New strata laws tested - the best and the rest

If you've been hiding under your bed - and who isn't tempted these days? - you may not have heard that NSW is about to see a second tranche of strata law reforms become a reality on July 1.

What are the new laws and what do they mean? We invited Robert Anderson, President of SCA-NSW, the state's professional body for strata managers and service providers, on to the podcast to explain some of them.

We discussed the fact that strata contracts will come under Federal consumer protection laws for the first time, and what that means - especially in relation to SCA's much maligned standard contract.

Did you know Fair Trading is planning to issue a standard strata management contract, like the one for rentals? Me neither.

We also touched on estimates for legal services, new processes for minor renovations, embedded networks, common property repair delays, the doubling of fees for seeing strata records, and the behaviour of committee members at meetings.

And Sue thinks she's found a wrinkle that will make it harder for buildings to ban drying laundry on balconies.

That's all in this week's (legal) action-packed Flat Chat Wrap.

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Recorded by Jimmy Thomson & Sue Williams; Transcribed by Otter.ai.
Find out more about Sue Williams and Jimmy Thomson on their websites.

Transcript

Jimmy

Apartment dwellers are getting excited about new laws relating to strata in New South Wales. When I say people are getting excited, mildly interested, a little bit anxious, who are these people? Strata managers, building managers and of course the people on strata committees.

For instance, contracts signed after the 1st of July will come under consumer protection like federal consumer protection. There will be a limit on embedded network contracts. Does that mean anything when the embedded networks like electricity meters cannot be ripped out?

Strata committees will be expected to behave honestly and fairly and without unreasonably affecting other people and at the same time chairpersons will be expected to understand their duties such as following the agenda and maintaining order. It's a utopia in strata and it's confusing and challenging. Robert Anderson, President of Strata Community Association New South Wales, came in to the flat chat rap studio, actually he came in on Zoom, to talk to Sue Williams and me about what the new laws mean, if anything.

I'm Jimmy Thomson, I write about strata for anybody who'll publish my stuff and I edit the flat chat website and this is the Flat Chat Wrap. We're joined today, I'm happy to say, by Robert Anderson who is the President of SCN New South Wales and he's going to take us through some of the issues that are brought up in the new legislation that comes out on July 1st about strata law basically. Robert, welcome to the flat chat rap.

Robert

Thank you Jimmy and Susan, good to see you both. And you. 

Jimmy

Now, question one, the new legislation kind of draws strata contracts into the consumer fairness laws, I mean, what difference is that going to make?

Robert

Well, there's a few things like the fair trading legislative that they can draw up both a building manager contract and a strata managing contract and they intend to do that. So it'll become a standard form, a little bit like the residential tenancies form for leasing. That's going to be, it's pretty hard asked, but that's their plans and they plan to, they can authorise other agency agreements, whether they do or not, we'll have to wait and see.

What they've done in the meantime is they've prohibited some terms in a strata agency agreement. One of them being that an agent can't have a clause that allows them to claim the professional indemnity insurance excess, if there was a claim against them. And another one was they've ruled out that an agent can have a specific amount of a liability under PI.

And now it's not permitted except if you're in professional standards council scheme. So two things is the strata agency agreement drawn up by SCA has been reviewed and the clauses have been reviewed for unfair contracts. So they've all passed that test and they never had that insurance excess in it.

So it would have been agents that weren't part of the association that may have had it in there. So that's where that's gone to now.

Jimmy

So one of the things that strikes me and it's been a bugbear for a lot of strata schemes over the years, and I'm not sure that may not even apply anymore. There used to be a clause that basically said that the strata managers were not liable for any mistakes that they made, even when they knew they were making a mistake. I'm obviously paraphrasing hugely there.

Is there still anything like that in the standard agreement?

Robert

They're not liable where an owner's corporation has made the mistake. So Fair Trading has again put a clause in on that, but they are liable where they're negligent, but they're not liable where they weren't negligent. And so that's the important thing.

There has to be some cover.

Jimmy

Yes. So if the owner's corporation is asking the strata manager to do the wrong thing, then they do the wrong thing, then they're not liable. But if they go ahead and do something wrong or give bad advice or something like that, then they could be potentially liable.

Robert

Yes. So if it's a breach of duty caused by the owner's corporation, the agent took all reasonable steps to prevent that breach of duty, then the strata agent is not liable. And that's a change.

Sue

All right. Fantastic. And I was really interested in the changes to utility contracts and embedded networks because I've done a few stories for The Herald and The Age about some buildings that have had embedded networks, and they've kind of inherited them from the developer way before the first AGM.

So they had no say in them whatsoever. And I believe the new changes mean that this can't happen. If the developer enters into an embedded network, at the first AGM that stops and the AGM actually has to, all the owners have to vote on whether to continue with it or not.

