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- 25 February 2004
Strata Schemes Management Amendment Bill
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Page: 6545
Second Reading
Debate resumed from 4 December 2003.
Ms KATRINA HODGKINSON (Burrinjuck) [10.00 a.m.]: The Opposition will not oppose the Strata Schemes Management Amendment Bill. However, during consultation stakeholders raised a number of concerns about several aspects of the bill and the way in which some of its provisions will impact on strata management practices. I will read onto the Parliamentary record a collection of the stakeholders' comments about the proposed legislation. I take the opportunity to thank the many stakeholders who were contacted for their response to the legislation, in particular, the Property Owners Association of New South Wales for its detailed submission and the Institute for Strata Title Management Ltd and the Retirement Village Residents Association for their respective submissions.
Strata living is an important feature of a considerable segment of the State's population. The Strata Titles Act and its successor, the Strata Schemes Management Act, were designed to deal with relatively small blocks of units for a group of residents who were able to manage the property, often assisted by a strata managing agent. Such residents are now called an "executive committee" in this bill. In recent years, the trend has developed for large high-rise blocks, not only in the city central business district and suburbs but also in regional cities and rural areas. The change in the scale of operations and the consequent problems associated with these blocks, which often contain several hundred units, have necessitated amendments to the Act. The amendments provide additional legal support and provisions to meet the new requirements of the blocks. The Opposition believes that institutional changes should be introduced to cope with the management of multiunit blocks. We predict that this bill is the beginning of a series of amendments that inevitably will be needed to provide for the requirements of this rapidly expanding property sector.
In 2001 approximately 13 per cent of private dwellings in Australia were flats or apartments and more than 75 per cent separate houses. The percentage of flats and apartments has doubled over the past 40 years. In 2000-01 nearly 33 per cent of all dwellings constructed were in the flat or apartment category. Statistics provided in a report following the Campbell inquiry estimated that the percentage of multiunit dwellings constructed in the Sydney metropolitan area compared to the construction of detached dwellings will continue at a proportion of 55 to 45 for the foreseeable future. I refer to "Living in Strata Developments", which is an issues paper that was distributed by the Government last May.
Some suburban areas will have a much higher proportion of multiunit dwelling construction than others. Because of the issue of available space, residential construction in the Sydney central business district will be 100 per cent multiunit. In the past 10 years the number of people living in inner Sydney has risen by 40 per cent, which is an extraordinary figure. In the last financial year banks have advanced $43 billion in loans for investors around Australia, and 80 per cent of those loans were made for the construction of apartments. One-third of the 173,000 new dwellings that are estimated to be built to the end of 2003 will be under strata title. Therefore, the Government, given its knowledge of this information, has a responsibility to promote regional development in this State and to expand residential programs into rural and regional areas. It should provide incentives for industry to relocate and provide greater assistance to people who want to start their own businesses in rural areas away from the Sydney-Newcastle-Wollongong areas. There has never been greater proof that the Government is failing in its responsibility in the regional development portfolio than the statistics to which I have just referred.
I now speak to the specific aspects of the Strata Schemes Management Amendment Bill. The bill seeks to provide a mechanism whereby larger schemes can be treated differently to smaller schemes. The inclusion of such a provision recognises the great difference between managing a city apartment block and a suburban block of six to ten units. The bill defines any scheme with 100 or more blocks as a large scheme and is intended to enable the owners corporation to tailor its scheme to its particular requirements. The Opposition notes, however, that parking lots and utility lots, such as storage rooms, will not be counted when calculating the 100 lots. The intention of the bill is to provide a large scheme with sufficient flexibility to alter its administrative arrangements for ease of management. Further, this provision is in recognition of the greater accountability of owners corporation funds that are required by large schemes.
The bill intends that regulations contain provisions that will prescribe different processes and requirements in matters such as the conduct of meetings, the functions of office bearers, the management of finances and the operational powers of the executive committee. While a great deal of the changes to the administration of large schemes will be handled by regulation, some matters have been addressed in the bill. For example, the bill provides that the financial accounts of large schemes will be subject to an audit on an annual basis by a suitably qualified person. In addition, owners corporations will need to obtain two quotations for large items of expenditure. An executive committee for a large scheme will be limited to spending no more than 10 per cent above any approved budget item. All unit owners are required to be notified personally of upcoming executive committee meetings and to be notified of any decisions made by the executive committee at such meetings. The practice of conveying the notification of decisions made at meetings by placing them on the noticeboard will no longer be regarded as sufficient. Further, proxy votes to be used at a meeting of the owners corporation will need to be submitted to the secretary at least 24 hours before the meeting takes place.
As to the 10-year sinking fund, the bill seeks to introduce changes to the way sinking funds are managed by owners corporations. It requires owners corporations to adopt a structured approach to their sinking fund reserves. At present if inadequate owners corporation funds have been set aside and the maintenance of the strata scheme has been neglected, a large one-off levy may be imposed upon all unit owners. The bill will make it a mandatory requirement for all new schemes to implement 10-year sinking fund plans that will need to be reviewed at 5-yearly intervals. Also, 10-year maintenance and expenditure plans with associated budgeting will be required of all new strata schemes. This provision is designed to make an owners corporation face up to the likely capital expenditure that a scheme will incur over the ensuing decade and to plan the sinking fund budget accordingly. The bill also provides owners corporations with the option of drawing on the expertise of professionals to formulate a 10-year sinking fund plan. Although the sinking fund provisions will apply only to new schemes, they may be extended to existing schemes by regulation if deemed appropriate.
The bill seeks to establish a procedure to be followed prior to the commencement of any form of legal action by an executive committee. It has been argued that owners should be made aware of the cost of legal action and its likelihood of success prior to the commencement of such action. The commencement of legal action by an executive committee on strata scheme matters is at times an area of disagreement among owners. The bill requires that if an executive committee is contemplating taking any type of legal action all owners are to be provided with a written estimate of the cost of the action in accordance with the Legal Profession Act. The bill further provides that a meeting of the owners corporation must be called prior to taking action to afford owners the opportunity of expressing a view on the matter. These provisions will cover not only the initiation of legal proceedings but also the obtaining of legal advice.
The bill seeks effectively to prevent executive committees from undertaking legal action on their own initiative to ensure that the decisions taken will not be subject to claims that the committee has not acted in the interests of all owners. In addition, owners corporations will be required to consider whether any restrictions are to be placed on the decision-making powers of executive committees at an annual general meeting for the ensuing year. This provision is designed to ensure that an executive committee will only perform the functions the owners corporation has mandated. The bill also clarifies the situation of a disagreement between the owners corporation and its executive committee. The owners corporation will be regarded as the superior body and may override a decision of the executive committee in the event of a dispute between the two tiers of management.
The bill contains a further provision that confirms the right of an owners corporation to dismiss its executive committee by special resolution, should circumstances deem that necessary. In relation to fire safety, the bill clearly recognises the importance of having the necessary fire safety measures in place in strata buildings and the need to provide adequate access to fire authorities for the purposes of inspection. The bill is clear that the owners corporation is responsible for ensuring access to buildings. In future an owners corporation will be subject to a penalty for not complying; however, it will be extended a defence to prosecution in the event that residents fail to grant access inside individual units for the purposes of a fire safety inspection.
In relation to the transfer of strata managers, the bill provides that a strata managing agent appointed by the owners corporation cannot transfer the management responsibilities to another agent without gaining the prior consent of the owners corporation concerned. That provision is an extension of the one already enacted concerning the transfer of caretakers. In relation to the transfer of documentation, the bill stipulates the degree of documentation to be handed over by the original owner at the first annual general meeting of an owners corporation and increases the penalties for failure to comply with this requirement. In relation to national competition policy amendments, the bill contains a series of amendments arising out of the recommendations from the national competition policy review of the Strata Schemes Management Act 1996.
The bill seeks to clarify the power of an owners corporation to add to, alter or erect new structures on common property. A standard five-year retention period will apply to all owners corporation records. Owners corporation office-bearers will no longer be permitted to merely issue notices to residents to comply with the by-laws of a strata scheme without the formal support of an owners corporation meeting or executive committee meeting. Individual lot owners will be able to provide verbal consent to conveyancing searches of owners corporation records. Insurance taken out by an owners corporation will need to be with an approved insurer. However, I would appreciate the Minister, in her reply, indicating the accurate definition of "an approved insurer" as proposed under this bill.
In relation to the delegation of owners corporations, at present an owners corporation can delegate its functions only to a licensed strata managing agent while others can and do assist an owners corporation in carrying out its tasks and duties. Only strata managing agents are empowered to make decisions on behalf of an owners corporation. The bill seeks to remove any residual uncertainty in this area. It specifies the types of matters that can be given only to a strata managing agent to carry out critical operational functions of an owners corporation, in the areas of budgeting, fixing of levies, managing finances, insurance, conduct of meetings, handling of correspondence and keeping necessary records. Other and less important tasks will be carried out by others. The circumstances in which a strata managing agent can be appointed by an adjudicator, or the Consumer, Trader and Tenancy Tribunal, is to be widened. This will put beyond any doubt that the compulsory appointment of a managing agent is justified, in the event that in the course of considering an application on an unrelated issue such appointment is revealed as necessary.
In relation to mediation, the bill seeks to make a series of changes to the mediation provisions contained in the legislation. It widens the discretionary power of the registrar to waive the need for mediation. In circumstances where mediation is deemed pointless or counter-productive, the registrar can direct the parties to adjudication. The bill also provides for a ratification order by an adjudicator once the parties have come to a mediated settlement; in effect, this makes the settlement a binding one. However, such ratification can arise only in the event that the parties agree to it at the conclusion of the mediation session. In relation to by-laws, while the by-laws of an individual strata scheme are often tailored to accommodate the circumstances peculiar to that scheme, it is not intended that they be used as a means of fundamentally altering what the general law provides.
