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COVID-19 Measures for Strata and Community Schemes Extended

NSW COVID-19 MEASURES FOR STRATA AND
COMMUNITY SCHEMES EXTENDED

The NSW Department of Fair Trading has recently announced that the State Government has extended its temporary COVID-19 emergency measures for strata and community schemes to 29 September 2022.

This means that strata Owners Corporations and Community Land Associations can continue, until 29 September 2022, to:

• meet and vote electronically, without passing a resolution to authorise this beforehand;
• validly execute documents, without affixing the seal of the Owners Corporation or Association.

The previous temporary measure of allowing certain documents to be sent by email has not been extended because of changes made by the COVID-19 and Other Legislation Amendment (Regulatory Reforms) Act 2022 (the Act) on 24 March 2022. The changes mean that an Owners Corporation and Association can send documents to an email address nominated by a lot owner, lot occupier or another person on the roll.

The Act makes other permanent changes to the strata and community scheme laws on ways of voting and using an electronic seal. These changes are currently expected to start on 30 September 2022, once supporting regulations are made.

The measures allow Owners Corporations and Community Land Associations to continue operating as they have been during 2020 and 2021, until the permanent changes commence.

NSW Strata Scheme Reporting

All strata schemes in NSW will have to report annually to NSW Fair Trading through a new strata portal by 31 December 2022.

The reporting will make it easier to access key strata information, and it will deliver a range of benefits. For example, emergency services will have access to a dedicated contact for each scheme in the event of an emergency.

The Department of Fair Trading will be implementing the portal’s functions in stages. From July 2022, Owners Corporations can register a scheme, set up a profile and access educational webinars. More features will be added in the following months.

Strata communities in NSW can now start to prepare for the reporting now by:

• knowing what information you’ll need to report and where to find it;
• deciding who will do the reporting and who will be the emergency services contact.

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Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

2022 08 Aug - COVID-19 Measures for Strata and Community Schemes Extended

SW SHORT TERM RENTAL ACCOMMODATION (STRA) – FURTHER UPDATE

NSW SHORT TERM RENTAL ACCOMMODATION (STRA) – FURTHER UPDATE

The NSW Department of Planning and Environment has recently clarified its views in relation to the application of the State – Wide Short term Rental Accommodation (STRA) planning laws.

You may recall that from the 1st November 2021, new rules commenced in NSW in relation to STRA, including:

• a state-wide planning instrument permitting the use of dwellings for STRA under certain conditions, including limits on the days the activity can take place; and

• a mandatory Code of Conduct that applies to online booking platforms, letting agents, hosts and guests; and

• allowing strata schemes to adopt a by-law that prohibits STRA where a lot is not a host’s principal place of residence. (Any such by-law has to be adopted by special resolution, with 75% of votes supporting the proposal at a general meeting), and

• STRA properties upgraded where necessary to meet certain minimum safety requirements.

After some delays and staggered starts, all these policies have now been put into effect.

Day Limits on STRA

The planning laws now include new ‘exempt’ and ‘complying’ approval pathways that enable STRA within certain day limits:

• where the host is present, STRA is ‘exempt development’ for 365 days per calendar year. This allows hosts to use an existing approved dwelling for the purposes of STRA, without requiring any further approval from the local council;

• where the host is not present, and the site is not on bushfire prone land or a flood control lot, STRA is ‘exempt development’ for:

• 180 days in Greater Sydney;

• 365 days in regional areas; except where a council varies this to no lower than 180 days (although Byron Bay is possibly looking to varying this to 90 days in some parts of the shire and 365 days in other parts);

(Note that where the host is not present, and the booking is for 21 or more consecutive days, the booking will not count towards the above day thresholds).

What does this mean for management rights operators?

Prior to the commencement of the STRA laws, only a limited number of Councils in NSW had local environmental plans that specifically regulated the use of properties for short term rental accommodation. Many operators conducted short term letting from complexes that were zoned (or had a DA) for “residential accommodation”.

Following the introduction of the STRA laws, management rights operators now need to make enquiries with their local Council to ascertain if the development approval (DA) for their building specifically allows short term letting in the complex. If a valid DA for STRA exists, the day caps set under the STRA planning policy do not apply to that building.

However, if the DA for the building was only for residential use (notwithstanding that it may have been used for STRA in preceding years without any Council intervention), the day caps will apply, which this obviously could have a detrimental effect on management rights operations.

It should be noted however that the Departments interpretation of these new STRA laws have not been tested yet in a Court of Law – so watch this space!

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

Update on Caretaking Agreements in NSW Community Title

What is Community Title?

