First Reading
Bill introduced on motion by Mr Anoulack Chanthivong, read a first time and printed.
Second Reading Speech
Mr ANOULACK CHANTHIVONG (Macquarie Fields—Minister for Better Regulation and Fair Trading, Minister for Industry and Trade, Minister for Innovation, Science and Technology, Minister for Building, and Minister for Corrections) (10:20): I move:
That this bill be now read a second time.
I am pleased to introduce the Strata Schemes Legislation Amendment Bill 2024. The bill implements 37 recommendations from the 2021 statutory review of the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015, as well as other reforms raised by stakeholders since the review. The Government remains committed to reforms that will protect owners' corporations, improve the accountability of strata management services, ensure owners' corporations maintain their buildings and make strata living easier for residents. That is what the bill does. The Government is committed to meeting our State's housing needs, and has already introduced significant reforms to planning, building quality and rental affordability. To meet our housing targets, we must make strata living a key part of the discussion, which includes ensuring that people want to live in strata because it is safe, affordable and reliable.
There are already more than 86,000 strata schemes in New South Wales, with 50 per cent of New South Wales likely to be living in strata in the next 15 years. However, the benefits of strata can only be realised when the regulatory framework overseeing the sector is effective, supports good governance and fosters public trust in strata professionals. This is why the Government is pursuing an extensive reform agenda for the strata sector that started with reforms implemented by the Strata Legislation Amendment Act 2023 that passed the Parliament in November last year. This was followed by the Strata Managing Agents Legislation Amendment Act that passed in September this year to enhance disclosure obligations for strata professionals to ensure owners can make informed decisions about their homes.
I now turn to the specific reforms contained in the bill. The bill introduces important reforms that aim to improve accountability and confidence in strata managing agents and building managers. These reforms build on the Government's reforms to disclosure requirements that will commence in February 2025 by ensuring that owners have confidence in their strata manager and building manager. These key reforms in the bill will ensure that an agent cannot avoid liability when they act outside their agency by prohibiting management agreements, including terms that require the owners' corporation or association to pay for the agent's professional indemnity liabilities or terms that limit an agent's liability to a specified monetary amount, except if the agent's agreement is covered by a professional standards scheme within the meaning of the Professional Standards Act 1994; increase the frequency managers need to provide key reports; and allow schemes to terminate a strata managing agent agreement, building management contract or facilities manager contract where the agent or manager is carrying on their business in a way that is contrary to law.
While the reforms will enhance protections for owners from misconduct by strata managers, they will also strengthen accountability of building managers. The bill imposes a statutory duty on building managers to act in the best interests of the owners' corporation or the association in carrying out their duties, unless doing so would be unlawful. To ensure that the new obligations are fit for purpose, the bill includes a regulation-making power allowing for further obligations to be imposed.
I now turn to a significant reform in the bill that many stakeholders have been calling for to protect owners. Owners' corporations or associations are run by volunteers who may be vulnerable to unfair contract terms. Owners are not legal experts and may not understand the implications of certain contract terms until they are in operation. The bill prohibits unfair terms in standard form contracts for the supply of goods or services as well as the sale or grant of an interest in land to an owners' corporation or association. The bill does this by amending the Fair Trading Act 1987 so that prohibited unfair contract terms and associated remedies under the Australian Consumer Law apply to such contracts. Prohibiting unfair contract terms will help strengthen consumer protections and encourage suppliers of goods or services to ensure their contracts have compliant terms. This change will also complement reforms to prohibit certain terms from agency agreements. This is a significant realignment of contractual rights of the owners' corporations and associations as buyers of goods and services. I am proud that New South Wales will set a new high watermark of protection for owners' corporations.
The bill also improves the governance of strata and association committees. Currently, committee members must carry out their functions for the benefit of the owners' corporation or association and with due care and diligence. While many members take this duty seriously, there are concerns that many are falling short of expectations. The bill introduces additional duties and obligations on members, including complying with strata and community land scheme laws and acting with honesty and fairness. This will be a big change for some committees, so the Government will work with the sector to roll out mandatory training to support committee members in meeting their duties under the Act.