Robert

Yeah. Embedded networks has been a hot topic for a long time and it's kind of been unfair for owners, I guess, that didn't know about it. So the government has made some changes there.

The change in the section 184 notice. So if there is an embedded network, it must be disclosed in the document that the lawyers will get for new owners when there's a sale of an apartment in an existing block. So they will know there's an embedded network.

The government has also made changes that embedded networks are limited after the first AGM for three years. So there's a time and that's an important and insignificant change.

Jimmy

As an observer, Robert, I mean, you've seen a lot of schemes go through this over the years. If, let's say you've got an electrical system as an embedded network, I mean, even after that three years, is there a chance that the energy provider could turn around and say, well, if you don't sign the contract again, we're taking all our electrical meters out. I mean, is it a real protection, this three year limit on the contract?

Robert

Well, I don't know the answer to that. I'm interested in your opinion. We'll find out in three.

I never thought of that. But is it possible that they would? Because the company, like I had a building where they had gas meters and the company owned the gas meters and we wanted to take them all out so that it was an older building and we ended up doing it.

But yeah, the company owns the meters. So I presume that there could be a risk.

Jimmy

There you go.

Robert

Get all changed.

Jimmy

So make sure that the developer has bought the meters would be the thing to do at the first AGM rather than just having this fake three year limit.

Sue

But then I read one of the embedded network things. It was for an electricity company. Basically, if owners wanted to get out of the embedded network, they had to pay a huge amount of money to the company to be able to do that.

So this obviously outlaws that, which is a good thing. So maybe it won't be quite so onerous to replace all the electricity network.

Robert

No, I don't think it. No, it may not. And if a new company is coming in, you may be able to negotiate with them.

But I can understand how it all happened in the beginning because governments before our time used to pay for the infrastructure, but they stopped paying for it and developers didn't pay for it. They got the electricity companies to install it. The electricity companies needed their money back.

I think three years is reasonable.

Jimmy

Yeah, I agree. I mean, it gives you a chance to sort out any accidental wrinkles in the way things work, but also gives you a horizon to look forward to if you want to change providers.

Robert

Sure, exactly right.

Jimmy

I mean, it's the same as with strata managers, isn't it? One year initially, and then three years maximum after that, which seems to be working. Is that working?

Robert

Three years is reasonable. I used to sign two-year contracts, but it's up to the owners corporation. Some schemes just wanted a one-year and agents would agree to that.

It's a little bit more expensive and a bit more risk, so the price might be higher for a one-year contract than a three-year contract. But three years, it works and that's reasonable too. It's better than the management contracts, five plus five, 10.

Jimmy

Yeah, and plus all the rest. One of the things that comes in, I'm curious about, is clarifications regarding the approval of legal services. I mean, what's all that about?

Robert

This is interesting because often you'll get a cost estimate from a lawyer and it's not even anything real. You always find they go over, so the cost estimates might've said, this work is going to cost 30,000. Invariably, it will cost more, but now they can have the resolution to engage the lawyers.

If it was over the threshold of 15,000 or I think 750 per lot, the resolution needs to specify the maximum cost. Also, if they can't say what the cost will be, they've got to say, well, the costs are unspecified. So it's an estimate.

I think what has happened in the past is it might've got, say it was 30,000 for some advice on defects. When it runs over 30,000, technically, or my view is always, the owner's corporation should go back and get a new approval. But this kind of thing, I think owner's corporations have a better idea.

While it's unspecified, they will know that it's going to be 100,000, not 30,000.

Jimmy

I remember a few years ago, a lawyer friend telling us that his problem was that the cost of putting together an estimate was higher than the limit that the owner's corporation was allowed to spend.

Robert

I was opening the file, oh my goodness. So yeah, it's good to shop around for the lawyers as people shop around for all their service providers and to get someone that can perform, even though the cost, as long as they're performing, then you're getting an outcome.

Sue

And there's also been the changes related to repairs and maintenance. And this is interesting too, owner's corporations can't delay common property repairs that affect somebody who's living in the building solely because legal action has been taken against someone for the damage. So presumably, owner's corporations now have to fix the stuff which might pose a safety risk or impede somebody's access to common property, even if there may be suing the developers or maybe somebody has crashed into the door of a garage, which happened to us in our building once.

So the owner's corporation can't just sit back and say, no, we're waiting to get the money from that person. We have to fix it.

Robert

Well, that'll be interesting. Because when I was doing a locum recently, there was this very case came up where one owner went off to NCAT and got orders to have it fixed for his unit. It was him, a male.

And the owner's corporation didn't want to do it because they were getting a deed signed with the developed builder to fix the whole thing. So I think it'll be interesting to see how that plays out. Because remember, the new builds won't have funds either to do those.