I recently wrote an article that explained the difference between community title and strata title in NSW.

To recap, a good example of a community title is a gated community estate where there may be say 20 houses, each separated by boundaries and each owned by different people. The owner of each house will own all of the building and all of the land on which the building is situated – just like a traditional housing lot. At the centre of the estate there may be a tennis court, swimming pool and parking area. To enter the estate, you need to pass by an electric gate, which is monitored by a security company. In this example, each owner still owns their individual house and adjoining land, but they all share common amenities, including the security system, the entrance gate, the tennis court, the swimming pool and the parking area. These areas are known as “community property” (same as “common property” in strata subdivisions).

A community title scheme is created by the registration of a Community, Neighbourhood or Precinct plan and (much like a strata scheme) caretakers are often appointed by the Community Association to maintain the community property, including all recreational facilities, gardens and parklands.

Term of Caretaking Agreements in Community Title

When the Strata Schemes Management Act was amended in 2003 to limit the term of caretaking agreements in strata complexes to no more than 10 years (including options), similar changes were not made to the Community Titles legislation. Accordingly, agreements between Community Associations and caretakers could still be for terms of 25 years – and often were.

However, this has changed in late 2021 when the Community Land Management Act 2021 (the “New Act”) commenced on 1 December 2021. The New Act is designed to bring the legislation for community title into alignment with, and ensure consistency with, the Strata Schemes Management Act 2015.

Under the New Act, caretakers became known as “Facilities Managers” and are defined in the New Act as any person who assists with one or more of the following functions (except as a volunteer, casual or committee member):
• managing association property.
• controlling use of association property by persons other than owners/occupiers.
• maintaining and repairing association property.

These duties capture all of the traditional roles of an on-site caretaker.

Most importantly, the New Act prescribed that the maximum term of these agreements moving forward was now 10 years.
It also prescribed that:
1. the proposed facilities manager must disclose interests, including connection with the original owner and any pecuniary interest, in the association;
2. NCAT is empowered to make variations to, or terminate facility management agreements in certain circumstances; and
3. if authorised at a general meeting, an existing facility management agreement can be transferred to another entity.

What about Caretaking Agreements Already Existing at the Commencement of the New Act?

Unfortunately, the New Act did not grandfather all existing caretaking agreements so they could continue to operate in accordance with the old legislation.

In fact, it provided that a caretaking agreement in force immediately before the commencement of the new legislation is taken to be a facilities manager agreement for the purposes of the New Act and the agreement is deemed to expire 10 years after the commencement of the New Act, i.e. they will terminate by 1 December 2031.

Is there a Loophole in the new legislation?

There is one exception contained in the transitional sections of the New Act that may exempt some existing managers from this harsh new write down of their agreement term.

If the caretaker is entitled to “exclusive possession of a lot or association property in the scheme”, any caretaking agreement in force immediately before the commencement of the New Act is not taken to be a “Facilities Management Agreement” for the purposes of the New Act and therefor the 10 year term limitation does not apply to that agreement.

In other words, the owner of the caretaking business must be the same entity as the owner of the lot where the business operates, or there must have been a lease in place prior to 1 December 2021 that grants to the caretaker exclusive possession of the lot or community property where the business operates.

If you are a caretaker or service provider for a community title it is strongly recommended you seek advice on this issue relevant to your circumstances.

Article Written by Col Myers of Small Myers Hughes Lawyers

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

Further Pending Changes to the Role of Building Managers in NSW – Part 2

FURTHER PENDING CHANGES TO THE ROLE OF
BUILDING MANAGERS IN NSW – PART 2

In last month’s article, I outlined some of the key issues raised in the current review by the NSW Government of the Strata Schemes Management Act 2015 and Strata Schemes Development Act 2015.

These issues included:

  1. Amending the definition of a Building Manager under the Act to more clearly distinguish the role of Building Managers from that of other contractors who engage with the Owners Corporation from time to time; and
  2. Imposing on Building Managers a higher degree of disclosure to the Owners Corporation of potential conflict of interest issues when engaging contractors and receiving referral fees etc.; and
  3. Further consultation in relation to the ongoing review of the term of Building Management Agreements (currently capped at 10 years).

Further recommendations which directly relate to Building Managers include:

  1. Building Managers be subject to a statutory duty to act in the best interests of the Owners Corporation in carrying out their duties.

               Background – Some stakeholders argued that, in addition to conflict of interest controls, Building Managers should be subject to an explicit statutory duty to act in the best interests of the Owners Corporation. For example, the Property and Stock Agents Regulation 2014 requires managing agents conducting letting to be licensed professionals subject to a fiduciary duty and an explicit duty to act in the best interest of their client.