It has been suggested that in the past certain owners corporations have attempted to utilise by-laws in a way not intended by the legislation. The bill makes it clear that by-laws are not to be used as a means of going beyond the provisions of the Strata Schemes Management Act. Exclusive use by-laws refer to those by-laws that give individual owners sole access to or use of a portion of common property. An exclusive use by-law can be passed only if 75 per cent of an owners corporation votes in favour of it. The bill requires that a vendor must disclose to a purchaser whether any such exclusive use by-law has been registered with the strata scheme. In relation to strata retirement villages, between 40 and 50 of the more than 700 retirement villages operate in New South Wales as strata schemes, while both the Retirement Villages Act and the Strata Schemes Management Act operate in tandem in respect of those villages. The overlap of the two sets of laws requires careful consideration by older members of the community who are considering moving into a strata retirement village. The bill requires that prospective residents of strata retirement villages must be provided with the necessary information about strata levies payable and all relevant strata information to assist in making their choice of village.
In relation to exclusion from dispute resolution, the bill contains a regulation-making power to exclude certain strata schemes from the dispute resolution mechanisms available under the Act, should that measure need to be taken. It has been suggested that a dispute resolution process that is mainly designed to resolve issues concerning residential buildings is not necessarily the most appropriate means of addressing an issue confronting large commercial strata schemes and that that situation may be more appropriately met by using conventional mechanisms. I note the Minister conceded that the bill contains extensive regulation-making powers that could well draw the interest of the Legislation Review Committee. I trust the Minister will keep true to her word and ensure that consultation takes place with relevant interest groups before gazettal of the regulations.
I note further that the Minister has foreshadowed the release of a follow-up issue paper on matters pertaining to the Strata Schemes Management Act. I am sure that stakeholders will await the release of that paper with considerable interest. It is intended that the issues paper will contain a number of issues upon which those with an interest in strata management have yet to reach agreement. That includes the extension of a new sinking fund provision to schemes already in existence, further restrictions on the use of proxy votes and a limit on the maximum number of persons permitted to occupy residential units.
I turn now to specific aspects of the bill, which were raised during the Opposition's consultation period. However, I first record my thanks to Messrs Sam Maresh, James Mugambi and Peter Berry, for their briefings to me in relation to the bill. I have received a very detailed and comprehensive submission from the Property Owners Association of New South Wales in relation to the Strata Schemes Management Amendment Bill. I will detail some of the concerns of the association. I refer to schedule 1 [4], the appointment of a strata managing agent. The function of the strata managing agent is generally the sale of the management rights to another agent for the sale of the business. There is concern over the meaning of the words "transferred to another person". The words should be "transferred to another licensed strata management agent". It is essential to ensure that the transfer is to another licence holder, not just another person. While that condition is included in other sections of the Act, it also should be emphasised in this schedule.
Another concern is that no time limit has been set on the new appointment listed in that new section. Does this mean that the transfer is for the unexpired term of a contract of the agent selling the management rights? It would be preferable if the term of the new agent were for one year, after which it would be subject to renewal between the contracting parties on terms agreed between them. In relation to schedule 1 [8], how an owners corporation can enforce the by-laws, new subsection (3) states that limitations on issuing a notice to enforce a by-law do not apply to a strata managing agent, if it has been delegated to the strata managing agent.
This provision seems to supersede a ruling of the adjudicator and the tribunal that a strata managing agent must have the authority or instructions in each particular case of the owners corporation or of the executive committee before issuing such notices. Strata managers have complained that the need to secure approval in each individual case is cumbersome and time consuming. The tribunal ruling is made to ensure that the notice represents the will of the committee or corporation and is not made because one particular person has made a complaint application about the activities of another person. A compromise between the two points of view might be that the managing agent may issue the initial notice to comply without the approval of the corporation or the executive committee. However, if any follow-up action is deemed necessary it should have the approval of the corporation or the executive committee.
I have discussed with the department at some length schedule 1 [11], which inserts section 65A, which is headed "Owners corporation may make or authorise changes to common property". I will put on record the concerns of the Property Owners Association. I trust that the Minister in her reply will address the issues I am about to raise. The proposed changes in section 65A change the manner in which changes to common property may be made or sanctioned. The changes facilitate the alienation of common property by some owners while at the same time may impose a responsibility, possibly unwittingly, on the owners corporation for maintaining responsibility for repairing or maintaining the areas of common property that were alienated.
At present there are two methods by which an owners corporation may authorise changes to common property. The first is by special resolution under bylaw 5 passed at a general meeting of the corporation. This resolution may contain conditions on which authorisation is given, for example, obligation to maintain the property in good repair and so on. The second is by passing a bylaw under section 52 that specifies the condition under which certain action is authorised, in particular that the maintenance, repair or replacement will be the responsibility of the owner concerned. Such a bylaw needs to be registered on the title of the property so that the terms will be clearly known and be binding on successive owners. If the resolution made in the two ways mentioned does not state that the owner is going to be responsible for the maintenance or repair then this responsibility remains, by default, with the corporation, despite the changes, alterations, et cetera made by the owner.
The proposed section 65A seems to be designed to codify the rather fluid situation whether an owners corporation should act under bylaw 5 or prepare and register a bylaw. Except in simple cases such as the use of car parking spaces, a bylaw should be prepared setting out the exact conditions or terms and it should be duly registered for the information of future owners. Upon closer inspection, I believe that in proposed section 65A (2), line 16 "may specify" should be changed to "should specify" the responsibility of who will be responsible for ongoing maintenance of common property under reference and should be clearly stated in any bylaw resolution in order to avoid future problems. This is necessary in view of proposed section 65A (3), according to which, if the special resolution does not specify who is responsible or the ongoing maintenance, repair, et cetera of the common property concerned, then this responsibility remains with the owners corporation. If an owner receives permission to install an airconditioning unit or blinds to the outside of the building it should be obvious that the owner concerned should be responsible for the ongoing maintenance of the equipment. There is no logic or justification why, after the owner has alienated common property for private purposes, responsibility for that particular maintenance should still remain with the owners corporation. Other owners should not have to contribute to the maintenance of a facility installed by and for the benefit of one owner.
The Property Owners Association has also raised several areas of concern relating to section 65A (4). In lines 28 to 30 it is stated that before making a bylaw an owners corporation must obtain the consent in writing from the owner concerned for the provision of maintaining that part of the common property and the objects installed. The association says that this is a back to front provision. If an owner requested permission to install certain equipment on common property then the owners corporation may consent, subject to certain conditions. If the owner concerned does not agree to the conditions the concession may not be granted and the subject is closed. It is not and should not be the for the owners corporation to seek the agreement of the owner who received the concession for that person to undertake the maintenance. The corporation has the right to set the conditions. If the owner does not agree then the concession may not be granted.
The association also raises the following important matters missing from the proposed section 65A. First, the legal costs of drafting and registering the bylaw on the title should be the responsibility of the owners seeking the use of common property. Second, the association also asks for clarification of the legal position regarding what action an owners corporation may take when an owner alters common property or installs equipment on common property without seeking the approval of the owners corporation. Third, if an owner undertakes alterations to common property without permission and no action is taken to stop this, thereby giving tacit consent, the maintenance responsibility should stay with the person making the alterations. This is a very important point as this situation does often arise, particularly where many owners are non-resident and may not be aware of any alterations or changes but could incur the expense of maintenance by default.
In relation to section 65B, which is headed "Owners corporation may grant licence to use common property", the Property Owners Association points out that bylaws may be granted or used but the bill fails to mention that licences should be registered to define the legal position. The association also has concerns in relation to access and fire safety inspections. However, I am comfortable with the proposal under the bill. The association supports the amendment in relation to 10-year sinking fund plans. The Opposition is also pleased to support it. Schedule 1 [15] inserts Division 3, which is headed "Restrictions on spending". Section 80B only large corporations are required to obtain at least two quotes but this provision should probably apply to all corporations irrespective of size, as it may not be practical to obtain quotes for small jobs. For instance, it may not be necessary to obtain a quote for jobs costing less than $300. The Minister might address this issue in her reply. Schedule 1 [20] inserts section 108, which is headed "Inspection of records of owners corporation".
Concerns have been expressed to the Opposition about the deletion of the words "in writing" from section 108 (1). The Property Owners Association says that strata records, details of owners, mortgage details if applicable, financial statements, procedures of meetings, et cetera are confidential documents and it is essential that only authorised persons should have access to them. It is possible that the deletion of the words "in writing" from section 108 could lead to a person without specific authorisation having full access to all strata records. The association goes on to say that if the intention was to broaden the authorisation from just being in writing to other forms of notification, such as fax or email, the wording could be changed and instead of deleting "in writing", the present wording should be retained with the addition of "by fax, or by email". Authorisation could also be broadened to allow authorisation by the vendor's solicitor as well as by the vendor.
Strata lot owners in large developments have put to the Government that appropriate advice and information that should be available to owners in the minutes of meetings or by other means is often withheld with the misinformation that if the details get out, the resale value of their investment will be lowered. These committees often undertake decisions in the secrecy of subcommittees that are not required to provide an account of their decisions and the decision of the chairman often overrules the majority. There is obviously a real need to increase the transparency in relation to minutes of owners corporation meetings. The Opposition supports that amendment. Section 123 relates to what action can be taken if there is a dispute. The Property Owners Association says that it is not clear under new subsection (2) why any particular class or classes of strata schemes may be excluded by regulation from the provisions of this legislation. We believe that the whole subclause should be deleted. New section 131 is headed "Agreements and arrangements arising from mediation sessions. The association supports the introduction of mediation to try to resolve disputes by mutual agreement between the parties. Statistics showed that a high percentage of applications are resolved during mediation, so the cases do not need to go to adjudication.
That body is concerned about the provisions in new subsection (2B) but it agrees with the provisions in new subsection (2A). In relation to new subsection (2B), when mediation is successful and a consent order is requested, the consent of both parties is required by the adjudicator before he or she can issue an order containing the terms of the agreement. I believe that section will be addressed by way of an additional amendment that will be moved by the Government, so I will not address it any further at the moment.
