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Strata Schemes Legislation Amendment

A number of changes to the Strata Schemes Management Act 1996 and Strata Schemes Management Regulation 1997 came into effect on the 7th February 2005. Some of these important changes are set out below.

Special provisions for large schemes:

Strata schemes with over 100 lots (not including parking, storage or other utility
lots) now have specific rules applying to them. The owners corporation of any scheme with 101 or more lots must now:

a. have the scheme's financial accounts audited every year prior to the annual
general meeting.

b. specifically identify in the annual budget amounts expected to be spent on
individual items.

c. obtain at least two quotations for any expenditure of over $25,000.

d. give all lot owners at least 72 hours personal notice of upcoming executive
committee meetings.

e. give all lot owners notice of the decisions of the executive committee within
seven days.

Other new provisions applying to large schemes are:

a. Lot owners wanting to utilise a proxy vote at an owners corporation meeting
must give the secretary the written proxy arrangements at least 24 hours before
the scheduled meeting.

b. Executive committees of large schemes are limited in what they can spend.
Other than in the case of an emergency, the executive committee may not spend more than 10% above the budgeted amount for any item.

Owners Corporations may choose to lift the spending restrictions on its executive
committee (either entirely or just in relation to specific items) by passing a
majority vote at a general meeting.

Fire safety inspections

It is the owners corporation's responsibility to arrange access to all parts of the
building for the purpose of fire safety inspections. Owners corporations are subject to a penalty of up to $2,200 for not complying with a notice given to them requiring access. However, an owners corporation can defend itself against prosecution if individual lot owners or tenants within a strata building refuse to give access after being requested by the owners corporation to do so, or are unable to be contacted.

Where there is a dispute about a lot owner or tenant not giving access, the owners
corporation may apply to an Adjudicator for an order against the person in question.

The Adjudicator has the power to order that access be provided for a fire safety inspection.

Common property alterations and additions

An owners corporation has the authority to do the following or to allow a lot owner
in the scheme to:

a. add or alter the common property
b. erect a new structure on the common property.

The additions, alterations or new structures must be for the purposes of improving
or enhancing common property and must first be approved by a special resolution at a general meeting of the owners corporation.

The question of ongoing maintenance for any alteration, addition or erection must be addressed. If a by-law is not created making a particular lot owner responsible, the owners corporation becomes responsible for the ongoing maintenance.

Legal action by owners corporations

Should an owners corporation wish to commence legal action or obtain legal advice in relation to the administration of the scheme, specific steps must be taken.

Firstly, the decision to commence legal action will often have to be approved by a
general meeting of the owners corporation (by majority vote). Executive committees will not be able to make all decisions about legal action. However, some legal matters will remain within an executive committee's decision-making powers.

Any legal matter involving anticipated expenditure of less than $750 times the
number of lots in the scheme or $10,000, whichever is the lesser, will still be able
to be dealt with by the executive committee. For example in a five-lot strata scheme the executive committee would be able to spend $3,750 on legal matters. In a 200-lot scheme the executive committee would be limited to spending no more than $10,000.

Secondly, where the estimated costs of legal action have been disclosed under the
Legal Profession Act to the owners corporation this must be passed on to all lot
owners and executive committee members within seven days of this information being given to the owners corporation.

Documents and information to be provided by developers

The original owner of strata schemes (usually the developer) is required to hand
over the following documents at the first annual general meeting of the owners
corporation:

a. development consents

b. complying development certificates and related endorsed plans

c. 'as built' drawings

d. compliance certificates (within the meaning of the Environmental Planning and
Assessment Act 1979)

e. fire safety certificates

f. warranties obtained or received relating to the complex and any building,
plant or equipment

g. occupation certificates

h. sewerage line diagrams

i. maintenance and service manuals, and

j. depreciation schedules.

The maximum penalty for failing to hand over the necessary documentation has been increased from $1,100 to $11,000.