  1. The Department of Consumer Service to consult with the strata and facilities management industries about ways to improve the expertise of Building Managers, especially in the management of defects, including the possibility of a licensing framework in the longer term.

          Background – The review panel noted that the maintenance and repair of common property is a critically important duty of the Owners Corporation, in order to ensure the ongoing safety and amenity of strata buildings throughout their life. In complex, multi-storey strata buildings, the Owners Corporation of necessity relies more on the Building Manager than in simpler buildings, for expert advice on managing defects, safety, repairs and maintenance. The lack of expertise of the Owners Corporation when dealing with issues of building defects, fire safety and maintenance has led to suggestions that overall management of maintenance and repairs should rest with an accredited or licensed Building Manager, who is subject to statutory duties to ensure the upkeep and safety of the building.

               The Facilities Management Association of Australia argued for the licensing of facilities (or building) managers and for a requirement to engage a suitably qualified Building Manager for buildings of a certain complexity. Other submissions were concerned that placing such a duty on a Building Manager would be unfair if, for example, they requested approval for repairs or upgrades but were refused by the Owners Corporation. The review considered that any proposal to delegate the obligation of the Owners Corporation to maintain and repair the common property to a Building Manager would require suitably qualified Building Managers supported by a licensing scheme and compulsory qualification requirements. Without such uniformity and oversight of qualifications, imposing such a duty could be unfair to some Building Managers who would not have the right expertise, and could risk dangerous practices and Owners Corporations placing their trust in unsuitable candidates.

              However, it was noted that at this time, there is a lack of a properly recognised qualification in the vocational educational framework that could be used to support such a scheme. Further, developing and implementing a licensing scheme would involve substantial costs which would be borne by the Government, the industry and Owners Corporations as the end consumer. The review therefore did not consider that a licensing scheme is a viable or supportable option at this time. Nevertheless, the review recognised that there is substantial support for improving the expertise of Building Managers, especially in the management of defects.

  1. Building Managers be subject to explicit statutory duties to:
    • disclose to the Owners Corporation the qualifications and experience that make them suitable for the role;
    • familiarise themselves with fire safety and building safety obligations to which the Owners Corporation is subject;
    • take all reasonable steps to ensure that the Owners Corporation complies with these obligations; and
    • promptly bring to the attention of the Owners Corporation any maintenance, repair or safety problems with the building, and provide a proposal for how these could be best addressed.

               Background – It was the opinion of the review panel that, prior to an Owners Corporation entering into Building Management Agreement, a potential Building Manager should be required to disclose to an Owners Corporation the qualifications and experience that make them suitable for the role. While such disclosure may already be common in practice, mandating it will ensure that all Owners Corporations are required to explicitly consider the qualifications of a prospective Building Manager.

  1. That a failure by a Building Manager to disclose to the Owners Corporation any commissions it has received be added to the existing grounds for termination of Building Manager Agreements under the Strata Schemes Management Act.

Current termination grounds are:

  • a failure to satisfactorily perform the duties;
  • if the caretaking fee is unfair;
  • a failure to disclose a connection to the original developer; or
  • that the terms of the Agreement are harsh, oppressive, unconscionable or unreasonable.

Background – The Discussion Paper asked whether any further grounds for termination of Building Manager Agreements should be added or if the grounds should be the same as those for strata managing agents. Submissions supported the current grounds for termination of Building Managers in section 72 of the Strata Schemes Management Act and the review recommended their retention. Given the recommendation that Building Managers be subject to the same requirement to disclose commissions and training services that applies to strata managing agents, the review recommended that the Tribunal should also be able to terminate a Building Manager’s contract on the grounds that the Building Manager has failed to make these commission disclosures or has failed to make them in good faith.

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Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice

Difference between Old System, Torrens, Company, Strata and CT in NSW

UNDERSTANDING THE DIFFERENCES BETWEEN
OLD SYSTEM, TORRENS, COMPANY, STRATA AND COMMUNITY TITLES IN NSW

There are different title systems for ownership of property in NSW. The following is a snapshot summary of the different ownership.

Old System Title

In the early years of the NSW colony, there was no system for recording land transactions. In some cases, brief particulars of a sale were written on the back of a land grant but in many cases, ownership changed hands without any evidence at all. This changed in 1802 when the Judge Advocate invited parties to record their land dealings, forming the first book of the ‘Old Register’. From then on, landowners would have to show a ‘good chain of title’ to prove their ownership to land. This was (and still is) called ‘Old System Title’.