So they're not going to make it compulsory to put whatever the levies are recommended. So it'll be tough. And the other thing they've done is that an owner can now have seven years instead of two to go to NCAT and seek compensation for damage to their apartment.

So it's pretty onerous.

Jimmy

There's another couple here that are kind of connected. One of them is that the committee decides on minor renovation requests. They have to give a written reason if they refuse.

And the other one, which is more broadly based, is that members of committees have to understand that they have to behave honestly and fairly. And allied to that is that the chairperson of the committee has to follow the agenda and maintain order. I mean, I don't even know how you would begin to enforce that.

Robert

Well, they're very difficult. I think the minor renovations, I didn't realise there was a problem with the hold-up, but I can understand applicants getting cranky if there's not a decision. So I think three months is reasonable, as long as they've put all their...

Generally speaking, there's an application form they've got to put in exactly what they're doing. And so if they've got that all in place, I've never seen one refused once all the paperwork's in place. So I can't imagine...

I think three months is reasonable. If the strata committee just haven't made a decision, there's deemed approval. If the strata manager's been a bit snowed under or something, there's deemed approval as well.

Jimmy

So that's not... I think in a lot of these cases, you get some committees, especially in older buildings, where they just don't want to make any decisions because they're frightened of being held responsible for it. Or you get the personal thing of that guy who wants to put a door somewhere, a door in his inside.

He's been a rat bag for the past three years. Let's just keep him dangling, that kind of thing.

Robert

But the problem with it is not that. The problem is that with what I've seen a lot, owners try to get major renovations through as a minor renovation. It happens time and time again.

And as soon as you're doing a membrane in the bathroom, or say you want to do your balcony, that's then a major renovation and needs a bylaw and needs a general meeting. So you're going to have to be a little bit careful there. That's why I always get the application in writing.

What do you want to do? Write it down. It fits into...

And then we can decide whether it fits into a minor renovation or not and pass it on to the committee and tell them, well, it's a minor renovation.

Jimmy

But the other aspect of this is that the refusal, if there is a refusal, has to come with a written reason as well. And obviously, in a case like that, the written reason would be this is not a minor renovation.

Robert

That would be good. So that's a valid reason to refuse it. Absolutely.

Sue

And I like this change telling people to review and update the bylaws because you have to check for any bylaws that ban sustainability infrastructure solely based on appearance. And that, to me, screams washing on balconies. In our building, washing was banned for a long time on balconies to dry it, obviously, in the fresh air because people said, oh no, it's going to look awful.

And in fact, so then you kind of have to use a dryer and it uses so much electricity. It's bad for the environment. So it's great that people have to rethink that, I think.

Jimmy

I hadn't even thought of that. Yeah.

Robert

Me neither.

Sue

Oh, OK. I wonder who does the washing in the house.

Jimmy

There's going to be, it's going to look like LA out there when there's going to be battles in the street about whether you can hang your washing on your balcony or not.

Robert

What did you both think of that? Well, I didn't think, no, I didn't think that, I thought it meant like if they had a ban on the appearance where you've got, and I had a building where we couldn't put the, we couldn't put, change the front of the building because it faced Glee Point Road. But that now goes out the window.

And if you wanted to put solar panels on that facade, that front of the roof, I think you're now permitted to do it, whereas you might have had a bylaw not allowing that, you know.

Jimmy

Yeah, but one of the examples is a reverse cycle air conditioning and putting a, some people go nuts if you put an air conditioning unit on the balcony, which is where it would go usually. But reverse cycle air conditioning is, believe it or not, a sustainability factor if it's reverse cycle and not just a cooling process. So that's something that, yeah, neither did I until I mocked Fair Trading about a year and a half ago for saying air conditioning was sustainable.

Robert

And they said reverse cycle is, and it's actually, reverse cycle, like where there's a balcony, and that's also one of the 11 minor renovations, but the issue is where you've got to put it on the facade of a building, right, or on the roof, you know. So those ones, I've always said, only you need a bylaw for that because you're getting, it's not on your balcony. And I think that doesn't change.

It's just an resolution for that then instead of special.

Jimmy

Yeah. I noticed that the fees for looking at your records have gone up to $60 for a first look and $30 for each half hour thereafter, and that's almost double, isn't it?

Robert

Yeah, it's gone up from $31 to $60, yeah, but it's been over 10 years since they've changed.

Jimmy

Yeah. Now, one of the things that I keep tripping over is who can see the strata role? Because there are some strata managers out there who will defend the strata role and their ability to not let owners see it with their lives, but it's always struck me that it seems to be quite clear in the law, if you're an owner, you get to see the strata role.

So what's your view on that?

Robert

Yeah. Well, you do. There you go.

Yeah. So the point is that the strata role is part of the books and records, and an owner is entitled to see it. In fact, I had to do one, and you've got to be a bit careful what information you give out.

