A 2024 Recap of Key Updates to NSW Strata Law

Introduction

Throughout 2024, New South Wales strata law underwent a series of important legislative changes that impacted developers, strata managers, building managers, committees, and owners. These updates were designed to improve transparency, strengthen protections, and address evolving needs within the strata sector.

As the year progressed, stakeholders across the strata community needed to adapt to new financial requirements, enhanced governance standards, and extended rights for owners and occupiers. Understanding these changes remains essential for anyone involved in strata schemes across NSW.

Major Financial Changes for NSW Strata Developers in 2024

Understanding the Increased Strata Building Bond

In 2024, developers of residential strata schemes faced a significant financial adjustment with the mandatory building bond increase.

Key details of this change include:

• Regulation: Introduced by the Building, Development and Strata Legislation Amendment Regulation 2024 (NSW)
• Bond rate: Raised from 2% to 3% of the building work’s contract price

This amendment to the Strata Schemes Management Act 2015 (NSW) officially took effect on 2 November 2024. Although the implementation was originally scheduled earlier, it was postponed to provide the industry with more time to adapt to related market changes.

Decennial Liability Insurance DLI as a Strata Bond Alternative

As an alternative to lodging a building bond, developers were encouraged to consider Decennial Liability Insurance (DLI).

Key attributes of DLI:

• Ten years of protection for owners corporations against serious structural defects
• Exemption from the building bond requirement under Section 211AA of the Strata Schemes Management Act 2015 (NSW)

The government’s decision to increase the building bond formed part of a broader strategy to promote DLI uptake. Moreover, the delay in the bond increase was a direct response to the limited availability of DLI products, allowing the insurance sector additional time to mature.

New Governance & Disclosure Rules for Strata Management

Enhanced Disclosure Obligations for Strata Managing Agents

The Strata Managing Agents Legislation Amendment Act 2024 (NSW) introduced significant changes to improve transparency. Strata managers are now required to obtain approval from the owners corporation through a general meeting resolution before accepting commissions or training services.

To ensure informed decisions, the motion for approval must provide specific details, including:

• The exact amount of any commission and how it is calculated.
• The monetary value of any training, or a reasonable estimate if the exact value is not known.
• The nature of the relationship between the strata managing agent and the person providing the commission or training.
• A clear explanation of why accepting the commission or training is in the best interests of the owners corporation.

Furthermore, disclosure requirements under Section 71 of the Strata Schemes Management Act 2015 (NSW) were expanded. Before being appointed, a potential strata managing agent must now disclose:

• Any connections with suppliers who provide goods or services to other strata schemes they manage.
• Whether they provided advice to the original owner about the strata plan within the previous two years.

Stricter Requirements for Strata Insurance Quotations

To enhance financial transparency, the rules for obtaining strata insurance quotations were made more stringent. Under the updated Section 166 of the Strata Schemes Management Act 2015 (NSW), strata managing agents must provide at least three quotations that include a detailed breakdown of all associated charges.

Each quotation must now clearly itemise the following components:

• The base premium amount.
• Any commission, separate from the broker fee.
• The broker fee, expressed as a percentage of the base premium.
• Applicable stamp duty and levy amounts.
• Any underwriting agency fees and GST.
• The individuals or entities to whom the commission and broker fees will ultimately be paid.
• A statement confirming whether the person providing the quotation is connected with the strata managing agent.

New Duties for Building Managers & Strata Committees

The Strata Schemes Legislation Amendment Bill 2024 introduced new statutory duties for key figures in strata governance. A significant change was the introduction of a duty for building managers to act in the best interests of the owners corporation, with penalties for breaching this duty—a complex area often requiring legal advice for an owners corporation—without a reasonable excuse

The Bill also established a more extensive list of duties for strata committee members to improve governance. These responsibilities now include:

• A broad duty to act with due care and diligence.
• A requirement for committee members to complete specified training to remain eligible to serve on the strata committee, ensuring they are well-equipped to handle their roles.

Strengthened Protections for Strata Owners & Occupiers

Extended Limitation Period for Common Property Repair Claims

The Strata Schemes Legislation Amendment Bill 2024 proposed a significant change to Section 106 of the Strata Schemes Management Act 2015 (NSW), which sets out an owners corporation’s strict duty to maintain and repair common areas.

A key feature of the Bill was the extension of the limitation periods to claim damages against their owners corporation. If enacted, the period for an owner to bring an action for a breach of this duty would increase from two years to six years from the date the owner first became aware of the loss.

This change would significantly increase the timeframe for a strata owner to seek compensation for foreseeable losses, such as:

• Water damage to their lot caused by a failure to maintain common property
• Other losses resulting from breaches of the duty to repair and maintain

Continued Professional Indemnity Exclusions for Cladding

In 2024, changes were also made affecting the insurance market for building certifiers through the Building, Development and Strata Legislation Amendment Regulation 2024 (NSW). This regulation extended the period during which certain exclusions are permitted in professional indemnity insurance policies.

This allows insurers to continue excluding liability for claims related to non-compliant building cladding, a key issue when determining who pays for a building defect, in policies that commenced on or before 30 June 2025. This provision, which was previously set to end on 30 June 2024, was extended to apply to policies that commenced on or before 30 June 2025.

This extension provided the insurance market with:

• More time to adapt to reforms
• Continued availability of professional indemnity coverage for certifiers in the strata industry

Conclusion

The 2024 updates to NSW strata law introduced significant changes impacting developers, managers, and owners alike. These reforms focused on increasing financial accountability through new building bond requirements, enhancing governance with stricter disclosure rules, and strengthening protections for owners regarding common property repairs.

Navigating these complex legislative changes requires expert guidance to ensure full compliance and protect your interests. For trusted expertise on all strata matters in NSW, contact the specialised strata lawyers at PBL Law Group today to secure peace of mind.

Frequently Asked Questions