Under Old System Title, a landowner had to retain (as evidence) the complete chain of documents that ultimately led to that person’s ownership of a property. This chain of documents would often go back over many generations.

(These days, we see very little Old System Titles in NSW.)

Torrens Title

The Torrens Title system was introduced into NSW with the commencement of the Real Property Act 1863. Torrens Title is based on the notion of ‘ownership by registration’. You register your ownership of land with NSW Land Registry Services (LRS). Essentially, if you have registered your name as the owner of land then you are deemed to be the rightful owner – despite any other claims. Your ownership is said to be “indefeasible”.

(Torrens title is the most common form of land ownership in NSW – being your traditional parcel of land or your house/land package.)

Company Title

Under Company Title, the building is owned by a company. When purchasing a unit within the building, buyers do not actually own the unit. They are effectively buying ‘shares’ in the company, which in turn allows them the right to occupy a particular unit.

You also receive a ‘Share Certificate’ rather than a title deed.

The good thing about Company Title units is that they are generally cheaper to buy and, because of the restrictions on shareholders, many company titled properties are occupied only by the owners – meaning less turnover and less risk of noise and other issues that occur with short-term rentals.

The downside with Company Title is that you do not actually own the unit, but rather you own ‘shares’ in the company.

Also, banks are more reluctant to issue loans for company titles units and interest rates are generally higher.

Renting your apartment out may not be possible (or could involve limitations) depending on each company’s constitution (which can vary significantly).

(It is my experience that Company Title works very well in certain limited situations. It is ideal for smaller complexes, where owners want control over who their neighbours may be and also don’t require bank funding to purchase their property.)

Strata Title

The strata system was invented in Australia in 1961, and has since been adopted globally.

Strata Title is ideal for ownership of larger, multi-level buildings, where ownership of each unit is separate, but no unit owner owns the physical building which comprises the units or the land on which the building sits.

The building itself and the adjoining land is referred to as ‘common property’ and includes things such as entrance ways, hallways, swimming pools, tennis courts, driveways, lifts and so on. No single unit owner will own any of these areas. All the unit owner owns is the cubic space inside each unit, other than the paint on the walls.

Common property is managed through the creation of an Owners Corporation. All of the owners of the individual units automatically become members of the Owners Corporation and have a right to participate in the decision-making of the Owners Corporation. The Owners Corporation is created as soon as the strata plan of subdivision is registered with the LRS.

The Owners Corporation is responsible for maintaining and repairing common property, taking out relevant insurances, managing the Owners Corporation finances, keeping records and administering the by-laws (e.g. parking and pets).

The Owners Corporation is financed by the levies that are raised against each of the units. Levies are usually paid every 3 months. The levies that a particular unit owner will need to pay will be determined by the ‘unit entitlement’. When the developer of the strata development first registers the strata plan of subdivision, he or she gives the entire building an ‘aggregate unit entitlement’ (e.g. 100 unit entitlement). A share of the unit aggregate is then attributed to each unit based on their individual value, which involves a consideration of unit size, location, aspect, rules attributable to the unit and so on. In most cases, the allocation of unit entitlements will need to be carried out by a qualified valuer.

The higher the unit entitlement allocation for a particular unit, the more that unit owner must pay in levies to the Owners Corporation. The unit allocation can also affect voting rights, so it is important that the allocation is done properly and fairly.

Community Title

A Community Title in NSW relates to properties with at least two lots that share a common area, such as a driveway or recreational land. Community Title is often used in developing large estates, which could include residential lots, as well as commercial and retail outlets. A good example is a gated community estate. Within the estate there may be, say, 20 houses, each separated by boundaries and each owned by different people. The owner of each house will own all of the building and all of the land on which the building is situated – like a traditional Torrens housing lot.

At the centre of the estate there may be a tennis court, swimming pool and parking area. To enter the estate, you need to pass by an electric gate, which is monitored by a security company.

In this example, each owner still owns their individual house and adjoining land, but they all share common amenities, including the security system, the entrance gate, the tennis court, the swimming pool and the parking area.

A community title scheme is created by the registration of a Community, Neighbourhood or Precinct plan and (much like a strata scheme) is managed by a body corporate consisting of all lot owners, known as the Community Association. All common areas (including all roads, recreational facilities, promenades and parklands) are referred to as Association property. Unit entitlement is based on site values, which determines unit owners’ voting rights and contributions to maintenance and insurance levies.

The management of a community title scheme can be complex and multi-tiered. Usually found in big developments and complexes, they can often span large areas of land and consist of a mix of commercial, residential and retail lots with conflicting interests. Much like in strata titles, everything is managed via Association meetings. The community scheme committee deals with day-to-day issues and general meetings are held for larger issues, which each individual lot owner may attend.

