entitlements be improved? Would
you support the ACT model being adopted in NSW? Should the procedure for
revising unit entitlements in community schemes be expanded to precinct
scheme, standalone neighbourhood schemes and strata schemes?
After five years, owners should be able to apply to have unit entitlements reallocated on the basis of the actual market value of units, if it can be shown that they have been unfairly distributed. The actual use of facilities is less relevant than the maintenance of the building and it is unfair of the owners of high-value units to expect less well-positioned owners to pay more for something that benefits them less.
Empty-nester retirees are distorting this argument by buying high-value apartments then wanting to force their levy payments down because their incomes are fixed while costs, inevitably, are rising. This will lead to a reduction in quality of some of our better buildings as maintenance is neglected to save money.
However, the answer is not to force other owners to subsidise retired neighbours – it’s to make people aware that there are costs attached to buying high-value units that go way beyond the purchase price.
40. Should notices for AGMs contain more details about proposed levy increases?
If yes, what additional information do you suggest?
A comparison figure between the proposed increase and the CPI should be displayed. Areas where there have been cuts in spending should also be highlighted.
41. Should the law require periodic levy notices to be issued?
Yes. With increased use of electronic communications there is no excuse for not doing so.
42. Is more regulation over the initial setting of levies by developers required?
Yes. If the difference between the levies set by developers in the selling phase of a building differ by more than the CPI plus five percent from the actual levies required to run the building, developers should be required to make up the shortfall for the first five years of the building’s life.
43. Should developers be liable for budget shortfalls in the initial period?
Yes. See above
44. Should the law allowing discounts for early payment of levies be removed?
No. This is a valid financial management tool that helps to ensure cashflow. However, owners Corps should be allowed to vary the amount of the discount. It souldn’t have to be 10 percent. Why not 5 percent are 15 percent, if that suits the financial needs of the strata scheme.
45. Should a strata management statement be required to disclose the method of
allocating the shared expenses and/or be certified by a quantity surveyor?
Yes to both (in larger schemes). The more information there is for owners, the greater the transparency but you ahev to be wary of imposing too many rules that are expensive to observe on smaller strata schemes.
46. Should the penalty interest rate on outstanding levies be raised? If so, what
should the figure be?
The West Australian system of 2.5% per month provides a balance between penalties for short-term shortfalls and long-term debt accumulation.
47. Should schemes be required to take recovery action within a certain time? If so,
what should the timeframe be?
Schemes should be required to set their own recovery action period in their by-laws, but it should be no less than 30 days.
48. Should the CTTT be given jurisdiction to deal with outstanding levies?
Yes – provided there are safeguards against some of the illogical and pro-individual, anti- Owners Corp rulings we have seen from the CTTT in the past.
49. What hardship provisions (if any) should be introduced?
Owners Corps and strata managers should be allowed a level of discretion for resident owners only in terms of penalty rates and debt recovery, to be decided on a case by case basis.
50. Should the recovery of expenses for outstanding levies be limited to reasonable
expenses or built into the penalty interest rate?
You don’t want to get into defining “reasonable” – that’s the kind of area where lawyers make their money. However, a debt recovery notice should include a statement of the likely additional costs that may be accrued if the Owners Corp proceeds with the action.
51. Should owners who owe levies continue to not have voting rights? Do you
support any other practical punishments or deterrents and if so what?
This area needs to be clarified, one way or the other and on balance I’d do away with it completely. At the moment an owner who isn’t allowed to vote can apparently still provide a proxy. More fundamentally, the level of owner apathy being what it is, deprivation of voting rights is hardly a big issue. It does become an issue, however, when an Executive Committee that’s under attack starts knocking off votes from owners who are just a few dollars out on their payments. I would make the penalty rates more of a deterrent and remove this clause.
However, the Owners Corp should be obliged to “name and shame” the owners who are behind with their levies, detailing by how much and for how long and if the apartment is rented (with discretion allowed for residents suffering genuine hardship).
