Introduction to New Strata Laws in NSW

Strata laws in NSW are changing big time in February 2025, kicking off a fresh era for strata communities. The NSW Government’s rolling out these new rules to boost transparency and accountability across the board. It’s a shake-up that’ll touch everyone from strata property owners and residents to managers and committees.

For those who live in strata or are involved in strata management, understanding these changes is important. The reforms address key areas such as increased disclosure obligations for strata managers, enhanced strata committee member duties and training, and measures to ensure developer accountability. These new obligations and changes aim to create a fairer system for all involved in NSW strata schemes.

Key Changes to NSW Strata Laws in February 2025

Increased Disclosure for Strata Managers

Significant changes to strata laws in NSW are set to come into effect in February 2025, with a focus on increasing transparency and accountability within the strata sector. These reforms mean strata managers in NSW will have new disclosure obligations to owners corporations. Strata managers must now disclose more information about their services and relationships.

The new disclosure obligations for strata managers include:

• Connections with suppliers and developers: Strata managers need to disclose any connections or interests they have with suppliers and developers. This includes detailing the nature of these relationships.
• Commissions or training services: Strata managers are required to disclose any commissions or training services they receive. This ensures owners corporations are fully informed about potential financial benefits the strata manager might be gaining.
• Detailed financial information: Strata managers need to provide detailed financial statements and reports to owners corporations. They must also offer detailed breakdowns of insurance quotes, including commissions and broker fees.
• Real-time reporting of new connections: Strata managers are obligated to report in real-time if any new connections or interests arise during their tenure. This ensures ongoing transparency and prevents conflicts of interest from being hidden.

These new disclosure obligations are part of the NSW Government’s reforms to better protect strata property owners and assist owners corporations in making informed decisions. The aim is to ensure strata managers act in the best interests of owners corporations by eliminating potential conflicts of interest and promoting fairer practices.

Enhanced Transparency and Accountability

The February 2025 strata law reforms are designed to enhance transparency and accountability in strata management. These reforms are a significant step towards a fairer strata system in NSW. By mandating comprehensive disclosures, the reforms aim to ensure strata managers are more accountable to owners corporations.

The key aspects of enhanced transparency and accountability include:

• Acting in the best interests of owners corporations: The new strata laws aim to ensure that strata managers act in the best interests of the owners corporations they serve. This is reinforced by the requirement for strata managers to disclose any connections or commissions that could influence their decisions.
• Fairer management practices: By increasing transparency, the reforms seek to promote fairer management practices within the strata sector. Mandatory disclosures are intended to eliminate conflicts of interest and build consumer trust and confidence in strata management.
• Enforcement by NSW Fair Trading: NSW Fair Trading will enforce these new obligations, ensuring compliance within the strata sector. A dedicated Strata and Property Services Taskforce has been established within NSW Fair Trading to strengthen compliance and enforcement of NSW strata laws.
• Penalties for non-compliance: Strata managers who fail to comply with the new disclosure requirements could face significant penalties. Managers who break the law and fail to meet the new disclosure standards could face penalties of up to $110,000.

These measures collectively aim to give owners greater insight into strata management, enabling them to make informed decisions and hold strata managers accountable. The NSW Government is making these changes to help owners make informed decisions about their strata property.

Strata Manager Accountability and Unfair Contract Terms

Application of Unfair Contract Terms Legislation

Commonwealth unfair contract terms legislation will now apply to strata manager agreements in NSW. This change aims to better protect owners corporations from unfair contract terms. The Fair Trading Act 1987 (NSW) has been amended to incorporate the Australian Consumer Law’s provisions on unfair contract terms, specifically Part 2-3 and Part 5-2, into NSW law for contracts with owners corporations and community associations. This means that owners corporations now have the backing of unfair contract terms legislation to ensure fairer agreements with strata managers.

This legislative amendment does not apply to contracts already in force before the commencement date of the changes. However, it does extend to contracts renewed after the commencement date, but only for conduct occurring after the renewal. Furthermore, any contract provisions inserted or changed after the commencement date are also subject to this legislation, again, only for conduct after the change.

Penalties for Strata Manager Non-Compliance

Strata managers who do not comply with the new disclosure requirements and other regulations could face significant penalties. NSW Fair Trading will enforce these new obligations. Strata managers who fail to meet the new disclosure standards could face penalties of up to $110,000. These penalties highlight the importance of strata managers adhering to the new regulations and maintaining transparent operations. The NSW Government is investing $8.4 million in a dedicated Strata and Property Services Taskforce within NSW Fair Trading to enforce these reforms. This taskforce will focus on strengthening compliance and enforcement within the strata sector.

Strata Committee and Developer Accountability

Enhanced Strata Committee Duties and Training

The new strata laws in NSW introduce expanded duties for strata committee members and a mandatory training requirement. These reforms aim to enhance the accountability and effectiveness of strata committees in managing strata schemes. Strata committee members will now have obligations that are essentially fiduciary in nature, requiring them to act in the best interests of the owners corporation.

The duties of strata committee members are being expanded to include:

• Acting in accordance with strata management legislation
• Not misusing information obtained through their role
• Acting reasonably in matters concerning owners’ use of lots and common property
• Complying with essentially fiduciary obligations

To ensure strata committee members are equipped to handle these expanded duties, training is now mandatory. Strata committee members will be required to complete training, and failure to do so may result in their office being vacated. This training is intended to help committee members effectively perform their roles and contribute to the smooth operation of strata communities.