Community Title lots can be subdivided by strata titled buildings, which means that sometimes the by-laws of both the strata scheme and the community scheme apply.

All by-laws in a community title scheme are detailed in a Management Statement, which differs with each plan.

As every community scheme varies in nature, the by-laws are therefore far less standardised than strata scheme by-laws.

 

Article Written by Col Myers of Small Myers Hughes Lawyers

Liability limited by a scheme approved under Professional Standards Legislation

Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

New Disclosure Requirements for NSW Sales and Qld BC Records that may be accessed

NEW DISCLOSURE REQUIREMENTS FOR NSW SALES

and

WHAT QLD BODY CORPORATE RECORDS CAN BE ACCESSED

 

  1. New Disclosure Requirements for NSW Sales

 

Real Estate agents in NSW should be aware of a recent change to the Property and Stock Agents Regulation 2014 in relation to agents’ material facts disclosure obligations.

 

From 1 September 2021, agents must disclose any order that is in force under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (the RAB) to prospective purchasers.

 

These orders can include a:

  • Building work rectification order – requiring the developer or builder to carry out or refrain from carrying out building work to eliminate, minimise or remediate serious defects or potential serious defects, or
  • Prohibition order – prohibiting the issuing of an occupation certificate for the apartment building, or its registration as a strata plan. The Building Commissioner may make such an order when:
  1. an expected completion notice was not given or was given less than 6 months before the application for the occupation certificate was made;
  2. an expected completion amendment notice was not given or was given less than 6 months before the application for the occupation certificate was made;
  3. a serious defect in the building exists;
  4. a building bond has not been given.
  • Stop work order – to ensure building work stops due to the likelihood of significant harm or loss to the public or occupiers, or significant damage to property.

Agents who are aware of a material fact set by the regulations, or ought to reasonably know, and fail to inform prospective purchasers (whether intended or not), face a maximum penalty of $22,000.

 

NSW Fair Trading is introducing these changes to restore confidence in the residential construction industry and to make sure that apartments being built are trustworthy. The Department will continue its compliance and enforcement role to ensure real estate agents are meeting their disclosure obligations to buyers. This will include targeted audits of agents who are selling properties where RAB orders have been issued.

 

  1. Qld Body Corporate Records that may be Accessed

 

What constitutes a “record of a body corporate” is much broader than the compulsory list of documents set out in the Queensland regulation modules, and has ramifications for the duties of a body corporate and the breadth of access allowed to an owner or prospective purchaser.

 

The Three categories

 

Consistent with the approach of department adjudicators, the Queensland body corporate legislation in effect creates three categories of records:

  1. records that must be kept;
  2. records that should be kept;
  3. records that are

 

‘Records’ are defined to include the rolls, registers and other documents kept by the body corporate under the Body Corporate and Community Management Act (Qld) 1997 and applicable regulation module. They include paper and electronic documents.

 

What records must be kept?

 

The body corporate regulation modules set out a long list of documents that a body corporate must keep, with varying requirements about the length of time each document must be kept.

 

Examples of these documents are:

  • accounting records for each financial year;
  • insurance policies;
  • orders made against or in relation to the scheme or body corporate;
  • correspondence received and sent by the body corporate;
  • minutes of committee and general meetings.

 

These are however, not the only documents that form part of the records of a body corporate.

 

What records should be kept?

 

A body corporate has a statutory duty to act reasonably in anything it does in carrying out its function given to it under the body corporate legislation and community management statement.

 

Acting reasonably, a body corporate would be required to keep:

  • additional maintenance records;
  • records relating to its obligations under workplace health and safety and fire safety legislation;
  • any other document retained by the body corporate for the purpose of discharging its functions.

 

If records are not kept that are records that a body corporate, acting reasonably, should have kept, then a department adjudicator may find that the body corporate has not acted reasonably in responding to an owner or prospective purchaser’s request to access records.

 

Records that are kept

 

There are often records that are kept by a body corporate that are beyond the scope of records required to be kept under the body corporate legislation.

 

These records also form part of the records of a body corporate and an owner or prospective purchaser may be allowed to access these records.

 

However, there are ways that a body corporate may withhold access to records under certain circumstances, and if a body corporate is unsure as to what documents constitute body corporate records or how to withhold access its records, it should seek assistance before or during the seven day turnaround time for record requests.

 

Article Written by Col Myers of Small Myers Hughes Lawyers

 

 

Liability limited by a scheme approved under Professional Standards Legislation

Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.