Monday, 13 January 2014

NSW: Proposed changes to strata title in NSW to have major effect on property developers and strata title owners

Australia: Proposed changes to strata title in NSW to have major effect on property developers and strata title owners

Last Updated: 6 January 2014
Article by Carolina Zandarin

In brief - Strata and community title law reform to facilitate much-needed redevelopment

Proposals put forward by the NSW government will make it easier to extinguish strata schemes, allowing thousands of apartment buildings to undergo the redevelopment they desperately need.

NSW government releases position paper on proposed changes to strata laws

In November 2013, the NSW government released a position paper on proposed reforms to strata and community law, Strata Title Law Reform.
The paper sets out over 70 changes ranging from pet ownership, smoking restrictions and occupancy limits to possible redevelopment of older and dilapidated buildings.

Easier termination of strata schemes to facilitate redevelopment of ageing apartment blocks

One of the most significant changes proposed involves a six stage process to permit the extinguishment of strata schemes with a 75% consensus of lot owners (not based on unit entitlements), thereby giving owners greater opportunity to vote and sell buildings to property developers and investors. The current law provides that a strata scheme can only be terminated with the unanimous support of all owners.
These changes would apply to all strata schemes in NSW, but are mainly targeted at older residential apartment blocks that are well past their prime.
It is predicted that the reforms would open the doors for developers and investors, particularly in the Sydney area, where there are numerous ageing and old apartment blocks very much in need of a makeover.

Introduction of bond for work on buildings with more than three storeys

Another major change is the introduction of a 2% bond (based on the contract amount for the building work) to be paid by developers of strata buildings with more than three storeys. The bond must be paid as assurance that defects will be rectified.
This will add to the cost of development. However, the Urban Taskforce which represents developers has welcomed these changes by saying: "The proposed changes to the NSW Strata Act will give greater confidence to the development industry and to owners corporations that apartment buildings will be well designed and managed".

New by-laws to address pet ownership, cigarette smoke and overcrowding

More than 14 changes are proposed to the standard strata model by-laws. The model by-laws are a set of rules which govern the use of common property by residents and are adopted by many strata schemes.
Some of the changes will give owners the ability to keep pets (such as cats, small dogs, birds and fish) without permission, which will give new hope to pet owners wishing to live in apartment buildings.
It is also proposed to amend the model by-laws to deal with cigarette smoke drift and to make it clear that cigarette smoke can be a nuisance or hazard to other residents. Pursuant to the reform, repeat balcony smokers will face steep fines.
Overcrowding has also been a constant problem in apartment living, so it is proposed to amend the model by-laws to limit the number of people who can occupy a lot to combat this issue.

Property developers to welcome greater opportunities to redevelop old apartment buildings

These reforms will no doubt receive some political backlash from the community, as they affect the proprietary rights of unit owners.
In NSW there are currently more than 72,000 strata and community schemes. Many of these cannot be maintained by the owners and are in desperate need of redevelopment. There is no doubt that these changes will be welcomed by investors and developers. However, there will be some owners who will not want to sell, for whatever reason.
Some of the changes dealing with by-laws may be perceived as infringing on personal rights to occupy one's own home and use the common property of a strata scheme. However, they do seem to reflect the current values of Australian society.

Strata law reform - what happens next?

The NSW government is in the process of drafting a Bill to give effect to these reforms. The Bill is expected to be tabled in Parliament in early 2014.
We will provide further updates on the strata and community title law reforms as new information comes to light.
Carolina Zandarin
czp@cbp.com.au