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Strata Management Legislation Amendment Act 2008

A number of changes to the Strata Schemes Management Act 1996 and The Home Building Act 1999 came into effect on the 1st August 2008.

The changes were introduced by the Strata Management Legislation Amendment Act 2008, and its purpose is to enhance the operation and management of strata schemes.

Caretakers

This amendment makes it clear that all on-site caretakers are covered by the Strata Schemes Management Act, even if they use a different job title such as ‘building manager’.

The changes to the caretaker laws make it clear that anyone carrying out the role of an on-site caretaker is subject to the those laws, regardless of whether they are called a caretaker or use a different title, such as building manager or resident manager.

This change is important, because the Strata Schemes Management Act sets out strong protections for strata owners in relation to caretaker contracts. The amendment will ensure that a caretaker cannot avoid the requirements of the Act simply by using a different job title.

Caretakers may be employed to assist the owners corporation in carrying out its functions. Caretakers may assist the owners corporation in:

managing the common property,

controlling the use of common property by persons other than the owners and occupiers of lots, and

maintaining and repairing common property.

By-laws about parking vehicles on common property

This amendment prevents by-laws giving a right to park on common property being made during the initial period of a strata scheme.

An owners corporation may make by-laws giving rights to an owner for the exclusive use of, or special privileges in relation to, an area of the common property. However, these types of by-laws cannot generally be made during the ‘initial period’ of the scheme, that is, the period from the date of registration of the strata plan and expires on the day when there are owners of lots (other than the original owner) whose unit entitlements is at least one-third of the aggregate unit entitlements.

Prior to the amendment the Strata Schemes Management Act contained an exemption allowing by-laws to be made during the initial period authorising an owner to park a vehicle on the common property. This led to disputes when buyers later move in and find that the developer has given themselves or someone else the right to permanently park in visitor parking spaces.

This amendment saw the removal of this exemption so that such by-laws can only be made after the expiry of the initial period when other owners besides the developer are able to vote on the proposal.

Proxies and power of attorney

These amendments will protect strata buyers from terms in sale contracts which require them to give proxy voting rights or power of attorney to the developer of the strata scheme.

Under the legislation, owners in a strata scheme who are entitled to vote in an owners corporation meeting can appoint a person as proxy to vote on their behalf. Proxy appointments enable owners who are unable to attend meetings to have a say on issues under consideration.

A proxy appointment must be made on a prescribed form and remains in effect for 12 months or two consecutive annual general meetings. The owner making the appointment can, if they wish, specify how their proxy is to vote on any matter. Alternatively, an owner may allow the proxy full discretion in the use of their voting entitlements. An owner can revoke or replace the proxy appointment at any time or may attend a meeting and vote in person, thus overriding any proxy they have issued.

However, some developers seek to avoid these requirements by making it a condition of the sale of a strata lot for the buyer to give the developer unconditional proxy voting rights or a power of attorney. Owners who have signed such contracts could risk having action taken against them for breach of contract if they attempt to exercise their right to vote at an owners corporation meeting or make a change to their proxy.

To provide further protection for owners’ voting rights, the legislation has been amended so a developer or a person connected with the developer cannot make use of a proxy voting appointment or power of attorney that was obtained by a condition in a contract for the sale of a strata lot, or another related contract or arrangement.

The amendment does not stop an owner from giving proxy voting rights to anyone they choose – including the developer or caretaker if that is what they wish. However, the provisions of the Act apply and the owner can cancel their proxy at any time or override it by attending a meeting to vote in person without fear of legal action or penalties.

Executive committee members - disclosure requirements

Executive committee members will need to disclose any personal, business or financial connection they have with the developer or caretaker.

The executive committee of the owners corporation is a group which represents owners or owners’ nominees. It administers the day-to-day running of the strata scheme and is elected at each Annual General Meeting.

The owners corporation has the authority to dismiss some or all of its executive committee. If a vacancy occurs during the term of the executive committee, the owners corporation must appoint a person to fill the vacancy until the next Annual General Meeting.

In response to complaints about executive committees being ‘stacked’ by friends or associates of the developer, the Act has been amended so that a person nominated for election to an executive committee must disclose any financial, business or family connections they have with the developer or caretaker. The disclosure will need to be made at the meeting at which the executive committee is to be elected before the election is conducted and the disclosure must be recorded in the meeting minutes.

Once elected, members of executive committees will also have to disclose any connection they subsequently develop. The disclosure must be made in writing to the secretary of the executive committee and placed on the agenda for the next general meeting. If the person is the secretary, the disclosure is to be made to the chairperson of the committee. A person being appointed to act in the place of an executive committee member must also disclose any connections they have with the developer or caretaker. This disclosure is to be made in writing to the executive committee before the appointment.

However, the disclosure of a connection with the developer or caretaker does not prevent an executive committee member from continuing to hold their position on the committee. Equally, the disclosure of a connection between an executive committee candidate and a developer does not prohibit or prevent the candidate from being elected to the committee.

This measure will enhance the transparency of executive committee elections, and will enable the other owners to take candidates’ association with the developer into consideration when voting on membership of the executive committee or when voting to remove a member of the committee.

Building disputes

Individual owners in strata schemes will be able to lodge a building dispute with the Office of Fair Trading and arrange for an inspection of building work in common areas.

The Home Building Act provides for complaints about defective building work on the common property of a scheme to be made to the Office of Fair Trading by an owners corporation.

Where the developer has majority ownership or voting rights, it can be difficult for the owners to agree about the lodgment of a complaint. This sometimes occurs because the developer is also the builder, or is financially connected with the builder, and is seeking to avoid their responsibilities.

As of 1 August 2008, individual strata lot owners will be able to lodge complaints with Fair Trading and to invite a Fair Trading building inspector onto the common property of a strata scheme. As a further safeguard, caretakers and other persons who control access to areas of the common property will be obligated to cooperate with officers from Fair Trading and provide assistance to enable the inspection to be carried out.

To review the Strata Management Legislation Amendment Bill 2008 please click here