Item [31] inserts new section 183B (4), which refers to the qualifications of persons to be appointed. That new subsection states that strata managers should be suitably qualified. In the case of corporations, limits should be placed on the number of certificate holders or trainees who can work under the supervision of a licensed strata manager. That number should be limited to five to ensure that licensed holders can properly supervise the management of strata properties contracted under their care. I ask the Minister to address that issue when she responds to debate on this bill. I have also received comments from the Institute of Strata Title Management Ltd which, in a nutshell, states:
In its current format the Bill will make the Strata Schemes Management Act unworkable as no reasonable consumer will want to volunteer to be elected to an executive committee of an owners corporation.
The Retirement Village Residents Association states:
The Government has to some extent "borrowed" some of the ideas which went into the Retirement Villages Act 1999. Where that Act has failed is mainly the lack of quality of management and the failure of management to study the provisions of the legislation and abide by it. Will not the same problem recur in strata units whether they be large or small?
The Retirement Villages Residents Association then states:
… there must be some mandatory education scheme to ensure that the Act is properly complied with by residents and strata corporations alike.
The legislation is only going to make the task of administering the plans so much harder.
It then states:
Personally, I have little faith in the Consumer Trader and Tenancy Tribunal because the members have little practical knowledge of retirement village living and they rely mainly on interpretations of the law. I find it difficult to believe the management of the strata schemes and the residents will have little knowledge either unless there is a comprehensive plain english book given to each resident and then a series of meetings of all residents until they are all reasonably conversant with the proposals.
That is a pretty fair request. Plain English instructions should be given, in particular to those people who live in retirement villages. In late June last year I met with Frank Archibald who came to Parliament House to discuss strata issues with me. There is a level of concern in the wider metropolitan area—and, I am sure, in country areas—about the property sector, the Labor Party and the level of political donations from the building and property sector to the Labor Party. I have raised that issue as it is one that is constantly raised with me. We are talking about strata issues so that is what Frank Archibald came to see me about. He is also concerned about self-certification and the lack of corporate governance, as exercised by $2 companies building assets that exceed $100 million. Some of those $2 companies are spending huge amounts of money. That issue does not come within the provisions of the bill at this time, but I have raised it as it was raised with me in relation to strata matters.
Amendments should be made to one of the most important issues facing people living in strata developments today. I have raised the many concerns that have been raised with me as part of the Opposition's extensive consultation process with organisations and interest groups in relation to matters such as these. I thank all those people for taking the trouble of reading the legislation and the Minister's second reading speech and for participating in debates that led to the introduction of this amendment bill. I thank those people living in strata developments who put forward submissions to the 2003 discussion paper and all those people who continue to express their concerns to the Opposition. I am pleased to have been able to represent them in this place today. I hope that the Minister, in her reply, will address the many issues that I have raised in the House.
Ms ANGELA D'AMORE (Drummoyne) [10.35 a.m.]: I support the Carr Government's comprehensive Strata Schemes Management Amendment Bill. Strata schemes have become such an entrenched feature of urban life that it is hard to imagine a community without the variety of apartment buildings, townhouse developments and villas that we see in our suburban and regional areas today. While some may lament that fact, it is beyond doubt that the age of a sprawling family home and big backyard is over for much of the population, and medium-density and high-density living arrangements are much more likely choices.
Strata living, whether it be in a city high-rise tower or a two-lot dual-occupancy type of development in a suburban street, means that the interests and expectations of others living close by are involved. While it would be wonderful if every strata scheme were perfectly harmonious, with all owners sharing the same attitudes and agreeing on plans for the present and the future, such a scenario is a pipedream. It is obvious that any group of people will have different opinions on how things should be run, on the priority issues that are to be looked at in the current environment and what should be the goals for the future. It is thus essential, in my view, that there be some legislative framework for strata schemes to operate as smoothly as possible.
We have had strata development laws in New South Wales for 40 years, and we have had strata management laws for 30 years. Generally, they have worked pretty well. However, regulation can always be made more effective and I believe that is what will arise from the provisions of this bill. Of particular interest are the revised sinking fund provisions in the bill. I am sure that many honourable members can verify the fact that some strata scheme buildings have not been adequately maintained. The neglected appearance and unsatisfactory state of repair of some older apartment buildings is a blight on our communities. Any steps that can be taken to avoid such situations arising are to be welcomed. The problem with some owners corporations is that they do not put aside enough funds or plan ahead thoughtfully enough to deal with long-term maintenance and repair costs.
The bill aims to ensure that strata buildings in the future will not be placed in the same situation. For the first time the bill will require owners corporations to prepare specific 10-year sinking fund plans so that adequate financial reserves can be built up in readiness for the necessary major capital expenditure on buildings that will inevitably arise with the passage of time. Many strata schemes already adopt such practices as a matter of course. The aim of the bill is to encourage owners corporations to plan ahead so that they are not left in situations in which everyone is hit with a large one-off levy to fund a sudden and urgent building expense. I am sure that most people would prefer to put a little extra aside each quarter over a period of years than suddenly have to find thousands of dollars to meet their contribution to the cost of essential building or equipment.
The concept of the 10-year sinking fund plans that are provided for in the bill will enable some forward planning. People will be able to work out when the painting will have to be done and they will be able to estimate when the plant and equipment will have to be replaced rather than leaving those things until they are confronted with the problem. I feel especially for pensioners who own their strata units having to rake up a large special levy because insufficient reserves have been built up over the years. I am sure that these new sinking fund provisions will provide a better mechanism. For those reasons alone the bill deserves to be supported. I commend the bill to the House.
Mrs JUDY HOPWOOD (Hornsby) [10.40 a.m.]: I join the honourable member for Burrinjuck in addressing the Strata Schemes Management Amendment Bill, which amends the Strata Schemes Management Act. It makes miscellaneous amendments in respect of the functions of owners corporations, special requirements for the management of large strata schemes and other matters relating to the management of strata schemes. As has been said, the Opposition will not oppose the bill. However, qualifications and comments have been made and I wish to add to them by providing feedback from residents of The Grange in my electorate.
The Strata Schemes Management Act 1996 was amended in late 2002 to take account of the national competition policy review of the legislation. Further proposed amendments to the Act arising from the national competition policy review were not implemented at the time. An issues paper released by the Carr Government in May 2003 discussed many of those issues in addition to a number of other matters. This bill provides a mechanism for large strata schemes of 100 or more lots to be treated differently, especially in calculating large lots. Parking, storage and utilities lots will not be counted. As it stands, all developments are treated the same regardless of whether they involve two units or 1,000 units.
Amendments are also to be made to the way in which sinking funds are to be managed. A structured approach must be applied to sinking fund reserves, and it will be mandatory for all new funds to implement 10-year sinking fund plans, which must be reviewed at least every five years and will be required to include a 10-year maintenance plan with associated budgeting. All insurances must be taken out with an approved insurer. The bill gives greater discretion to the Registrar of the Consumer, Trader and Tenancy Tribunal to refer matters to adjudicators or to the tribunal. The bill also amends the Retirement Villages Act 1999, the Retirement Villages Regulation 2000 and the Conveyancing (Sale of Land) Regulation 2000.
Financial accounts are to be audited annually by suitably qualified persons. At least two quotations will have to be obtained for larger items of expenditure. The executive committee will be limited to spending no more than 10 per cent above any approved budget item. Personal notice to all unit owners will be required for upcoming executive committee meetings, as will notification of decisions of the executive committee. Proxy votes must be submitted to the secretary at least 24 hours prior to a meeting. If any form of legal action is being contemplated, the estimated cost is to be provided to all owners in writing in accordance with the Legal Profession Act. A meeting of the owners corporation must be held prior to the commencement of any action. That also applies to the obtaining of legal advice.
A new mandatory item is to be added to the annual general meeting agenda to consider any restrictions that will apply to the executive committee decision-making powers for the following year. It is the duty of the owners corporation to ensure adequate access for appropriate authorities to inspect and confirm that necessary fire safety measures are in place. The bill also prevents the functions of a strata management agent being transferred to another person without the approval of the owners corporation. It is made clear that the owners corporation may make by-laws granting a licence to an owner of a lot to use common property in a particular manner or for a particular purpose.
The bill also amends the Retirement Villages Act 1999 to require information about living in a strata scheme to be given to a prospective resident of a retirement village that is subject to a strata scheme. It amends the Retirement Villages Regulation 2000 to require the current strata contributions for a lot in a retirement village that is subject to a strata scheme to be included in the disclosure statement required to be given to a prospective purchaser of a lot. The requirement to prepare long-term plans to cover sinking fund expenditure has been welcomed by stakeholders. The Government has acknowledged that a great deal of the legislation covering management of strata schemes is to be implemented by regulation. While welcoming many of the changes, stakeholders are concerned about the restrictions on expenditure and legal action imposed on executive committees.
I refer honourable members to three residents who live at The Grange at Waitara in my electorate. Peter Schell has written to me drawing my attention to several aspects of the Act relating to strata scheme management. He states:
I have lived happily at the Grange, Waitara for over 13 years & served on the Executive Committee for five years & then undertook a number of assignments at the behest of the later Committee.
The Grange was designed for 'over 55's' living & offers an excellent level of life style. We number approximately 235 people & live in 176 totally self contained units. It should be noted that the Owners also own the amenities. In other words, there is no outside ownership & so no profits need to be generated for third parties. We own the Grange, lock stock & barrel!
I understand the Government is to call on amendments to the NSW Strata Schemes Management Legislation & so I would like to draw you attention to one or two aspects of the present Act which cause some discomfort to me & a number of my fellow Owners.
The points Mr Schell makes have not been effectively addressed in the bill. He continues:
1. Owners only to be eligible to be elected to the Executive Committee
The Act requires an establishment such as ours to be run by 'The Body Corporate' who may or may not appoint either a qualified Strata Agent &/or an Executive Committee to run the day to day activities. The Grange opted for the Executive Committee system of governance.
However this concept has been corrupted & non owners have caused themselves to the elected by utilizing the authority detailed in Schedule 3, 'Constitution of Executive Committee of the Owners Corporation etc' Part 1, clause 2...