Another important duty of strata committees can be considering minor renovation applications from lot owners. The review highlighted some committees repeatedly refusing minor renovations without providing reasons. This can create a sense of uncertainty for the owner and reduce trust within the owners' corporation. The bill addresses these concerns by requiring written reasons for any refusal of minor renovation requests and providing deemed approval of an application for minor works if the committee fails to provide written reasons for refusal within three months of receiving the application.
Buying into a strata or community land scheme is a significant investment and it is imperative that the safety and amenity of buildings are maintained. It is a legislative duty that falls on the owners' corporation and association of a scheme. Feedback received during the review, and verified during inspections by NSW Fair Trading and the Building Commission, found that too many schemes are failing to properly maintain and repair common property. This can lead to rising insurance costs and special levies being imposed. These costs could have been avoided or reduced if the scheme had been proactive about the problem. Failing to repair and maintain common or association property can also impact lot owners who face damage and loss of amenity of their lot. Impacted owners must then attempt mediation and go to the NSW Civil and Administrative Tribunal, or NCAT, to help resolve disputes over repairs. Feedback to the review found that owners' corporations have ignored or delayed compliance with a tribunal order, resulting in further damage.
The bill will address noncompliance with the owners' corporation and association's obligation to look after its building by stopping an owners' corporation or association from deferring works if safety or access or use of a lot or common property is affected; mandating that the 10-year capital works fund plan meet minimum requirements that set up the schemes to properly maintain the building and avoid bill shock for owners; extending the time that lot owners can make a claim for damages as a result of a scheme's failure to maintain and repair the common property from two to six years from when they first became aware of the loss; and enabling NSW Fair Trading to enter into enforceable undertakings with, or issue compliance notices to, owners' corporations or associations to take action to remedy a breach of duty to maintain and repair property. NSW Fair Trading will also have associated powers to help investigate compliance with the duty to maintain and repair, including powers to require information and records, require answers, enter premises and issue search warrants.
I turn to measures in the bill that ensure the original owner, usually the developer, hands over the scheme to the new owners' corporation or association with the information they need to properly fund maintenance and repairs into the future. Currently, the original owner, such as a developer, must prepare an initial maintenance schedule ahead of the first annual general meeting. The schedule includes information about the obligations and costs in maintaining scheme property such as maintenance of lifts. The schedule informs the first 10-year capital works fund plan and is also critical in estimating the initial levies for the new owners. Owners have told us that the quality of this schedule varies from scheme to scheme, leaving many schemes with initial levies too low to meet ongoing costs. This tactic prevents incoming owners from having a realistic indicator of what it will cost them to live in the building.
The bill makes several changes to address this problem, including mandating that the schedule meet the minimum requirements set out in the regulation; requiring the original owner to engage an independent surveyor to review the schedule and certify that it has been prepared in accordance with the prescribed form; requiring the original owner to engage an independent surveyor or other prescribed expert to certify that the estimates of initial levies meet the scheme's expected expenditure for the year, based on the expenses provided by the original owner; and mandating that the original owner must give evidence of the certification and that the certification was carried out by an independent surveyor or other prescribed expert at least 14 days before the first annual general meeting.
All these new requirements will be backed with a maximum court-imposed penalty of $55,000 on the original owner to ensure they prepare quality schedules and realistic estimates of the initial levies for current and prospective owners. The bill will help guide how this new information is used by requiring that schemes consider the initial maintenance schedule when preparing its first 10-year capital works fund plan.
A further important reform in the bill relates to utility supply contracts and embedded network arrangements in strata and community land schemes. Currently, section 132A of the Strata Schemes Management Act 2015 puts the power of choice into the hands of owners by providing an automatic end date for contracts entered into by an owners' corporation for the supply of electricity, gas or other utilities to the whole scheme. It prevents owners' corporations from being permanently locked into uncompetitive supply agreements, but it does not apply to agreements entered into for the supply of electricity through an embedded network.
Embedded networks are private arrangements made by or on behalf of an owners' corporation for the supply of utility services, including electricity, to all of the owners in a scheme. To support these arrangements, infrastructure is often installed during construction of the building by the developer, with services arranged by the owners' corporation to be on sold to owners. These lock-in contracts can lead to higher costs for owners, as well as prevent owners from entering more competitive contracts for services. The bill addresses these concerns by extending section 132A so it applies to the supply of electricity through an embedded network. The bill also applies this change to community land scheme laws.
