Introduction

The NSW government has implemented significant reforms targeting embedded networks within strata schemes, following a comprehensive review. These changes, enacted through the Strata Schemes Legislation Amendment Act 2025, aim to provide greater consumer protection for residents who have often faced uncompetitive pricing and a lack of choice for essential energy services within these private networks.

As part of this reform, the final decision introduces crucial new obligations for vendors and developers when selling a property in an affected strata scheme. This guide provides essential information on the new vendor warranty and disclosure requirements, helping owners and developers understand and navigate their responsibilities under these recent reforms.

Understanding The Recent NSW Reforms For Embedded Networks

The Strata Schemes Legislation Amendment Act 2025

The recent NSW embedded network reforms are driven by the new Strata Schemes Legislation Amendment Act 2025. This key piece of legislation, which came into effect on 1 July 2025, introduces significant changes to strata laws for the strata sector. The Act amends existing laws to address long-standing issues within embedded networks in strata schemes.

Key Goals Of The New Consumer Protection Reforms

A primary goal of the recent reforms is to increase consumer protection and transparency for customers within embedded networks. Previously, many residents in strata schemes were locked into long-term and often uncompetitive contracts for their energy services.

The changes aim to rectify this situation by aligning state-level strata obligations with broader national consumer and energy reform efforts. These reforms were necessary because the previous regulatory framework had several critical shortcomings:

• It was no longer fit for purpose
• It failed to balance innovation with adequate consumer protection
• It created significant practical barriers limiting embedded network customers’ access to retail market competition

As a result of these deficiencies, customers within embedded networks often experienced fewer protections than those on standard energy supply arrangements.

What Is An Embedded Network In NSW Strata Schemes

Defining An Exclusive Supply Network

Under the recent NSW reforms, the legal term for an embedded network is an “exclusive supply network.” The Strata Schemes Legislation Amendment Act 2025 defines this as an arrangement where the delivery of a service to lots within a strata scheme is managed by the owners corporation. In this setup, an individual lot owner is unable to select an alternative supplier for that service unless they install new infrastructure outside their lot.

These private networks are typically established when a developer installs a “parent” or “gate” meter between the main utility grid and the individual meters of each lot. This structure creates a captive market for an embedded network service provider, who purchases the utility in bulk and on-sells it to the residents and the owners corporation.

Common Types Of Embedded Network Energy & Other Services

The new consumer protection laws apply to a broad range of utilities, extending beyond traditional electricity and gas. The legislation identifies these as “relevant services” to ensure comprehensive coverage for residents in strata schemes.

The types of services that can be supplied through an embedded network include:

Service Type	Description
Electricity	The most common form, where a building has a private electricity microgrid.
Gas	Similar to electricity, gas can be supplied in bulk and distributed to individual lots.
Hot and Chilled Water	Centralised systems for providing hot water or chilled water for air conditioning are frequently managed through these networks.
Internet Access	High-speed internet services are increasingly offered through exclusive supply arrangements.
Other Services	The reforms also cover other utilities that may be prescribed by regulations, including EV charging infrastructure, solar and battery systems, and stormwater management.

New Vendor Disclosure Obligations & Warranty Requirements

The New Prescribed Warranty In Sales Contracts

As part of the recent NSW embedded network reforms, a new prescribed warranty has been added to the Conveyancing (Sale of Land) Regulation 2022. This change introduces a critical disclosure obligation for vendors selling a property within an affected strata scheme.

The warranty mandates that the contract of sale must disclose the existence of an exclusive supply network, also known as an embedded network. This requirement ensures that potential buyers are made aware from the outset if the property they are considering is part of such an arrangement for its energy or other utility services.

Special Disclosure Rules For Your Off-The-Plan Sales

The reforms introduce specific and stringent disclosure rules for developers selling properties off-the-plan in NSW. These obligations are designed to provide greater transparency and consumer protection to purchasers before they commit to a contract.

Developers are now required to provide upfront details about any embedded networks within the development. This disclosure must include:

• The type of utility or energy service being supplied through the network
• The likely costs that the purchaser will be expected to pay
• Any changes to these arrangements that occur before settlement

Under amendments to the Conveyancing Act 1919, the presence of an exclusive supply network is considered a “material particular” of the contract. This means that a failure to disclose this information can have significant consequences for the developer.

Consequences Of Non-Compliance For Vendors

The Buyer’s Right To Rescind The Contract

Under the recent NSW embedded network reforms, failing to disclose the existence of an exclusive supply network in the contract of sale carries a significant penalty. If a vendor does not correctly disclose that the property is part of an embedded network, the buyer is granted a legal right to rescind the purchase.

This right is reinforced by amendments to the Conveyancing Act 1919 and the Conveyancing (Sale of Land) Regulation 2022. These changes classify the presence of an exclusive supply network as a material particular of the contract, meaning its omission gives the purchaser powerful rescission rights.

Potential For Financial & Reputational Damage For Your Development

For developers, the consequences of non-compliance extend beyond the risk of contract rescission. Failing to provide upfront and accurate disclosures about embedded networks in off-the-plan sales can lead to significant consequences:

• Substantial reputational damage that undermines trust in a developer’s projects
• Negative impact on future sales performance
• Potential financial losses from rescinded contracts

Ensuring transparency from the outset is not only a legal requirement but also a crucial step in protecting the financial viability and reputation of a development in the competitive NSW property market.

Broader Impacts On Strata Scheme Management

Changes To Strata Information Certificates

As part of the recent NSW embedded network reforms, strata schemes are now required to disclose more information in their Section 184 strata information certificates. These certificates must now clearly state whether the property is part of an exclusive supply network.

If an embedded network exists, the certificate must also detail the nature of the services provided under the arrangement. This change, introduced through the Strata Schemes Legislation Amendment Act 2025, ensures that potential buyers and other stakeholders are fully informed about any existing utility contracts affecting the strata scheme.

New Three-Year Limit On Utility Contracts

A significant reform impacting strata schemes is the amendment to Section 132A of the Strata Schemes Management Act 2015. This change introduces a maximum term of three years for any new or renewed embedded network contracts.

This new limit is designed to prevent owners corporations from being locked into long-term, uncompetitive agreements, which were often established by developers for periods of 10 years or more. The three-year cap applies to a wide range of utility services, including:

• Electricity
• Gas
• Water
• EV charging
• Stormwater systems

This reform gives strata schemes greater flexibility and control over their energy service providers.

Conclusion

The recent NSW embedded network reforms, driven by the Strata Schemes Legislation Amendment Act 2025, introduce critical new obligations for vendors and developers to enhance consumer protection within strata schemes. These changes mandate the disclosure of any exclusive supply networks in sales contracts and impose strict rules for off-the-plan sales, with significant consequences for non-compliance.

To ensure you fully understand and comply with these new legal requirements, it is essential to seek professional guidance. Contact the expert lawyers at our strata law firm, PBL Law Group, for specialised legal advice tailored to your specific needs and to safeguard your interests in any property transaction.

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