The legislation states that a person is not eligible for election as a member of an executive committee unless the person is nominated for election by an owner who is not a candidate for election. That provision has been abused and The Grange is now in the difficult position of having two non-resident executive committee members voting on matters affecting the day-to-day running of the village and its long-term financial affairs. Mr Schell recommends that the relevant provision be deleted.
He also states that voting for executive committee membership should be anonymous. As the legislation stands, owners are required to identify themselves when they vote in executive committee elections. That opens up the possibility of victimisation if those handling the completed ballot papers are of a vindictive inclination. Mr Schell believes that the identity disclosure is antidemocratic and goes against the principle of a free vote, particularly on such sensitive issues as voting for or against neighbours with whom one must fraternise during continuing residency. Mr Schell recommends the deletion of the requirement for owners to identify themselves when voting in executive committee elections. Mr Schell also comments on proxy voting. He states:
The present Act allows for an almost unlimited number of proxy votes providing the requisite number of owners are present at the meeting.
He believes that that could lead to a gerrymander. He also advocates a limit on proxies. I hope that the Minister will address those concerns in her reply. I also have a letter from B. J. Hannon who states:
? The Grange is a 100% resident owner lifestyle village...
? Lifestyle Villages need vision statements and implementation plans in addition to guidelines applicable to other Strata Developments.
? Management gives insufficient priority to residents activities and interests.
? The Manager and Treasurer are not resident owners and sit on the Executive Committee of seven and have voting rights. They need only the votes of two residents to carry a motion...
? Voting for the Executive Committee is not by secret ballot.
? Some residents collect hands full of proxies without limit and unduly influence the voting.
A third letter was sent by Adrian Ebert, who also lives at The Grange. He expressed concern about a recent annual general meeting and describes briefly what took place:
Our employed manager, non owner, put up a list of seven candidates for the Owners Corporate Committee which included himself and our employed non owner Treasurer and five owner residents. I put up a list of seven owner/residents...
However, between 30 and 40 proxy votes were collected, which ensured that Mr Ebert's campaign was unsuccessful. He states that the proxy votes were used to support the manager's list. He was not happy with the result. Mr Ebert continued:
There we were owning all the units as well as the body corporate but without control.
Over the past year many owner/residents have sent letters to the Owners Corporate Committee with requests and complaints etc. which have not been tabled and only a few replied to. Accounting matters have also been very obscure and if we queried items we were classed as troublemakers.
In the case of large strata schemes, Mr Ebert favours the Queensland concept of the standard module, upon which I hope the Minister will comment. Mr Ebert writes:
Large Strata schemes have a lot more complex problems — For example, at The Grange we have a staff of 22, restaurant/dining room, tennis court, bowling green, croquet green, extensive gardens, hydro/therapy etc — All this increases the volume of management, financial controls and reporting.
Mr Ebert also favours electing members by secret ballot. He believes the use of proxies should be restricted to 5 per cent of the total vote, that the committee should comprise owners only and that non-owners should have no voting rights. He also states:
Managers with contracts cannot transfer responsibility for management without the approval of the owners corporation committee … I believe that the strata rules covering management and accounting are very weak and need strengthening. I recommend for example that those used by local government councils be adopted.
I thank those three residents for sending me their comments. The Minister responded to those issues by stating:
There is no proposal at this stage to limit the number of proxies that any one person may hold. This is in recognition of the fact that some owners corporations would find it difficult to obtain a quorum for meetings without proxies being taken into account.
She also states:
Secret ballots for election of executive committees are not provided for in the current legislation and there are no plans at present to require them.
I would welcome further comments from the Minister about that matter. I am glad that an additional discussion paper will be developed and released in early 2004 to gain public input on a number of unresolved strata and related issues. I hope that the Minister will take account both of the further submissions that will be made in the course of that process and of my comments about residents in my electorate.
Ms KRISTINA KENEALLY (Heffron) [10.51 a.m.]: I have a particular interest in the Strata Schemes Management Amendment Bill as it deals with an issue in my electorate of Heffron that has been of great concern to me. I have been dealing with complaints raised by constituents regarding the activities of a developer that amount to what I believe is the improper manipulation of by-law making powers under the strata laws. It has emerged that a developer in my electorate is registering exclusive-use by-laws for parking spaces on common property so that only the purchasers of certain residential lots can use those particular spaces. While on the surface this might not seem such a serious matter, it is serious when one considers that the spaces allocated are apparently ones that the local council has designated as visitors' car spaces under the development approval. Even worse, some of the spaces were meant to be disabled persons' parking.
Under the bill developers will be required when selling strata units to disclose any exclusive-use by-laws that are already in place. This pleases me greatly. People who bought down the track into the scheme in my electorate to which I have referred were led to believe that adequate car spaces would be available for their relatives and friends but found out later that the spaces had already been allocated for the exclusive use of some of the owners. These exclusive-use arrangements were not brought to their attention. I believe purchasers have been misled and I am glad that the matters are presently under investigation by the Office of Fair Trading.
Leaving aside what may arise after possible action is considered by the appropriate authorities, the owners corporation in that building is currently divided. The owners who have exclusive use of the common area visitors' spaces do not want to give them up—they have paid handsomely for the privilege—and those who do not have exclusive use are resentful that the spaces they thought would be available for their visitors have already been hived off. Furthermore, cars that the council thought would be parked off street will now be parked on already congested public streets. This is clearly an unsatisfactory situation, and I am glad that this bill will reduce the likelihood of such a situation arising again.
The bill includes an amendment to the Conveyancing (Sale of Land) Regulation, which will require such exclusive-use by-laws to be items that must be attached to contracts for the purchase of strata title properties. Therefore, people will know, without having to ferret around and discover it for themselves, whether the developer has registered any exclusive-use by-laws that will benefit only some of the owners. Hopefully, prudent legal advice will result in their considering whether they should proceed with the sale. Developers must not be allowed to get away with misleading both local government authorities and individual purchasers in the way that some have in the past regarding the exclusive use of parking spaces located on strata scheme common property. I fully support the bill for all of its provisions but particularly for the way that it addresses this patently clear injustice. I urge all honourable members to back the improvements to the strata schemes management laws that this bill provides. The bill contains a range of positive and worthwhile amendments that all members should support.
Ms GLADYS BEREJIKLIAN (Willoughby) [10.55 a.m.]: I wish to speak to the Strata Schemes Management Amendment Bill as large strata scheme developments are becoming a common sight on the Chatswood skyline in the city of Willoughby. As noted in the discussion paper "Living in Strata Developments", released by the Government in 2003, in 2001 approximately 13 per cent of private dwellings in Australia were flats or apartments whereas more than 75 per cent were separate houses. The percentage of flats and apartments has doubled over the past 40 years. In 2000-01 almost 33 per cent of all dwellings constructed were in the flats and apartments category, and there is every indication that this trend will continue.
Therefore, like other Opposition members, I support the Strata Schemes Management Amendment Bill. It seeks to amend the Strata Schemes Management Act 1996 to make specific provisions for the management of large strata schemes, defined as those containing 100 or more lots. As I have said, such schemes are growing at a rate of knots in communities within the electorate of Willoughby. The bill also seeks to clarify provisions relating to the exercise and delegation of functions by owners corporations and their powers to add to or alter common property. It also seeks to enable officers authorised to carry out fire safety inspections of buildings to deal with the owners corporation for the building rather than individual lot owners.
The bill requires owners corporations to obtain approval at a general meeting prior to seeking legal advice or taking legal advice when owners corporation expenditure is involved. It requires all insurance to be taken out with an approved insurer and requires all new strata schemes to prepare plans for a 10-year sinking fund. Existing schemes may be required to provide such plans at some point in the future. The consent of owners corporations will also be required before a strata managing agent can transfer the management of a scheme to another agent. The bill's requirement for the preparation of long-term plans to cover sinking fund expenditure has been particularly welcomed by most stakeholders. I commend the shadow Minister for fair trading, the honourable member for Burrinjuck, for her consultation with relevant stakeholders in relation to this bill.
As I said at the outset, there has been an ongoing debate within the Willoughby community in recent times about the proliferation of large strata scheme developments. There is a strong community expectation that such developments will be dealt with appropriately in the interests not only of residents who choose to live in strata scheme developments but of the residential amenity of those who live in close proximity to them. This bill will go some way towards allaying community concerns about the management of large strata schemes. I reiterate that the management of strata schemes, particularly those that contain 100 or more lots, is a huge issue in my electorate. Many community members oppose the location of further large strata scheme developments in Chatswood.
However, it is likely that existing schemes will remain and that new ones will be developed, especially as the State Government's registration of interests regarding the development of the Chatswood interchange includes in its terms of reference the construction of three additional residential towers in that community. There is a strong community expectation that such strata schemes will be regulated to ensure the amenity of both residents of strata developments and those who live in close proximity to them. I look forward to reading the further comment paper which the Minister for Fair Trading has undertaken to release later in the year, to ensure that the implementation of the bill produces the desired outcomes in accordance with community expectations. On that basis I commend the bill to the House.
Mr JOSEPH TRIPODI (Fairfield—Parliamentary Secretary) [11.00 a.m.]: It is with great pleasure that I speak in support of this detailed package of amendments and improvements to the New South Wales strata management laws contained in the Strata Schemes Management Amendment Bill. New South Wales has led the way in the development and streamlining of strata laws since they first came into being in the early 1960s. We can all take pride in the fact that New South Wales strata management legislation has been the catalyst for the development of similar laws in other Australian States and Territories and, indeed, in other countries.
The bill contains a raft of improvements that will be appreciated by the vast majority of people in the strata schemes environment. It is estimated that around a quarter of the population of New South Wales are connected with strata schemes in some way, through ownership of a strata unit or occupation as a tenant. Many others work in or operate businesses within a strata scheme. Thus a significant portion of the community has a day-to-day link with the operations of a strata scheme. I am sure the legislative refinements will be of benefit to this large body of people.