52. Should a minimum period of arrears (e.g. two levy payments) be required before
loss of voting rights or other punishments are imposed?
Yes – but it should be cumulative so that owners who regularly stay in debt right to the 11th hour have their overdue period carried over to the next consecutive period that they are late.
53. Should schemes be able to seek orders that tenants pay rent to them to cover
debts owed by investor owners?
Yes. And it should happen after two consecutive periods of being overdue.
54. Should sinking funds remain compulsory? Should schemes be able to carry
forward budget surpluses instead?
55. Should the law dictate contributions to sinking funds? If so, how?
56. Have the 10 year sinking fund plan reforms been successful? Should they be
retained and expanded to the community scheme sector? Are any refinements
needed to make them more effective?
Once again, I think these suggestions are bogged down in “old” attitudes. And although all buildings should have a guide to their future needs, small, medium and large buildings which are all very different in this regard. Perhaps only medium and large buildings should be required to have a professionally assessed sinking fun plan – with small schemes allowed to make an assessment based on their or their strata manager’s experience.
Likewise only in large schemes, where individual owners are much less ‘connected’ with their Executive Committees and strata managers, should they be legally required to fund projections through appropriate levies.
More importantly, buyers should know exactly what they are getting into. Owners Corporations should be given figures as part of their annual budget that compare the assessed needs for future maintenance for, say, five years with funds and estimated income the Owners Corporation has to meet this estimate.
Thus if it has been assessed the future needs of the building are, say $50,000, and the current account and/or projected sinking fund levies are $40,000, any sales advertising material or information would have to show that the building has a projected shortfall of $10,000 split between however many lots.
This way owners can decide not to pay for maintenance until it is required but everyone knows exactly what they are getting into in terms of future commitments. They can also handle the funds as they wish without having to sequester sinking funds in accounts where they can’t be used and don’t earn interest.
57. Should the requirement for valuations every 5 years be kept or changed?
Kept but it should be indexed to rising or falling property values as published by an authoritative source.
58. Should insurance and valuation details be on the notices for each AGM?
59. What items should the law require to be covered by scheme insurance policies?
Keep it simple. Common property and damage caused by a failure of common property (except in cases where personal property insurance is in place).
60. Should schemes be encouraged or required to have a higher insurance excess?
Yes. To cut the number of claims and reduce costs. Careful owners shouldn’t be disadvantaged in this way.
61. How could the law give schemes more flexibility over their insurance
See answers above.
62. Should the cost of insurance be shared only on the basis of unit entitlements?
63. Is there a need to increase the minimum public liability cover for schemes? If
so, what should be the amount?
$10 million should be the minimum with schemes able to set their own figures, if they wish, based on perceived exposure to risk.
64. How do the laws around accounting records need to be modernised (if at all)?
Modernise the systems, use software that makes the information more easily available and understandable. The software and delivery systems exist – Owners Corps need to be encouraged to use them.
65. Do you support a simplified set of financial statements?
66. Are annual financial statements sufficient? Should the law require or recognise
the ability of schemes to request statements on a more regular basis?
Owners should be able to request current financial statements whenever they like but at their own expense. Owners Corps should be able to, if they wish, set up software to make such information easier to access.
67. Should internal dispute resolution mechanisms be recognised in the law?
There is already considerable confusion in this area with residents thinking, for instance, that they are allowed three warnings before they are sent a Notice To Comply, or even owners thinking by-laws only apply to tenants.
It is obviously preferable to deal with issues internally because it allows residents to discover information they may not have known about the scheme’s by-laws. But it’s a very tricky thing to mandate and may be used by some serial miscreants as just another way of delaying the process.
I believe the Victorian experience of mandatory internal mediation has not been entirely successful and has become a huge impost on the time and energy of people who are, essentially, volunteers. With that in mind, I would say No.
