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NSW strata laws are designed to help strata schemes run effectively. If you own, live in or rent a strata property, such as a townhouse or apartment, understanding how strata works will help you to get the most from your property and lifestyle, and resolve issues before they result in disputes or financial problems
Strata is a form of property ownership devised for multi-level apartment blocks and horizontal subdivisions with shared areas. The models allow for individual ownership of certain parts of a property and shared ownership of others.
A strata scheme is a building, or collection of buildings, where:
The Owners Corporation (formerly known as the Body Corporate in NSW) is the governing entity that looks after the Strata Scheme in entirety. This entity has an extremely important and very responsible position in the running of a Strata Scheme.
Strata Schemes are a community of Owners operating as a democracy as governed by the Strata Schemes Management Act and is typically assisted by a Strata Managing Agent.
The Strata Schemes Management Act 2015 “the Act” and the Strata Scheme Management Regulation are the main pieces of legislation which sets out the procedures and processes to provide for the management of a Strata Scheme and to provide for the resolution of disputes arising in the Strata Scheme.
The Owners of the lots from time to time in a Strata Scheme form the Owners Corporation.
The Owners Corporation for a Strata Scheme has the principal responsibility for managing a scheme.
The Owners Corporation has for the benefits of the Owners of lots in the Strata Scheme the management and control of the use of common property of the Strata Scheme and the administration of the Strata Scheme.
The Owners Corporation has many responsibilities such as managing the finances of the Strata Scheme, keeping accounts and records for the Strata Scheme, maintaining, and repairing the common property of the Strata Scheme and taking out insurance for the Strata Scheme.
All Owners share the costs for the upkeep of the common property.
Each lot owner has the right to vote on decisions affecting the Strata Scheme.
The First Annual General Meeting of a scheme must be convened in accordance with this Act and the regulations, not later than 2 months after the end of the initial period.
The initial period is the period commencing on the day the strata plan is registered (when the Owners Corporation is created) and expiring on the day when there are owners of lots (other than the original owner) in the strata scheme, whose total unit entitlements are equal to or exceed one-third of the aggregate unit owner) in the strata scheme, whose total unit entitlements are equal to or exceed one-third of the aggregate unit.
The Owners Corporation must hold an Annual General Meeting (AGM) at least once each year. The Act sets out the items to be considered and resolved at the meeting.
Any meeting of the owners corporation that is not an annual general meeting (AGM) is referred to as a general meeting. (Previously known as an EGM- Extra-Ordinary General Meeting).
It is a meeting whereby only the Strata Committee can vote on the matters and items in the agenda, Owners may attend the meeting but cannot vote and can only speak if resolved to do so by the Strata Committee.
The Owners Corporation must elect a Strata Committee at each annual general meeting. A decision of the Strata Committee is taken to be a decision of the Owners Corporation (where no restrictions apply).
It is the duty of each member of a Strata Committee to carry out his or her functions for the benefit of the Owners Corporation and with due care and diligence.
Individual owners may nominate themselves, or another eligible person, to stand for election to the strata committee. People eligible to be appointed to the strata committee include: an individual who is the sole owner or co-owner of a lot in a strata scheme, a company nominee of a corporation that is the sole owner of a lot, a non-owner if nominated by an eligible owner who is not themselves on the committee or hasn’t been nominated for election. Where an owner or co-owner has more than one lot, they are eligible for a nomination for each lot.
People who are not eligible, unless they own a lot in the strata scheme, include: the building manager for the strata scheme, a property Agent who leases one or more lots in the strata scheme to tenants, a person connected to the original owner (developer) of the scheme or the building manager (unless this is disclosed in writing to the secretary or chairperson before they are appointed). Any owner of a lot who was unfinancial (owing unpaid contributions) when notice is given for the next meeting of the strata scheme, and who remains unfinancial before the meeting, is not eligible to be nominated to the strata committee.
The Secretary, the Chairperson, and the Treasurer. A person may be appointed to one of or more of these roles.
The Chairperson’s duties include chairing meetings of the Owners Corporation and Strata Committee and make determinations as to quorums, and procedural matters at these meetings.
The Secretary’s duties include the preparation and distribution of the minutes of meetings, maintaining the Strata Roll, answering communications addressed to the Owners Corporation, and convene meetings of the Strata Committee and the Owners Corporation.
The Treasurer’s duties are to keep the accounting records and prepare the financial statements, provide notification of levy contribution, and receive, acknowledge, bank and account for any money paid to the Owners Corporation.
An Owners Corporation for a strata scheme may appoint a person who is the holder of a Strata Managing Agents licence under the Property and Stock Agents act 2002 to be the Strata Managing Agent of a scheme.
The Strata Schemes Management Act sets out what delegations and function the Strata Managing Agent can perform which include the following;
The Owners Corporation can appoint a building manager to assist in any one or more of the following functions of the Owners Corporation.
All owners’ corporations must establish an administrative fund and a capital works fund to administer the finances of the strata scheme.
The administrative fund is used to manage the day-to-day expenses of running the scheme, such as maintaining and repairing the common property and personal property owned by the owners corporation, ongoing maintenance, and insurance.