It was inevitable that strata schemes would grow larger and more complex with the passage of time, and the bill takes account of this. I am pleased that steps have been taken to provide special provisions for schemes of 100 lots or more. Figures provided by the Department of Lands indicate that about 0.6 per cent of the total number of schemes registered since 1961 fall within this large category. However, modern city schemes developed in recent years are more likely to be in the large category. The government issues paper released last year entitled "Living in Strata Developments in 2003" quotes statistics showing that 9 of the 65 schemes registered in the city of Sydney during 2002 were in the 100-lot-plus category.
These large schemes are substantial enterprises. They are, in effect, self-sufficient communities within the larger community. The bill takes account of the impact of decisions made within large schemes that affect many individual owners, and it modifies the powers of large scheme owners corporations and their executive committees. The provision that the annual financial accounts of large schemes will have to be properly audited each year is a sensible and appropriate amendment that is difficult to argue against. Any similar size enterprise in other spheres of activity would automatically be subject to an audit of its finances, and I am sure that any prudent strata owners corporation would agree with the new provision. We are talking here of annual budgets of hundreds of thousands, and sometimes millions, of dollars. This new provision for mandatory auditing of the finances of large schemes merely confirms what is sensible management and accounting practice and appropriate consumer protection for individual owners within the scheme.
The next important modification to the management of large schemes, regarding the obtaining of at least two quotes for larger items of expenditure, should also be widely supported. Again, it is wise business practice and a judicious risk minimisation procedure to consider more than one price before entering into a binding arrangement. Under the bill, large scheme owners corporations will merely be asked to obtain at least two quotes for items involving high expenditure. This will not affect emergency expenditure such as a burst sewer pipe, the replacement of glass in the building foyer in the event of late-night vandalism, or the restoration of the electricity supply after a fire in the basement. However, the provisions will apply to more discretionary expenditure, such as the repainting of common hallways, the recarpeting of staircases, the landscaping of gardens, and maintenance of the swimming pool.
The level of expenditure above which at least two quotes must be obtained has not yet been set, and I understand that this will be settled after the Office of Fair Trading has consulted widely on the issue. I am confident that a figure can be settled upon that will enable large scheme owners corporations to carry out their routine business without unnecessary restriction, and at the same time ensure that major expenditure is not entered into lightly. The other main effect of the bill's provisions on large schemes relates to the decision-making powers of executive committees. I am sure most people would agree that any large organisation needs an executive body to deal with much of the routine and less controversial business. Strata owners corporations are no different, especially those responsible for the administration of our very large schemes. It would not be feasible for the whole body of people constituting a strata scheme to have to be called together for every decision, no matter how minor. It is essential that an efficient and responsive executive committee be in place.
However, executive committees cannot take their powers lightly; after all, they represent the interests of all the owners. While most strata executive committees do their best to carry out their tasks responsibly, I understand that some concern has arisen about the activities of a minority of them. As a result, some limitations are to be placed on them, and I believe that these are fair changes. Executives handling the affairs of large schemes will be restricted to spending no more than 10 per cent above any budgeted item. This will ensure that overenthusiastic executive committee members do not commit owners to open-ended expenditure that has not been approved by the full body of people making up the scheme.
Another important change is that notice of future executive committee meetings will have to be given personally to all owners. It will no longer be acceptable for a notice to be simply pinned on a notice board that is hidden away somewhere in the building. This is a sound measure to ensure that everyone is fully aware of the types of matters that are before the executive. A further specific provision of the bill will ensure that legal action cannot be launched by any executive committee, regardless of whether the scheme is large, without reference to all owners in the scheme. All owners will thus be kept in the loop and be made aware of the costs and time frame involved in any legal proceedings undertaken on their behalf. This sensible initiative will minimise disputes arising within schemes over concerns that expensive legal action is being taken by elected office bearers without adequate consultation with the unit owners who will have to pay for it. The bill contains a welcome package of improvements to the strata laws, and it should be supported by all members.
I wish to expand upon the need for annual financial accounts to be properly audited. Obviously, people who purchase units under strata schemes purchase a package; in other words, they purchase not only an asset but also the prospect of liabilities in the future. The auditing of annual financial accounts gives both buyers and sellers security and certainty about what they are getting involved in. They are provided with information that has integrity, to allow them to make an informed decision before purchasing the asset and accepting the liabilities that could be associated with it. The improvement to that level of transparency provided in the bill is crucial for people making major decisions about purchasing such important assets. I commend the Government for its initiative of improving the integrity of that information so that purchasers can make more informed decisions before proceeding to take on such a level of debt.
Mr STEVEN PRINGLE (Hawkesbury) [11.08 a.m.]: The Strata Schemes Management Amendment Bill is very important for the electorate of Hawkesbury, and it is long overdue. As honourable members would be aware, last week the Minister for Infrastructure and Planning signalled changes to legislation that would replace the infamous State Environmental Planning Policy No. 5 [SEPP5] legislation, which is causing a great deal of distress to many residents throughout Sydney. One of the sleepers in the Strata Schemes Management Amendment Bill is that it assists in the establishment of large developments in rural areas. It will now be much easier to establish large, strata-style developments in Hawkesbury, which is a semi-rural electorate.
The requirement to prepare long-term plans to cover sinking fund expenditure is welcomed by most stakeholders. Large-scale developments involve issues such as the expensive maintenance of lifts, and adequate allowance must be made for depreciation and other issues. Landscaping also often involves large amounts of expenditure. I certainly look forward to the implementation of this bill. The amendments and the concerns which the Opposition has already raised are very important, and I hope the Minister will address them all and agree to the amendments so that the legislation is workable in all parts of Sydney, not just in the inner-city areas. I commend the shadow Minister for her efforts in bringing to the attention of the House the importance of these amendments. But, yet again, the Government is slow to act both on SEPP5 and on this legislation.
Mrs KARYN PALUZZANO (Penrith) [11.10 a.m.]: I speak in strong support of this bill, which contains a wide range of improvements to the strata management and related laws. I believe these improvements will have a positive effect on the operation of schemes, whether large, medium or small in size. It is well known that 10 new strata schemes are registered each working day in New South Wales. That equates to around 500 additional strata units coming into being each week, or 26,000 each year. The popularity of strata development and strata ownership shows no signs of waning in this State. Today as I travelled on the intercity train from Penrith, as I usually do, I noticed the amount of small to medium developments in Doonside, Blacktown, Parramatta and Strathfield.
Keeping in mind those strata schemes coming on line, it is interesting to examine the statistics provided by the Department of Lands, which may counter some of the outlandish statements that have been made by members on the other side of the House. These statistics show that of the 60,000 schemes in New South Wales about 27 per cent are 2-lot schemes, 24 per cent are 3 to 5 lots, and 24 per cent are 6 to 10 lots. It can be seen that 15 per cent are 11-to-20-lot schemes, 7 per cent are 21 to 50 lots, and just over 1 per cent are between 51 and 100 lots in size. Just 0.6 per cent of all the strata schemes in New South Wales are over 100 lots in size. I know that members on the other side of the House can do the calculations on what 0.6 per cent of 60,000 is.
So despite valid concerns over some of the issues arising in the larger schemes, it can be seen that the vast majority of schemes are at the smaller end of the scale, and it is these average suburban schemes that will reap many of the benefits of the legislative reforms. I can confirm that Penrith has many within the 24 per cent of the 3-to-5 lot schemes, the 24 per cent of the 6-to-10 lot schemes, and the 15 per cent of the 11-to-20 lot schemes. One of the provisions of this bill is to ensure that the management arrangements applying to a strata scheme cannot be transferred from one licensed managing agent to another without the agreement of the owners corporation concerned.
I understand that instances have arisen in which a strata scheme has engaged a managing agent of its choice only to find at a later date that the agent sells his or her management role to a competitor. The owners corporation suddenly finds that the management arrangements for its building are in the hands of a manager it deliberately avoided employing. I am pleased that steps have been taken to ensure that the owners corporation itself has to agree to such a change in management arrangements rather than have the decision made for it. This is a completely appropriate refinement to the law.
Another commendable improvement to the legislation is the requirement for an expanded list of documentation that strata developers must hand over to owners corporations at the first annual general meeting. Often owners corporations have been given insufficient information by developers at the time of taking over their own affairs. Plans, drawings, warranties, compliance certificates and other important documentation is sometimes missing, and this has stifled the owners corporation in taking responsibility for the day-to-day running of the scheme. The bill takes some decisive steps in overcoming this problem. Additional documentation will be required to be handed over by the developer and the penalty for failing to do so has been substantially increased. I am sure this will encourage recalcitrant developers to toe the line in this area of their responsibilities.
I also support the sinking fund improvements. I believe that in time the wisdom behind these changes will become more obvious. The need to plan ahead for at least the next 10 years during the life of the strata scheme will become more accepted, and the benefits to both existing and future owners will be clearly seen. Owners will get a better price for their homes when they decide to sell should the sinking fund be adequately resourced, and purchasers will be more confident that the scheme they have bought into can handle the maintenance expenses that will inevitably arise in the future. The fact that the 10-year sinking fund plans need to be reviewed at least every five years is a good provision to ensure that there is constant review of the situation. The fact that owners corporations can use experts to assist them in putting their 10-year plan together is another positive step.
I am sure that we will see better-maintained strata buildings in the decades ahead as a result of these provisions. If we could project ourselves forward to 2044 or 2054 we would see that people of that era will appreciate the foresight of the Parliament in bringing these revised sinking fund obligations into being. I am sure that this bill can be supported by all members in full confidence that it will further improve the administration of New South Wales strata schemes in the immediate future and in the longer term. I commend the bill to the House.