68. Should attendance at mediation be made compulsory?
There’s no point in making attendance at mediation compulsory if the participants arrive unprepared to yield in any way. However, if non-attendance and non-engagement were seen as damaging their case, then it might change matters.
So, yes, make attendance at mediation compulsory or you forfeit the case – and this should be attendance in person and not representation by a lawyer unless the respondent lives overseas or interstate. Also make engagement or the lack thereof, as assessed by the mediator, a factor for consideration if the case goes to a tribunal.
69. If mediation is unsuccessful should parties be able to apply for a CTTT hearing
without needing to go through the Adjudication step?
Yes, for all the reasons listed above.
70. Should legal representation be limited to where a proven need is shown or the
dispute is over a specific amount (e.g. $10,000)?
Yes, to both.
71. Is there merit in establishing a ‘duty advocate’ like information service at
mediation sessions and CTTT hearings?
Very much so. Even executive committee owners and some strata managers aren’t aware of their rights or responsibilities, let alone the paperwork that they are required to bring to the meeting. Duty Advocates should contact the participants in a mediation and, especially, a CTTT hearing at least a week before to tell them the documents that they will be required to bring with them.
72. Should mediation for strata and community schemes be a free service? If so,
how should dispute resolution services be funded?
Keep the charges but the respondent should be required to refund the applicant’s costs if it goes to a tribunal and they lose the case.
73. Should the jurisdiction of mediation and the CTTT be broadened to cover the
majority of disputes which arise in strata and community schemes? If so, should such jurisdiction be exclusive?
Yes, but you have to allow the CTTT to award costs. More importantly, the CTTT Members and adjudicators have to recognize the validity of the by-laws of a scheme. The ad-hoc reinterpretation of strata law and by-laws – usually in favour of the ‘individual’ – has to stop. This undermined the whole basis of the self-management of strata schemes.
CTTT Members only need to establish two things – is the relevant by-law valid under the terms of the Strata Act? If so, has the respondent breached it. There are no other relevant considerations, in the first instance, leading to the issuing of an order or a fine.
It is still within the Member’s purview to assess whether or not a breach has occurred based on evidence produced or representations made. But they must be prevented from making decisions based on whether or not they think the issue is important. That is not a decision for them to make – if the community didn’t think the issue was important it wouldn’t have the by-law.
In criminal law, a slap on the face is an assault. To some it is traumatic, to other’s it’s trivial, but it’s an assault, nonetheless. In strata law, failure to observe a by-law is a breach. It is not incumbent on Members of the CTTT to decide that it isn’t a breach because they don’t think it’s important. They can reflect their view of the seriousness of the breach in the amount of the fine, if any.
The Member should then be allowed to award costs to either party, based on the simple question of whether or not the breach or non-breach was obvious and if the losing party could have resolved this earlier in the process (at mediation, for instance) but declined the opportunity to do so.
What types of matters would be inappropriate for mediation and the CTTT to handle?
Matters of an entirely personal nature that have no bearing on the strata scheme, per se, strata law or by-laws should be excluded (e.g. defamation, fraud, theft of personal property). In all other issues – such as the one cited of an owner demanding the Owners Corporation approves his application to be allowed to renovate – the CTTT should hear them but with two principles in mind: has a valid bylaw been breached or invoked; are the needs of the community being given equal or superior consideration to the ’rights’ of the individual.
74. Should the procedure around cost orders and interim orders be clarified?
Reasonable costs should be awarded against the “losing” side, especially since a need has been identified to have expert help in complicated cases. The CTTT should, however, set allowable fees for the involvement of strata managers or lawyers. This would go a long way to preventing some of the frivolous and vexations litigation referred to elsewhere.
The system of emergency hearings rather than interim orders seems to be fairer, provided they can be held expeditiously when there is a genuine emergency.
75. Should there be a process to reject applications about trivial matters or where
the same matter has been contested before?
