A Guide to the February 2025 NSW Strata Law Reforms for Strata Owners & Residents

Introduction

In February 2025, strata laws in New South Wales underwent significant reforms, initiating a new era for strata communities. The NSW Government implemented these new rules to enhance transparency and accountability across the sector, impacting everyone from strata property owners and residents to managers and committees.

For those who live in or are involved with the management of a strata property, understanding these changes is crucial. The reforms address key areas such as disclosure obligations and developer accountability, all aiming to establish a fairer and more transparent system for everyone involved in NSW strata schemes.

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Enhanced Accountability for Strata Managers

Increased Disclosure Obligations for Strata Managers

As part of the reforms, strata managers in NSW now have greater disclosure obligations to owners corporations. These changes were introduced to increase transparency and ensure strata managers act in the best interests of the owners they represent.

The new disclosure requirements for strata managers include several key areas:

• Connections with suppliers and developers: Strata managers must disclose any existing relationships or interests they have with suppliers or developers, detailing the nature of these connections.
• Commissions or training services: Any commissions or training services received by a strata manager must be revealed to ensure the owners corporation is aware of potential financial incentives.
• Detailed financial information: Strata managers are required to provide comprehensive financial statements and reports, including detailed breakdowns of insurance quotes that show commissions and broker fees.
• Real-time reporting of new connections: If any new connections or interests arise during their contract, strata managers must report them in real-time to maintain ongoing transparency.

Application of Unfair Contract Terms Legislation to Strata Agreements

Commonwealth unfair contract terms legislation now applies to strata manager agreements in NSW, offering better protection for owners corporations. The Fair Trading Act 1987 (NSW) was amended to incorporate provisions from the Australian Consumer Law, making these protections a part of NSW law for contracts involving owners corporations.

This change affects both new contracts and any agreements renewed after the reforms commenced. For renewed contracts, the legislation only applies to conduct that occurs after the renewal date. Similarly, any contract provisions that are changed or added are also subject to these laws for conduct occurring after the modification.

Stricter Penalties for Non-Compliance in the Strata Sector

To ensure adherence to the new regulations, significant penalties have been introduced for strata managers who fail to comply. NSW Fair Trading is tasked with enforcing these new obligations.

Strata managers who do not meet the new disclosure standards can face penalties of up to $110,000.

To support this enforcement, the NSW Government has invested $8.4 million into a dedicated Strata and Property Services Taskforce within NSW Fair Trading. This taskforce is focused on strengthening compliance and enforcement across the strata sector.

Greater Accountability for Strata Committees & Developers

Expanded Duties & Mandatory Training for Strata Committee Members

The recent strata law reforms in NSW introduced new duties for strata committee members, along with a mandatory training requirement. These changes are designed to improve both the accountability and effectiveness of strata committees. The obligations for committee members are now essentially fiduciary in nature, requiring them to act in the best interests of the owners corporation.

The expanded duties for strata committee members include:

• Acting in accordance with strata management legislation.
• Not misusing any information obtained through their position.
• Acting reasonably in matters that concern an owner's use of their lot and common property.
• Complying with what are essentially fiduciary obligations.

To support these new responsibilities, there is now a new mandatory strata committee training requirement for all members. This training is intended to equip them to perform their roles effectively. If a committee member fails to complete the required training, their office may be vacated.

Developer Responsibility for Initial Strata Levies & Maintenance

The reforms also increased developer accountability regarding the initial levies and maintenance schedules for new strata schemes, a complex area where strata property development lawyers can provide crucial guidance. These measures aim to protect new owners from unexpected costs and ensure buildings are properly maintained from the outset.

Key changes to developer accountability include:

• Increased Penalties for Non-Compliance: Penalties have been increased for developers who do not comply with these new obligations. This includes failing to provide the initial maintenance schedule and certified levy estimates before the first annual general meeting of the strata scheme.
• Independently Certified Initial Levy Estimates: Developers are now required to have their initial levy estimates independently certified. This ensures the financial projections given to prospective buyers are accurate and realistic, preventing them from facing unexpectedly high strata levies.
• Initial Maintenance Schedules: Developers must now provide an initial maintenance schedule for the strata scheme. For buildings that are three or more stories high, this schedule must also be reviewed and certified by a prescribed professional.

Reforms for Common Property & Infrastructure in Strata Schemes

Easier Approvals for Accessibility & Sustainability Upgrades

The NSW strata laws have made it easier for owners corporations to approve upgrades to common property that enhance accessibility and sustainability. The voting threshold for passing resolutions for such infrastructure was lowered to a majority vote. Previously, these types of upgrades required a special resolution, which needed a 75% majority.

This change is intended to encourage strata communities to adopt more inclusive and environmentally friendly features. Examples of upgrades that are now easier to approve include:

• The installation of solar panels
• The setup of electric vehicle charging stations
• Other accessibility infrastructure to improve common areas

Extended Timeframe for Strata Common Property Repair Obligations

Owners corporations in a strata scheme have a legal duty to repair and maintain common property, but lot owners often need to know what to do when the owners corporation fails to repair common property. The recent reforms have extended the time limit for owners to take action against an owners corporation that fails to meet this obligation. The timeframe has been increased from two years to six years.

This extension provides owners with a significantly longer period to address repair and maintenance issues and ensure their strata scheme is properly maintained. Additionally, NSW Fair Trading has been granted enhanced powers to investigate and enforce compliance with these common property obligations.

Changes to Strata Levy Contributions & Financial Hardship

Payment Plan Flexibility for Strata Owners in Financial Hardship

The strata law reforms recognise the importance of supporting owners facing financial hardship. As a result, owners corporations must now offer payment plans to those experiencing genuine difficulties with their levy contributions, thereby providing a crucial safety net to prevent strata levy recovery actions.

Under the amended Strata Schemes Management Act 2015 (NSW), owners corporations:

• Are prohibited from having blanket rules that automatically refuse payment plans.
• Must consider each request individually, taking into account the owner’s specific circumstances.
• Risk a strata dispute in NCAT if they unreasonably refuse a payment plan, with the tribunal empowered to order one to be established.

Increased Information Required with Strata Levy Notices

To improve transparency, owners corporations must now include more detailed information with strata levy notices. This amendment ensures owners clearly understand how their funds are being used.

Specifically, the levy notice breakdown may cover:

• Administrative fund levies: Covering the day-to-day operational expenses of the strata scheme.
• Capital works fund levies: Specifying funds allocated for long-term maintenance and major projects.
• Insurance levies: Outlining the costs related to strata insurance premiums.
• Special levies: Clearly explaining the purpose and amount for any specific levies.

Conclusion

The February 2025 strata law reforms in NSW represent a significant step towards a fairer and more transparent sector, introducing crucial changes to enhance accountability for strata managers, committees, and developers. These new laws better protect strata property owners by focusing on increased disclosure, expanded duties, and stricter penalties for non-compliance.

Understanding these new obligations is essential for all participants in NSW strata schemes, including property owners, residents, and managers. If you need assistance navigating these reforms, contact our experienced strata lawyers at PBL Law Group today to learn more about how these changes impact your strata scheme.

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