Mr WAYNE MERTON (Baulkham Hills) [11.16 a.m.]: The Opposition does not oppose this bill. I believe the legislation incorporates a number of good ideas and it certainly will assist in the administration of strata legislation in New South Wales. Notwithstanding the completely unfounded criticism of the honourable member for Penrith, the Opposition is quite realistic concerning this legislation. In the past 40 years since strata title has been in existence in New South Wales there have been enormous changes in the concept itself, in the types of buildings that are involved and, naturally, in the size of the developments. Strata title has come a long way from what were, in most instances, six to eight units built in a block: now there are multi-unit complexes. This legislation makes a number of improvements to the administration of the bigger lots.
As the honourable member for Fairfield quite correctly said, strata title is a very big investment. Purchasers of strata titles assume inherent risks, whether the building is new or old. In the case of second-hand buildings there is the question of existing liabilities of the previous owner effectively being passed on to the purchaser. The purchaser assumes any existing liabilities, not only in respect of the particular unit that he or she is buying but indeed of the building as a whole. In other words, if a purchaser is buying a unit on the ground floor and there is a problem on the 58th floor—for example, external cracking of the wall or the roof is leaking in unit 50 on that floor—the purchaser assumes a responsibility, as a member of the owners corporation, to make good that damage.
When purchasers buy a strata title they have to make sure they are aware of the history of the building, its financial status, and what funds are held in reserve to meet such contingencies. Purchasers also must be aware of the cost of levies so that all the incidental expenses of running the building are met. They should know exactly what their liabilities are. Financial statements and documents should be audited. It is essential that there is absolute transparency and that purchasers can ensure, with some degree of accuracy, that there is enough money in a sinking fund to meet any contingencies or problems that might arise in respect of that building. The maintenance of the outside of buildings is the responsibility of the owners corporation, whereas individual owners are responsible for such things as leaking taps and tiles falling off walls.
I shall not canvass all aspects of the bill because other members have already done so. However, I wish to make some reference to common property, which is an issue that has caused considerable friction, anxiety and distress. For many years it has been a requirement that a decision to grant exclusive access to common property must be a unanimous decision of all owners. For instance, if exclusive use of common property was sought by the owner of one unit in a block of four or six units, the owners of all the other units must agree to that exclusive use. If any one of the owners did not consent, exclusive access would be denied.
Many years ago when I was a young solicitor I was involved in a case concerning a block of four townhouses on the northern beaches. Each of the townhouses had a basement constructed underneath it. The owners of three of the four units had title to their basements but for some reason the basement under the fourth unit remained common property. The owner of that unit, whom I represented, did not have exclusive possession of the basement under the unit. The owners of the other units would not agree to him being granted exclusive access to that basement area. I represented the owner of the unit when the matter was dealt with by the Strata Titles Commission. Unfortunately, the commission did not have the power to intervene because the dispute related to title as opposed to problems relating to strata titles legislation.
The bill will give the owners corporation the power to grant exclusive use by way of by-law involving a special resolution which stipulates that 75 per cent of the owners corporation must vote in favour of the resolution. As only one owner withheld consent in the case I mentioned, my client would have been granted exclusive access. Strata title legislation is complex because many people with different agendas and different perspectives on life are thrown together as part of the owners corporation, and often they do not agree. However, when dealing with common property, reason should prevail. Certainly, the job of strata title agent is not one that I would relish. I notice the smiles on the faces of departmental officers, including my friend Peter Berry, so I assume the same problems still exist.
The bill is a worthwhile and sensible measure. I seek an assurance from the Minister that the by-law with respect to common property will be confined to a licence rather than the owners corporation having the power to grant a long-term lease of common property, which would have a detrimental effect on the value of the real estate. The granting of a lease for 50 years or 99 years could interfere with further redevelopment of the site. I congratulate the shadow Minister on her extensive research and consultation with community groups on this bill. She has been extremely diligent and industrious. I ask the Minister in reply to clarify the matter that I raised. With those few comments I reiterate that the Opposition does not oppose the bill. It contains some very worthwhile measures and I congratulate the department and those responsible, in particular, the Minister.
Mr NEVILLE NEWELL (Tweed—Parliamentary Secretary) [11.27 a.m.]: I join colleagues on both sides of the House in supporting the bill. It is part of an ongoing review of the Act, which has seen the introduction of worthwhile changes. The bill aims to address problems relating to strata titles and larger strata schemes, which are increasing dramatically with ongoing development within the housing industry. I accept that the responsibilities of managers are onerous and that an increasing number of larger schemes are more lucrative than was previously the case. Therefore, more stringent regulation is required to ensure that those schemes are not abused. The bill seeks to amend the Strata Management Act 1996 to implement a number of proposals in relation to the management of strata schemes arising from an overall review of the Act in connection with competition policy reforms. Although I shall be brief, I intend to raise ongoing concerns with the Act. Because of the changing nature of larger strata schemes, we still need to address thoroughly the lucrative nature of management rights and management positions, and how to protect owners from likely abuse.
In the first instance the legislation provides for an audit of the budgets of strata managing agents. However, even if an agent is working within an audited budget, there is still the possibility of abuse. The legislation further provides that at least two quotes must be obtained when an agent wants to vary a budget item by more than 10 per cent. An auditor cannot examine the nature of a budget to ensure that work is done or examine a quote to ensure that the nature of the work on the quote is fair value. An auditor is not required to make an assessment of that; the executive officers and the managing agent do the assessment.
Simply relying on audits as part of the system will not necessarily result in a good outcome for all the people in a strata management scheme. I am not saying that we can design legislation that will keep everyone happy; it would probably be difficult to do so. At the same time we must be mindful of the fact that this legislation can only go so far to protect people. In relation to the executive and managing agents, and their work, I would still like to have the Strata Schemes Management Act amended to limit the number of proxy votes held by a manager or agent which can be utilised at an annual general meeting or a general meeting. That is similar to the Queensland model. I have raised this matter with Ministers on previous occasions.
Even if we were to go to the Queensland model, there would be shortcomings in limiting the number of proxies that can be held by a managing agent. I am sure someone could work out how to get suitable like-minded people to use the proxies to vote on issues raised at a general meeting. However, I suppose a managing agent could disperse the proxies amongst other people and still get around what is essentially a real problem in some strata schemes, that is, they are open to abuse. In limiting the number of proxies of absentee landlords that can be utilised, I am sure the legislation could be suitably arranged to meet the requirements of people in strata schemes, as is the case in the Queensland model.
Another issue I raise—I thought the honourable member for Baulkham Hills would touch on this, but instead he gave us a another legal history lesson—relates to common property and owners who either rent or sublease their units. Those who rent or sublease units are required to lodge a bond with the Rental Bond Board. However, that bond only covers damage to private property, not common property. I have heard of a number of instances when the bond has been refunded to a tenant leaving a strata scheme before the owner has assessed any damage to common property. In such cases the bond could not be used to cover the damage to common property and the owner or corporation has had to pay to fix the damage that they believed could have been attributed to the person subletting the unit.
I suggest that some time down the track we will need to consider the possibility of providing for a rental bond to be split between the owner and the owners corporation to ensure that the damage to common property is covered by the bond. My electorate of Tweed is in close proximity to Queensland, where the number of proxies held by a managing agent is limited. Honourable members will not be surprised to hear that when the Queensland Government introduced legislation to limit the number of proxies that could be held by managing agents and to control the budgets of owners corporations a number of agents moved across the border and expanded their operations in New South Wales because lucrative management rights and management positions were available and they could have more control over their budgets.
The Government must continue to review this legislation. I commend the Minister for the work that has been done on this bill, which will go a long way towards providing a better environment in which to operate strata schemes and a better position for owners, especially those who wish to sublet their units. This bill picks up many matters that arose during the review of the Act, in which the Minister had a great interest. I commend the Minister for the changes she has brought about in this bill, which I commend to the House.
Mr ANTHONY ROBERTS (Lane Cove) [11.36 a.m.]: It is with pleasure that I speak on the Strata Schemes Management Amendment Bill. The Strata Schemes Management Act 1996 was amended in late 2000 to take account of the national competition policy [NCP] review of that legislation. Further proposed amendments to the Act arising from the NCP report were not implemented at the time. An issues paper released by the Government in May 2003 discussed many of these proposed amendments, in addition to a number of other matters. I shall refer to that document later. As stated, the bill seeks to amend the Act to make specific provisions for the management of large strata schemes, defined as those containing 100 or more lots. I shall refer to that matter later as well. The bill seeks to clarify provisions related to the exercise and delegation of functions by owners corporations and their powers to add to or alter common property.
The bill also seeks to enable fire safety inspectors of buildings to deal with the owners corporation instead of individual lot owners. It requires owners corporations to obtain approval at a general meeting prior to seeking legal advice or taking legal action when owners corporation expenditure is involved. It requires all insurance to be taken out with an approved insurer, and requires all new strata schemes to prepare 10-year sinking fund plans. Existing schemes may be required to provide such plans at some point in the future. The consent of owners corporations will also be required before strata managing agents can transfer the management of a scheme to another agent. I refer to the Government discussion paper, "Living in Strata Developments in 2003", in particular the modern trend towards urban consolidation and medium to high-density living. The document states:
In 2001, approximately 13% of private dwellings in Australia were flats or apartments, whereas over 75% were separate houses. The percentage of flats and apartments has doubled over the last 40 years. In 2000-2001, nearly 33% of all dwellings constructed were in the flat and apartment category. It seems likely that this trend will continue.
In the Report of the Campbell Inquiry, statistics were provided which estimated that the percentage of multi-unit dwellings constructed in the Sydney metropolitan area compared to detached dwellings will continue at 55:45 proportions for the foreseeable future. Some suburban areas will have a much higher proportion of multi-unit dwellings construction and, because of the obvious issue of available space, residential construction in the Sydney CBD will be 100% multi-unit. There has been an increase of 40% in people living in inner Sydney in the last 10 years.
In the last financial year banks advanced $43 billion in loans for investors around Australia and 80% of those loans were made for apartments. One third of the 173,000 new dwellings estimated to be built up to the end of 2003 will be under strata title.