It’s dangerous to disallow people from pursuing their legal rights, but the awarding of costs will deter a lot of this, and a “three strikes” rule on bringing the same or a slight variation of a previous action should apply.
76. Which of the following would improve the level of compliance?
• streamlining the number of offences
Yes, but we should also look at obligations in the Act that carry no penalty. There is no point in creating an obligation – for instance, the Owners Corporations have to have their AGM within a month of the 12-month anniversary of their previous AGM – unless there is a penalty for not doing so. It’s either an obligation or a suggestion and the Act is weakened by confusing the two.
By the way, in the above instance I would say that in the case of a medium or large building that fails to hold an AGM within the prescribed time frame, they should be subjected to the immediate appointment of a compulsory strata manager for one year or until such times as they can be shown to be capable of running their own affairs.
• increasing the penalties that can be imposed
Yes, and they should reflect the nature of the offence, the perpetrator and the number of breaches – not just of that specific by-law but of others too. So a noise breach that follows a parking breach should be considered a second offence.
• enabling penalty notices to be issued
Yes, again. It’s quick, efficient and makes people aware of their obligations without creating long-term resentments within a strata scheme as residents are dragged through mediation and tribunals.
• requiring or encouraging schemes to appoint a committee member as a
This sounds like a good idea but it requires a knowledge of the law that I would say is lacking in most Executive Committee members in this state. I would prefer to see Strata Managers more actively involved in this area (and being paid for doing so).
77. Should schemes be able to issue their own fines for by-law breaches?
They should be able to issue Notices To Comply followed by fines. But where there is a clear abuse of the powers, you need the safeguards of the right of appeal to the CTTT and the removal of the right to issue fines, and possibly the banning of the Executive Committee members involved from holding office. If the fines aren’t paid by the due date, the fines should be applied as debts on levies with investor owners advised that their tenants have incurred this additional cost to them.
78. Should it be mandatory for a scheme to enforce its by-laws?
It should be mandatory for schemes to respond to complaints by owners, at the very least to explain why they have chosen not to pursue a complaint. However, schemes should have to enforce their by-laws if their Strata Manager or a Fair Trading officer instructs them to do so.
79. What other changes to the system of enforcing by-laws would you like to see?
Whatever system is decided, information about by-laws, breaches and the processes that follow should be made easily available to all residents and owners. Landlords should be made aware that they can be held responsible for their tenants’ behaviour, tenants should be warned that they could lose their homes if they breach by-laws and owner-residents should be made aware that they too have responsibilities as well as rights.
Executive committees should be informed that they have a duty of care to their residents and individual residents should be informed that they have the right to initiate actions at fair trading and the CTTT if their executive committee fails to do so.
80. What do you think should be done, if anything, about parking in schemes?
Firstly, all schemes should be obliged to create their own by-law (if they don’t already have one) defining the hours and durations of visitor parking, and any exemptions that they feel are relevant to their circumstances. This should not in anyway, however, reduce the availability of visitor’s parking by effectively handing it over to residents.
For instance, a scheme might restrict visitor’s parking to one stay of no more that 2 hours per 24 hours, or three hours from 7 am to 8 pm then 11 hours from 8pm to 7am. Exceptions could include trades-people or medical staff working in the building. Longer stays for visiting relatives could be allowed with written approval. Some templates could be provided for adaptation. The important thing here is to allow schemes to come up with genuine rules that suit their circumstances.
I also think that local council parking inspectors should be encouraged to include strata parking in their remit. If the local council declines to participate, Owners Corporations should be allowed to hire parking management companies to run their car-parks, impounding cars where necessary, and raising revenue through administration fees recoverable from the illegal parkers. All of this would be subject to the rules and regulations – and consequences of ignoring them – being clearly displayed at the entrances and near the parking spaces.