So we just got the names and the addresses, I think, and not phone numbers, but email addresses, and that's what the chairperson agreed to, too. Of course, we checked with the chairperson because it was an owner they didn't want to, but I said, you've got to give it to them. So it ended up...

Jimmy

Did that include the email addresses?

Robert

I can't remember. I actually can't remember if we gave the email addresses or not, but the...

Jimmy

Because it says in the Act that if you have an email address, you have to supply it to the role.

Robert

Yeah. So if it's on the role, it's part of the record.

Jimmy

Yeah. I also discovered the other day that strata committee members can get the role for free. They don't have to pay the $60 or $31, as it was a week ago when I discovered this.

So that's something new.

Robert

No, that changed way back in probably... It was in somewhere between 1995 Act and 2005, I think. It used to be you had to pay.

Everyone had to pay, but then they changed it to the committee. Committee members can get it for free. Yeah.

So the owner's corporation would have to pay because it still costs money to give access and everything.

Jimmy

So getting back to that question of the members behaving honestly and fairly and avoiding unreasonably affecting other owners and the chairperson understanding their duties. I mean, we've got... We're looking at, I think it's in October where the next tranche comes through, that committee members are going to have compulsory training.

I mean, you will be talking, I'm sure, to the people at Fair Trading about what form that's going to take. I'm sure you can see problems. Can you also see how this can actually work and how it can be a benefit?

Robert

I think the government plans to do it through the government rather than private training places. So I think that's the first thing. And I think that it's going to be an online.

It's not going to be onerous. But there's a lot of topics to discuss. When I think about it, because I was thinking, well, I said to them, well, we know how to chair meetings and can do that.

And also just what the job, what the role of the secretary is, because you're doing agendas and minutes and doing, you know, updating the Strata role and stuff like that, and also the treasury duties. So just those three jobs, there's plenty of information that Strata managers would have, AOCN would have some of it as well. But I think the government, I think initially anyway, the government is going to do it and not make it too onerous.

They don't want people to fail in their duties or not stand for a committee because it's too onerous. That's a big fear, isn't it?

Jimmy

Yeah. Here's a thought.

Robert

You need committee members.

Jimmy

Yeah, absolutely. Can you foresee a time where if a building has a Strata manager, that Strata manager is the chair and is the secretary when it comes to meetings?

Robert

They've got the delegated authority to chair. I used to chair 90% of the meetings.

Jimmy

Yeah.

Robert

And then people wanted me to chair them, you know, because you're someone impartial, and then the chairperson can have an opinion in the building. And, you know, 100% of the time, activist secretary. So everybody went to.

So that's standard. I think that will continue.

Jimmy

But I'm thinking of a time in the future where the government will say, let's say a building over 50 units. You've got to have a Strata manager and the Strata manager has to chair the meeting. Do you think that'd be a good thing?

Robert

I'm not sure they'll do that. Well, one of the biggest buildings I had, the chairperson always chaired it until the very last one. And like, that's a right of the chairperson.

They've always got that right. But lots of the big buildings I used to chair because they didn't. In fact, once we had a bit of a barrister stood up and said, he can't chair it.

You're the chairperson. You've got to chair it. The chairperson said, no, I'm going to delegate it to Robert.

And then they made the owners there have a vote. And so they all voted except for him, that it was me. Because they knew that, you know, you're impartial.

And you also do what the Act now says. You allow everyone to have a say. You don't allow them to distract the meeting or get it off track.

And then you put it to a vote.

Jimmy

Okay. I've just had a signal from Zoom that we're running out of time. Is there anything about these laws that you're particularly happy with or worried about?

Robert

Well, look, I'm pleased that the building managers will have a duty to act in the best interests of the owners' corporation. And there will be changes where if they're getting a commission that has to be disclosed, I think that's good change. And it's about time.

So if there was one, that's the one.

Jimmy

Right. Excellent.

Robert

Thank you very much, Robert.

Jimmy

Thank you for your patience, for our false starts and various problems that we've had today that if I hadn't mentioned it, no one would know. And thank you very much for your insight, because it's always helped. You're a man of great experience and wisdom, so we always like having you on the Flat Chat podcast.

Robert

You're welcome. And thank you for having me.

Sue

Thanks very much. Bye-bye. Bye-bye.

Jimmy

If anybody knows about this stuff, it is Robert Anderson. He's been through it all many times as president of SCA. He's been brought back in due to recent turmoil.

He's slowly getting things sorted out. But in the meantime, just when he's got things going, the government hits him with a whole bunch of new laws. We'll be interested to see how all that sorts itself out.

Thanks for listening. Thanks to Robert and Sue for coming in and talking about that. And we will talk to you all again next week.

Transcribed by TurboScribe.ai.