This refers directly to unit buildings containing 100 or more lots. I note with some degree of caution the wise words of the Hon. Joe Hockey, MP, Federal Minister and member for North Sydney. In relation to the disgraceful takeover of South Sydney council, he said that there will be a development corridor from the city through to Botany. The Liberal candidate for the position of mayor of Sydney, Shayne Mallard, will fight strongly against that.
I am concerned about the proliferation of large unit dwellings. In 20 to 30 years' time, as these buildings fall into disrepair, the government will have to deal with ghettos, a problem experienced in the United Kingdom some years ago. The bill goes some way towards avoiding these ghettos. We hear awful stories about high-rise developments that are shoddily built, fail to meet fire control regulations, and have faulty lifts and high maintenance costs. The Government must protect consumers and citizens from poor developments. I commend Joe Hockey for his statements and I wish the Liberal candidate for the mayoralty of Sydney the very best in his fight against overdevelopment.
Mr ACTING-SPEAKER (Mr Paul Lynch): Order! I suggest that the honourable member for Lane Cove return to the leave of the bill, which does not have anything to do with council elections.
Mr ANTHONY ROBERTS: I draw to the attention of the House—and I have drawn it to the attention of the Minister for Fair Trading in the past—the fine work of a constituent of mine, Mrs Jacqueline Qualtrough, in setting up the Strata Executive and Owners Services web site at www.seos.com.au. On her web site she states that hundreds of people in Sydney purchase units every day. However, many of them do not understand or are not told about the significant liabilities and difficulties involved in entering into a strata contract and dealing with strata laws. The services provided by the web site to executive committee members, existing owners and prospective owners are fantastic. I recommend the site to all members of Parliament.
The site deals with various matters, such as articles of strata in South Australia, articles of unit titles in the Northern Territory, the by-laws of the States of Australia, councils and the jargon used by departments. The site provides information on various topics under the headings of audits, buying strata, caretakers, committees, common property and disputes and mediation. I am sure the material under the heading topic "Fascinating Facts NSW" would be of interest to all honourable members. Other topics are finance, insurance, levies, meetings of the executive committee, meetings of the owners corporation, dealing with the owners corporation, proxy votes, real estate managers, renovations, strata lawyers, strata managing agents and tradespersons. The Internet is a wonderful instrument where everything is at your fingertips. This site provides an essential service to interested parties. On the feedback page of this site an owner investor wrote:
I wish I had known more about the liability of strata ownership prior to purchasing. It would have changed my decision about the kind of unit I bought. Thanks seos.
An owner resident stated:
Like many owners I had little knowledge of the strata laws or my personal legal liability before experiencing conflict within the strata plan. Because of the financial implications, I made it my business to gain more knowledge and take a pro-active role. I would recommend any potential purchaser to join seos and gain the essential knowledge prior to any commitment.
Mrs Qualtrough provides this not-for-profit web site because, having experienced difficulties with the strata laws in New South Wales, she decided that someone had to spread the information. On the feedback page a strata managing agent wrote:
A large proportion of our time is spent trying to resolve issues between owners. If owners were more informed, and realised their obligations, our job would be made easier. We welcome the introduction of seos which can only help to raise the bar for us all.
An owner wrote:
We have had internal conflict for many years—mainly about funding—
That sounds like the Labor caucus—
and are still in the middle of resolving issues, but feel that we now see a resolution in sight.
A first home unit owner stated:
I am astounded by the lack of information and education offered to owners prior to purchase. I stepped into a strata unit as my first opportunity of home ownership and had—like many others—saved hard to get my piece of Aussie bricks and mortar. My bank manager did not tell me, my lawyer didn't, the real estate agent gave no input. I am now struggling to keep financially viable and hold on to my dream. Obviously there is a great need for you seos. Wish I had met you before I made a commitment—and thanks for your help.
A long-term owner resident wrote:
Until finding you, I had never taken any interest in the running of my Strata Plan. I am now the Treasurer and wish I had looked after my financial interests better in the past. Now I realise how important it is to be pro-active and take part in all decisions.
I commend all of the dedicated committee members who play a role in strata management and strata plans. These volunteers, who often perform a thankless task, spend a great deal of time and effort on maintaining their unit blocks and the value of their properties. I welcome the requirement in the bill for the preparation of long-term plans for sinking funds expenditure. It is a big step forward and I am sure the provision will be welcomed in the community. I am concerned about the restrictions imposed on executive committees as to expenditure on legal action. I believe that provision needs to be looked at. As previous speakers have said, while the bill is long overdue, a great part of it will be welcomed by the general community. I commend our shadow Minister for Fair Trading, the honourable member for Burrinjuck, for her hard work. I also commend my colleagues who have contributed to this debate. On behalf of my constituents I look forward to the Minister addressing the concerns that have been raised by the Opposition and to the implementation of Opposition amendments.
Mr BRYCE GAUDRY (Newcastle—Parliamentary Secretary) [11.46 a.m.]: I join members on both sides of the House in commending the Minister for Fair Trading and her department for their proactive approach to strata management and for the introduction of this bill. The history of this matter has been laid out by previous speakers. Every year more and more people live in strata accommodation and have to deal with the complexities of strata unit ownership. In many cases, they have to deal with the relationship between the body corporate and the managing agent.
I particularly want to refer to a matter that I brought to the attention of the Minister in February, that is, the management of strata units in tourism areas and particularly in Newcastle, where strata units are frequently being used as serviced apartments, often without the knowledge of owners and the body corporate. Bearing in mind the increase in strata and high-rise apartment developments in Newcastle, most of them with fewer than 100 apartments but nevertheless of a significant size, I ask the Government to deal with that issue. I commend the provision in the bill under which developers must provide the body corporate with a full range of documentation about the strata management of the building. I believe that will include all development approval issues, and restrictions on the use of accommodation in a particular strata block.
There is also the issue of fire safety. I lay out for the House one case that clearly shows the problems that body corporate owners can have. Many are aged. They have used their retirement money and moved from a freestanding cottage. They have invested in a major strata lot and, lacking management skills and not understanding fully the complexities of the strata legislation, they have passed the management of the corporation to a management agent. What has happened in the case I will detail is interesting. I refer to 215 Darby Street, Cooks Hill. This former wool store was converted by a developer into a series of luxurious apartments. A considerable atrium has been left in the centre of that massive wool store, providing a nice common area but one that is expensive to maintain.
Many of the owners were retirees looking forward to a quiet and contemplative lifestyle close to all the benefits of the city. Several of the units in the block have been purchased by investors and agents are letting them out for short periods of one to three days as serviced apartments. That has resulted in the resident owners being confronted with the following issues, the sorts of issues that would be dealt with by a body corporate. Some of the apartments have been leased out to football teams. The players have used the atrium, the common area, for games of football, including soccer, and at one stage, I am advised, naked football. Of course, this was quite confronting to the aged residents.
People occupying the serviced apartments, which they treat as motel rooms, are likely to leave accumulated rubbish behind in the common area. If they damage common areas that becomes the responsibility of the body corporate, which adds to costs. That results in a rapid attrition of the sinking fund. People moving into serviced apartments or motels often do not have the culinary skills that a homeowner might have. In several instances in this block the fire alarms have been set off, resulting in mandatory callouts by the security firm involved in the care and maintenance of the building and by the fire brigade. That is another substantial cost for the body corporate. The apartments are key locked and a key is necessary to gain entry to the complex. I understand that 20 to 30 security keys have been lost, which has resulted in the apartments having to be rekeyed. Once again, that involves substantial cost to the body corporate. The Department of Community Services leased one of the apartments for the secure keeping of a juvenile over a period. That is commendable. But, as I said, the residents of many of the apartments are retirees.
I commend the bill for clarifying the provisions relating to the exercise and delegation of functions by the body corporate. It clearly points out that the developer is responsible for passing across to the body corporate knowledge of a whole range of issues that many people seem to be unaware of. The bill also sets out the responsibilities of the managing agent and in particular the process for transfer of responsibilities from the managing agent to another party. The example I have given highlights common issues faced by people living in strata title units, particularly in the new and large developments in our cities. The amendments will strengthen the Strata Schemes Management Act. I commend the bill to the House and look forward to the Minister's response to the issues I have raised.
Ms VIRGINIA JUDGE (Strathfield) [11.55 a.m.]: I support the Strata Schemes Management Amendment Bill. I congratulate the Minister, her staff and her department on being proactive and progressive in bringing such a timely bill before the House. The figures by the Australian Bureau of Statistics for the 2001 census show the choices people are making in housing styles. I have the great honour and privilege of representing the electorate of Strathfield, which is in the inner west of metropolitan Sydney. The figures for Strathfield are interesting. The number of separate houses, semi-detached, row or terrace houses, or townhouses of one storey totalled 1,536. The total dwellings in blocks of two or more storeys was 1,217, making a total of 2,753. The flats, units or apartments in a one-storey or two-storey block totalled 4,187, households in three-storey blocks totalled 6,084 and in a block of four or more storeys the total was 2,538, with 180 dwellings attached to houses.
That is a total of 12,989 dwellings occupied by people who have chosen to move from the traditional A. V. Jennings style of home on a quarter-acre block with a picket fence. Living in a block of units is quite a different style of housing choice. For some time now the State Government has been trying to encourage councils, through developing urban strategies and being proactive, to provide a greater variety of housing choice. Families have changed. In my parents day, when I was growing up, the traditional family had two, three or four children, with perhaps an extended family including grandparents.
Mr Thomas George: And a baked dinner on Sunday.
Ms VIRGINIA JUDGE: It was great to have the good old baked chicken on Sunday night. The nature of the family unit has changed dramatically in the past 10 to 15 years. Today in the news there is talk of the ageing of the population. We need to provide suitable accommodation to fit people's housing choices. However, we need to ensure that when people move into a different style of accommodation there are appropriate strategies to protect the conditions in which they live, whether they are owner occupiers or tenants. That is why the bill is so important. I will address two aspects briefly. One is the provision that enables officers who are authorised to carry out certain fire safety inspections of buildings and premises subject to a strata scheme to deal with the owners corporation for the building or premises instead of individual lot owners. That is important. When a large number of people live in close proximity to each other, unfortunately, there is a greater risk of fire. Anything we can do to ensure that the tenants or owner occupiers are protected in every way possible is a progressive step.