80. What do you think should be done, if anything, about pets in schemes?
Even though I am a pet owner, I think a ‘special’ majority of owners in a scheme should have the right to ban pets if they so desire. The 75 percent rule for a by-law is substantial and not easily achieved if the default by-law is to allow pets but the majority of people don’t want to live under the same roof as animals.
Even if anti-pet owners outnumbered pro-pet owners by two to one, they wouldn’t be enough to change a pro-pet by-law. And although there are by-laws that cover noise etc, some schemes are reluctant to impose them because they could mean the owners are either deprived of their pets or forced to move out.
This is actually a market-driven issue and pet owners will naturally gravitate towards pro-pet buildings while the other side will find buildings where pets are banned. However, there has to be a choice which is why I would favour the current situation where some buildings can chose not to have pets while other buildings go down the “must not unreasonably refuse” route..
A more pertinent change would be for standard tenancy agreements not to unreasonably forbid pets in buildings where pets are allowed.
80. What do you think should be done, if anything, about noise in schemes?
All schemes are different both in the physical transmission of noise and individual tolerance of it, so it is very hard to create one-size-fits-all rules that aren’t vulnerable to highly subjective interpretation. However, it is far from impossible to establish benchmarks by which the level of noise can be measured. There are many inexpensive devices on the market at the moment that would allow Owners Corporations to set their own levels for acceptable noise and to then indicate objectively when they have been breached.
So my first priority would be to help strata schemes establish their own benchmarks and give them access to equipment that they could use to assess whether or not noise levels are excessive. After that, everything becomes so much easier and any action taken against miscreants would have a much more solid basis.
Widening police and local council powers could be part of this, as could ‘cease and desist’ orders. But I also think in terms of noisy parties that defy neighbours and police, the simple and immediate deprivation of electrical power would solve a lot of the problem.
There other kinds of ‘justified’ noise however. How do we deal with emotionally charged issues like children’s piano practice or hobby renovators? In those cases I think strata schemes must be allowed to say that there are some “rights” that should only be exercised in the privacy of a stand-alone home. Interrupting your strata neighbours’ peace and quiet extensively and frequently is not acceptable, regardless of how noble your pursuit is.
83. What do you think should be done, if anything, about smoking in schemes?
There is a genuine double standard at play in this issue. Earlier in the document, barbecues on balconies are dismissed as an issue that doesn’t affect other owners. However, quite clearly there are health and safety issues with barbecues (which can produce a lot more smoke than the odd cigarette) that are conveniently disregarded.
Meanwhile cigarette smoke is treated as the equivalent of poisoned gas pumped directly into people’s homes. The law has to be consistent and rather than quarantine one behavior and focus on the other, it should decide whether or not the possible transmission of toxic fumes and/or unpleasant smells are issues that Owners Corporations are capable of dealing with or if they should be a matter for strata law.
If someone wanted to smoke in their home and was able to do so without affecting anyone else, should they be forbidden from doing so? If they only smoke on their balcony when prevailing breezes take the smoke away from the building, should they be prosecuted?
If someone likes to chuck a few wood chips on their barbecue – or even have a naked flame barbecue that is a known fire risk – where is the legislation to stop them?
Let’s make the law responsive rather than restrictive. If there is a complaint about smoking on a balcony, the alleged perpetrator should receive a pre-emptive CTTT order to stop smoking while the claim is investigated (with a permanent ban if it proves to be a problem). But the same has to apply to anyone who is transferring any toxic fumes or unpleasant odours to neighbouring lots, whether they are from barbecues, glues, paints or ethnic food that is particularly pungent.
And unless there is 100 percent agreement that a building should be non-smoking – and I think that is a good thing, by the way – we need to be wary of launching witch-hunts against a minority whose addiction may only affect them.
84. What do you think should be done, if anything, about flooring in schemes?
Having recently installed an acoustically compliant timber floor (at considerable expense) I think the problem starts at the retailers who have zero interest in strata laws and the consequences to their customers and their neighbours of installing a timber floor that isn’t properly insulated for sound. I had one retailer tell me that I “didn’t need to bother about the boring farts in strata … their by-laws are unenforceable.” I wonder how many less savvy owners have found to their considerable cost that this is not the case.