Developer Accountability for Initial Levies and Maintenance

Reforms are being introduced to increase developer accountability, particularly concerning initial levies and maintenance in new strata schemes. These measures are designed to protect owners from unexpected costs and ensure buildings are properly maintained from the outset.

Key changes to enhance developer accountability include:

• Independently Certified Initial Levy Estimates: Developers are now required to have their initial levy estimates independently certified. This ensures that the estimates provided to prospective buyers are accurate and realistic, preventing owners from facing unexpectedly high levies after purchasing.
• Initial Maintenance Schedules: Developers must provide an initial maintenance schedule for the strata scheme. For schemes with three or more stories, this schedule must be reviewed and certified by a prescribed professional. This schedule helps owners corporations plan for future maintenance needs and costs from the beginning.
• Increased Penalties for Non-Compliance: There are increased penalties for developers who fail to comply with these new obligations, such as failing to deliver the initial maintenance schedule and certified levy estimates before the first annual general meeting. These penalties underscore the importance of developer compliance and aim to deter non-compliance.

These reforms aim to provide greater transparency and financial security for purchasers of new strata properties. By ensuring developers provide accurate levy estimates and maintenance schedules, and face penalties for non-compliance, the new laws seek to better protect strata property owners and promote responsible development practices.

Common Property and Infrastructure Reforms

Easier Approvals for Accessibility and Sustainability Infrastructure

The new strata laws in NSW aim to make it easier for owners corporations to approve upgrades to common property that improve accessibility and sustainability. The voting threshold required for owners corporations to pass resolutions for sustainability and accessibility infrastructure has been lowered to a majority vote. Previously, a special resolution, requiring a 75% majority, was needed for these types of upgrades. This change is designed to encourage strata communities to adopt sustainability infrastructure, such as solar panels and electric vehicle charging stations, and install accessibility infrastructure, making strata schemes more inclusive and environmentally friendly.

Common Property Repair and Maintenance Obligations

Owners corporations have a duty to repair and maintain common property in strata schemes. The reforms include changes to this obligation and the timeframe for owners to pursue breaches of this duty. The time limit for owners to take action against an owners corporation for failing to meet its duty to repair and maintain common property has been extended from two years to six years. This extended timeframe provides owners with more opportunity to address repair and maintenance issues and hold owners corporations accountable for their obligations. NSW Fair Trading has also been given enhanced powers to investigate and enforce compliance with common property repair and maintenance obligations.

Levy Contributions and Financial Hardship

Payment Plan Flexibility for Owners in Financial Hardship

The new strata laws in NSW recognise the importance of supporting owners facing financial hardship. Owners corporations are now required to offer payment plans to owners who are experiencing financial difficulties with their levy contributions. This measure aims to provide a safety net for owners struggling to meet their financial obligations and prevent them from falling into debt recovery action.

Owners corporations are prohibited from implementing blanket rules that automatically refuse payment plans. Each request for a payment plan should be considered on its merits, taking into account the owner’s individual circumstances and genuine financial hardship. This ensures a fairer and more compassionate approach to levy payments, especially for owners in financial hardship. The Strata Schemes Management Act 2015 (NSW) has been amended to provide greater flexibility regarding payment plans for levy contributions.

If an owners corporation acts unreasonably in refusing a payment plan, the NSW Civil and Administrative Tribunal (NCAT) has the power to intervene. NCAT can order an owners corporation to enter into a payment plan with an owner if it is satisfied that the owners corporation has acted unreasonably in refusing to offer one. This tribunal power acts as a safeguard to ensure owners corporations genuinely consider and accommodate owners in financial hardship.

Increased Information with Levy Notices

To enhance transparency and provide owners with a clearer understanding of their levy contributions, owners corporations are now required to include more detailed information with levy notices. This change ensures that owners receive sufficient information to understand what their levies cover and how the funds are being used. The Strata Schemes Management Act 2015 (NSW) has been amended to mandate this additional information in levy contribution notices.

The additional information that must be included in levy notices aims to provide owners with a comprehensive breakdown of their levy contributions. This may include details about:

• Administrative fund levies, outlining the day-to-day operational expenses of the strata scheme.
• Capital works fund levies, specifying the amounts allocated for long-term maintenance and capital improvements.
• Insurance levies, detailing the costs associated with strata insurance premiums.
• Any other special levies, clearly explaining the purpose and amount of these levies.

By providing this detailed breakdown, owners are better informed about how their levy contributions are being allocated and managed by the owners corporation. This increased transparency empowers owners to engage more effectively with their strata scheme’s financial management and ensures greater accountability in the use of strata funds.

Conclusion

The strata law reforms set to commence in February 2025 in NSW represent a significant step towards a fairer and more transparent strata sector. These new strata laws introduce crucial changes aimed at enhancing accountability for strata managers, strata committee members, and developers. By focusing on increased disclosure, enhanced duties, and stricter penalties for non-compliance, the NSW Government is making strides to better protect strata property owners and foster more harmonious strata communities.

Understanding these new obligations and changes is essential for all participants in NSW strata schemes, including strata property owners, residents, and strata managers. If you need assistance navigating these reforms and ensuring compliance, our experienced team at PBL Law Group is here to help. Contact us today to ensure you are well-prepared for the changes and to learn more about how these reforms impact your strata scheme.

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