Referring again to the statistics, the largest group comprises the 6,084 dwellings in blocks of three storeys. I presume that would be the traditional two storeys with garages underneath. The more modern style of units tend to have cars garaged underground. But the older style of units were built over the past 30 years in Ashfield, which is part of my electorate. It is one of the most densely populated suburbs not only in Sydney but probably in the whole of the country. We must ensure that we do whatever we can to protect unit residents who might be vulnerable to someone forgetting to turn off a stove and causing a fire. Those things happen, but this bill goes some way to addressing the issue.
The other important provision in the bill relates to requiring new owners to establish a 10-year sinking fund and enables the corporation to extend those requirements to some or all existing owners. This amendment establishes a 10-year plan that must be reviewed after five years. It covers the rainy-day scenario. Many pensioners or self-funded retirees live in blocks of units and mishaps occur. During my time as a councillor I have met residents dealing with large mature trees that are causing problems. Roots get into plumbing systems and tenants or owner occupiers are suddenly faced with a huge bill not only for removal of the tree but also for repair of plumbing systems, which can cost thousands of dollars.
Roots can also lift footpaths, and elderly citizens trip on the uneven pavement and hurt themselves. A fall like that can cause a person in his or her twilight years to end up in hospital requiring a hip replacement. Roots can lift fences and cause other serious damage. Many unit developers use cement rendering on the outside of the buildings and, of course, at some stage it will need to be repainted. Adequate funds must be set aside for that type of rainy-day event. If something happens, the money should be there so that the owners do not have to dig into their pensions or savings to ensure that they can live in safety and security. The bill has many great provisions, but it was important to emphasise these provisions. I commend the bill to the House.
Ms REBA MEAGHER (Cabramatta—Minister for Fair Trading, and Minister Assisting the Minister for Commerce) [12.04 p.m.], in reply: I thank all honourable members for their contributions to the debate on this important piece of legislation. I particularly thank the honourable member for Burrinjuck for raising the concerns of various stakeholders with whom she has met. I assure her that the Property Owners' Association of New South Wales' submission was considered in the preparation of the bill and its views were taken into account. I assure the honourable member that the Institute of Strata Title Management has approached me directly with its concern, which I have addressed in writing. The Retirement Village Association has raised a number of valid concerns. However, this debate is not the forum in which to raise those issues.
I remind all honourable members that only yesterday I introduced a bill to bring forward the statutory five-year review of the Retirement Villages Act 1999, which will provide an opportunity to deal with many of their concerns using a comprehensive and holistic approach. On the specific request for a plain English guide to strata issues, I am pleased to advise that the Office of Fair Trading distributes a plain English guide called "Living in Strata", which provides vital information on lot owners' rights and responsibilities, important steps to take, and contact numbers to initiate dispute resolution. However, I undertake that the office will have discussions with the Retirement Village Association regarding the distribution of that guide.
The honourable member for Burrinjuck has requested answers to three specific questions. First, I assure her that the reference to an approved insurer means an insurer approved by Australian Prudential Regulation Authority. Second, I remind the honourable member that the competency of managing agents was significantly enhanced under the Property, Stock and Business Agents Act, which requires agents to undertake continuing professional education. Finally, the honourable member raised concerns, as did others, relating to the alteration of common property. The bill takes a step to minimise these situations arising in the future by removing longstanding uncertainties over the issue. The owners' corporation will have a clear power to allow alterations, but must make a by-law to clarify who is responsible for ongoing maintenance. Presumably, most owners' corporations would want to ensure that the unit owner has responsibility for ongoing maintenance of the altered common property.
Once a by-law is made and registered, any subsequent owner is also bound by the by-law. The incentive provided under the bill for the owners' corporation to get it right is that if it does not register a by-law it will become liable for the upkeep of the altered common property. The existing dispute mechanisms can be utilised in the case of any dispute over responsibility for maintenance. The honourable member for Baulkham Hills raised specific questions about the assignment of the use of common property. I assure him that if it is a long-term intention, a by-law is required to be registered. However, if the use is for a short term, a licence can be issued by the body corporate for that short-term use of common property.
The honourable member for Hornsby asked me to respond to a number of questions relating to secret ballots and proxy voting. Given that both issues are subject to community and stakeholder consultations with the release of the next discussion paper, it would be pre-emptive and inappropriate to provide definitive statements about the future of those provisions. As requested by previous speakers, I reiterate my earlier commitment to ensure that community stakeholders are consulted broadly in the development of the regulations that will accompany this bill and future discussion papers. I foreshadow two amendments following the tabling of the bill and comments made by interested parties.
The first amendment provides a dispute-resolution mechanism for disputes regarding decisions of owners' corporations with regard to altering common property or granting licences for the use of common property. The adjudicator will be given the power to make orders to settle such disputes or to rectify complaints on such matters. The second amendment is designed to streamline the mediation process for strata disputes. It will prevent an adjudicator requiring mediation of a matter if the Registrar of the Consumer, Trader and Tenancy Tribunal has already decided that mediation is not appropriate. The third amendment is the same as the second amendment except that it prevents the tribunal requiring mediation of a matter after it has already been decided by the registrar that the mediation is not appropriate. I commend the honourable members who contributed to this debate. It has obviously generated a great deal of interest, which is an indication of the importance of this legislation. I commend the bill to the House.
Motion agreed to.
Bill read a second time.
In Committee
Clauses 1 to 4 agreed to.
Ms REBA MEAGHER (Cabramatta—Minister for Fair Trading, and Minister Assisting the Minister for Commerce) [12.09 p.m.], by leave: I move Government amendments Nos 1, 2 and 3 in globo:
No. 1 Page 13, schedule 1. Insert after line 17:
[26] Section 138 General power of Adjudicator to make orders to settle disputes or rectify complaints
Insert ", 65A or 65B" after "62 (3)" in section 138 (3) (c).
No. 2 Page 14, schedule 1. Insert after line 19:
[29] Section 163 Dismissal of application on certain grounds
Omit section 163 (1).
[30] Section 163 (2)
Insert "for an order under this Part" after "application" where firstly occurring.
No. 3 Page 16, schedule 1. Insert after line 27:
[32] Section 185 Dismissal of application on certain grounds
Omit section 185 (1).
[33] Section 185 (2)
Insert "for an order under this Part" after "application" where firstly occurring.
Since the bill was introduced on 4 December last year there has been an opportunity for interested parties to examine the proposed new provisions in some detail. A few small items have become evident, and these Government amendments will ensure that the new initiatives operate as intended. The first amendment arises as a consequence of the provision that removes uncertainty about the power of owners corporations to alter or add to common property, or to allow lot owners to do so. The bill makes it clear that owners corporations have such power over common property. Item [11] of schedule 1 adds new section 65A to the Strata Management Act to address the matter. However, as a consequence of this clarifying provision it has become apparent that there will need to be an accompanying provision that allows for a dispute about alteration of common property to be handled within the existing mediation and adjudication process. Alteration of common property or addition to common property in a strata building may not meet with everyone's approval, and it is clear that there should be an ability for such a dispute to be dealt with.
Amendment No. 1 will ensure that a minority owner who does not agree with the decision to allow alteration of, or addition to, common property has a means by which they can pursue a dispute over this new power of the owners corporation. The amendment also allows for disputes arising from the new provision set out in new section 65B, which gives a power to owners corporations to grant a licence for use of common property to a lot owner, to be dealt with by an adjudicator. An example might be that a licence is given to a restaurant in a commercial strata scheme to use a paved area of common property for outside dining. The amendment will ensure that owners corporations will have adequate powers to consider common property additions and licences over common property but that there will also be an accompanying dispute resolution process should the powers be exercised inappropriately.
Amendment No. 2 will have the effect of removing an adjudicator's power to refer a matter back to mediation after a registrar of the Consumer, Trader and Tenancy Tribunal has already decided that mediation is not appropriate. Amendments contained in the bill are intended to streamline the mediation process for strata disputes. The registrar has been given more discretion to decide whether the parties in dispute should first be required to go through an attempt at mediation. It was intended that once the registrar had assessed the matter and made the decision on the need for mediation, the matter would proceed directly to adjudication. It was not intended that adjudicators would have a power of review over the registrar's decision. However, unless the Government amendment is made, the possibility continues that an adjudicator could cause delays to the resolution process by disagreeing with the registrar and sending the parties back to mediation before commencing to hear the matter. Additional time and expense could arise, a matter that was not contemplated when the revised mediation provisions were drafted.
Section 163 (1) of the Strata Schemes Management Act will be deleted by the Government amendment, and section 163 (2) will be adjusted accordingly. Amendment No. 3 is the same as amendment No. 2, except that it applies to matters before the Consumer, Trader and Tenancy Tribunal rather than a strata schemes adjudicator. The tribunal will also not be able to review the decision of the registrar in instances in which the registrar decides that mediation is not appropriate in connection with a particular dispute. Once the registrar has decided that prior mediation is not necessary, the matter will proceed directly to the tribunal for hearing and determination.
Ms KATRINA HODGKINSON (Burrinjuck) [12.14 p.m.]: The Opposition was made aware yesterday of the Government's three minor amendments to the bill. Following further discussions with the department I am satisfied that the first amendment came about as a result of the Law Society reviewing the bill. The general power of the adjudicator to make orders to settle disputes or rectify complaints is acceptable to the Opposition. I understand that Government amendments Nos 2 and 3 will streamline mediation disputes, which can only be of benefit to consumers. Therefore the Opposition in this place will not oppose the Government amendments. However, due to the brief period we have had to consider the amendments and the fact that the Opposition has not had the opportunity to consult with other stakeholders who have previously been consulted on the bill, the Opposition reserves its right to further consider the amendments in another place.
Amendments agreed to.
Schedule 1 as amended agreed to.
Schedule 2 agreed to.
Bill reported from Committee with amendments.
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