So firstly it is incumbent on Fair Trading to educate potential purchasers at the point of sale about the issues they may face if they install a timber floor on top of a concrete slab – not least that they might have to rip it up at their own expense if the noise disturbs the neighbours. An information leaflet that must be handed to all strata customers would educate a lot of people when it really matters.
Secondly, someone needs to educate CTTT members and adjudicators that throwing down a few rugs is not going to make any difference in a unit where timber has been installed without adequate insulation. This is one of the reasons that so few cases are taken to the CTTT – nobody trusts the process because the people making the judgments clearly have little idea of or concern for the consequences of their rulings.
A five or six star acoustic rating is all very well but the variation of construction throughout strata makes even that almost meaningless. If a floor turns out to be noisy, the only way to moderate the noise is by modifying behavior. And however intrusive on personal freedom and “rights” it may be, strata schemes have to be able to say to residents whose floors are too noisy that they must, for instance, take off their shoes while they are at home and not let their kids run around in the apartment. If they aren’t prepared to do that, then they face the prospect of re-laying their carpet.
As an aside, the well-worn excuse that some family member has an allergy exacerbated by carpets should not be accepted. If their family’s health is so important, they should either spend the money on a compliant floor or go and live in a house.
85. What do you think should be done, if anything, about washing in schemes?
This is another issue that generated heated responses and has been characterised by some as unnecessarily intrusive on strata residents lives. I have encountered residents who have been ordered not to dry their clothes INSIDE their unit because it could be seen from the street.
Drying laundry on balconies does affect other people – the look of a building affects property values – but there is a bigger question than aesthetics or even personal freedom here and that is global warming. We have allowed strata blocks to be designed whereby we have to use expensive and energy hungry electric dryers or offend our neighbours by drying our laundry on our balconies.
As a society we are spending millions of dollars trying to find ways of exploiting solar and wind power while at the same time strata residents are being denied the opportunity to access these renewable resources in the most basic way possible.
My suggestion is that a model by-law be created whereby the default position is that drying on balconies is permitted provided the laundry is not visible above the balustrade. Owners can adapt that by-law to suit their scheme if they wish to. Any schemes that want to completely ban laundry from balconies must provide a secure area where owners can dry their laundry outside.
86. Do you agree with any of the above (Miscellaneous Issues) reform proposals?
Yes, the following (I don’t necessarily disagree with the others – I just don’t know enough to comment).
- Expanding the list of documents which must be handed over by the developer at the first AGM
- Enabling an owners corporation or community association to lease additional common property or association property from within its own scheme or a subsidiary scheme
- Giving schemes the power to deal with abandoned goods
- Authorising schemes to enter lots to trim trees which pose a risk or are damaging common property
- Removing the cap of nine executive committee members
- Clarifying who is the ‘controlling officer’ in a scheme for OH&S purposes
- Expanding the information to be kept on a strata roll to include details of all licences, loans and an index
- Enabling legal notices required to be given to owners corporations to be served on the managing agent, and
- Clarifying the circumstances when a scheme can restrict owners or residents from accessing common property.
87. Do you have any other suggestions for how the existing law regulating
strata and community schemes could be improved?
Start with the principle that community needs supersede individual ‘rights’.
Embrace the idea that there is no point in having Strata Laws that can’t be enforced or where there are no penalties for breaches. Laws without penalties are guidelines.
Get CTTT members to accept that a by-law breach is a breach and it isn’t up to them to decide that a properly constituted and registered by-law shouldn’t apply for spurious reasons known only to them.
Allow costs to be awarded against the losing side in a CTTT dispute.
View every aspect of the law through the prism of protecting the community from the rogue individual rather than defending individuals against the community.