The capital works fund enables major work to be undertaken to common property. The capital works fund is to ensure there is enough money to pay for capital expenses when the job needs doing.
The owner’s corporation must prepare a plan of anticipated major expenditure to be met from the capital works fund. This also helps determine the contributions that the owners need to pay. The plan is for a 10 year period starting on the first AGM of the owners corporation, and must be reviewed at least every 5 years. After the 10 year period is up, there should be a new 10 year plan completed.
A levy contribution is a contribution to the Owners Corporation which is levied on each Owner, based on the annual budget and proportioned by the unit entitlements assigned to each lot?
A budget must be given provided showing the existing financial situation and an estimate of payments to be made and received. The budget must be distributed when notifying of the upcoming AGM, or tabled at the meeting before voting on the levy motion. The motion to set the contributions must show the amount for each fund and be approved by a majority vote. Generally, the contribution can be paid by equal or unequal instalments, and the laws allow for the payment amount and due date to be varied.
A Unit Entitlement represents each units value as a percentage of the value of the whole Strata Scheme. They impact an Owners Contributions to the expenses of a scheme, rights over common property and voting rights. A schedule of the Unit of Entitlements for each lot is registered with the original Strata Plan.
Owners Corporations can vote to introduce a special contribution or ‘levy’ where there are insufficient funds to cover expenses such as large capital works or unforeseen work.
The Owners Corporation has the right under the Act to do all things necessary to pursue recovery of unpaid levies.
An unpaid contribution attracts interest at a rate of 10% as prescribed within the Act if the levy is not paid within 1 month after it is due. The owners corporation cannot change the rate of interest but can make a special resolution to charge no interest.
The owners corporation may vote by a general resolution to give a 10% discount where a contribution is paid before the date it is due.
The owners corporation can choose to enter into a payment plan with a non-paying lot owner to repay off their overdue contributions in periodic instalments. The payment plan must be in writing and contain specific information, including: the full details of the lot owner, the details about the amount outstanding, including any interest accrued, the manner in which the outstanding levies are to be paid. The owners corporation must provide a monthly statement to the lot owner. Entering into a payment plan does not restrict the owners corporation from taking debt recovery action.
An Owners Corporation for a Strata Scheme must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the Owners Corporation.
The owners corporation is responsible for the repair and maintenance of common (Refer to the SCA(NSW) “Who is Responsible Guide” to determine the responsibility for the repair and maintenance.
A lot owner should advise the strata managing agent, or secretary of the owners corporation of the repair. If the issue is a minor repair, it may be able to be fixed without the need for a meeting. However, if it is a major repair, a meeting of the owner’s corporation may be needed to authorise expenditure or decide what action to take. If no action is being taken, a lot of owners can put forward a motion requesting the repairs, to be voted on at the next strata committee meeting. If the matter remains unresolved, you can apply to Fair Trading for mediation.
Before undertaking or preparing for any renovations, you should consult first with the Strata Manager of the scheme to understand your rights and obligations as each scheme may have a different set of rules and conditions in their by-laws or could otherwise be subject to approvals from other bodies or authorities such as a Building Management Statement, a community management statement, or a development application.
The Act defines the approval required and will depend on the type of renovation being carried out.
Renovations fall into three categories; cosmetic changes, Minor renovations and Renovations other than cosmetic work or minor renovations often referred to as “Major Renovations”.
The owners corporation is responsible to ensure all necessary insurance policies are in place and up to date. Policies must be with an approved insurer authorised by the Australian Prudential Regulation Authority. Types of insurance needed include building insurance, public liability insurance, workers compensation insurance and voluntary workers insurance.
To ensure that your owners corporation has the right amount of insurance cover, regular building valuations are essential. It is suggested that a building valuation is done at least every 5 years. However, owners corporations could consider more frequent building valuations, such as every 2 to 3 years, so that they always have appropriate insurance cover.
All owners corporations have a set of by-laws (rules) that owners, occupiers and, in some cases, visitors must follow. By-laws may be made in relation to the management, administration, control, use or enjoyment of the lots or the common property and lots of a owners corporation.
The owners corporation can enforce these rules by-laws through the NSW Civil & Administrative Tribunal (NCAT), which may penalise a person who breaches a by-law.
To make or change a by-law, the owners corporation must agree to a motion put forward on the proposed new by-law with no more than 25% of votes cast against it.
If a resident breaches a by-law, the strata committee can first contact the resident to advise of the breach and ask that they stop the conduct that is causing the breach. If this is unsuccessful, the owners corporation may issue the person responsible for the breach with a Notice to comply with a by-law. If they have the delegated authority, a strata managing agent may also issue a notice to comply. If there is a breach after the notice has been issued, the owners corporation may apply to the Tribunal to impose a penalty, after resolving to do so at a general or strata committee meeting. If the Tribunal has already fined the owner or occupier within the last 12 months for a breach of the same by-law, the penalty imposed by the Tribunal can double to a maximum of $2,200. In this case, the owners corporation does not have to issue another notice to comply before applying to the Tribunal to impose the fine. A ‘Notice to comply’ form is available on the Fair Trading website.