As an added protection for consumers, the bill also imposes new requirements for disclosure of embedded networks at the point of sale of a property. For established strata properties, the bill requires vendors to warrant that, unless disclosed in the contract, the relevant strata or community land scheme does not include an exclusive supply network. Buyers will be able to test that warranty by consulting the strata information certificate issued under section 184 of the Strata Schemes Management Act 2015, which is obtained before settlement. If the certificate reveals the existence of an exclusive supply network that the vendor did not disclose, the purchasers may rescind the contract for breach of the vendor warranty.
For strata properties sold off the plan, developers must disclose in the off-the-plan disclosure statement attached to the contract whether the development includes or is likely to include an exclusive supply network, and details of the type of service. The developer must notify buyers before settlement if that disclosure changes during the development. Materially impacted buyers can rescind the contract or, in some cases, claim compensation if they can show they would not have agreed to buy the property had they known the true position.
The bill will encourage the uptake of environmental sustainability infrastructure, such as solar panels, electric vehicle charging and efficient water fixtures, in schemes. This Government is committed to working with home owners to support the appropriate adoption of sustainability infrastructure by helping them plan and budget for these upgrades in a measured way. The bill seeks to enable this process by prohibiting by-laws that block sustainability infrastructure due to external appearance, unless the property is heritage listed or within a heritage conservation area; and by requiring schemes to consider environmental sustainability within their scheme at each annual general meeting. This includes consideration of the annual energy and water consumption and expenditure in common areas. The bill also requires a scheme to consider sustainability when estimating how much money it will need for the capital works fund each year. These reforms will help reduce the environmental impacts of running schemes and contribute to the Government's vision to be a leader in energy transition.
Members on both sides of the House recognise the cost-of-living pressures communities are facing around New South Wales. This Government has already taken comprehensive action to support people through this cost‑of‑living crisis, and the bill builds on this work by assisting owners in financial hardship. The non‑payment of levies can be a significant issue for strata and community land schemes. If levies are not paid on time, there can be detrimental impacts, particularly if the levies are for urgent or necessary maintenance or repair work. However, some owners who struggle to pay their levies are unnecessarily facing legal or bankruptcy proceedings. This could be because they do not understand the consequences of non-payment or the options available to pay their levies, or because debt recovery is being pursued prematurely.
In response, the bill proposes a suite of reforms that aim to assist owners experiencing financial hardship without restricting the ability of owners' corporations or associations to make decisions that suit the circumstances of their scheme. The reforms include requiring levy notices to be accompanied by information approved by NSW Fair Trading that will set out a person's options, including payment plans, free financial counselling services and dispute resolution support from NSW Fair Trading; and allowing strata and association committees to enter into a payment plan with an owner in financial hardship, rather than requiring it to be approved by an owners' corporation or association at a general meeting. While a payment plan can be reasonably refused, the impacted party will be able to challenge the decision in the tribunal where the refusal was not a reasonable refusal.
Further reforms include enhancing the take-up of payment plans by prescribing processes and requirements of plan conditions and reasonable refusals in the regulations, by preventing an owners' corporation or association from taking debt recovery action if a payment plan is being complied with, and by increasing the notice of debt recovery action from 21 days to 30 days to give owners more time to seek support and pay off their overdue levies before debt recovery action is taken. These changes will make payment plans more accessible to owners in arrears and reduce the instances of owners' corporations or associations initiating debt recovery when it is not necessary.
Finally, the bill will make it easier to install accessibility infrastructure to assist owners in better accessing the lot where they live and the common areas of their scheme. The bill responds directly to stakeholder concerns by lowering the voting threshold needed for changes to common or association property to facilitate a person with a disability having access to the common or association property, or the lot in the scheme in which they reside. The person only needs a majority vote to make changes to common or association property for accessibility purposes. Importantly, the scheme will be required to consider the impacts of refusing to install the infrastructure on people with disability, and whether a given building can support the type of infrastructure required to provide access.
The bill also makes some other minor amendments to enhance the operation of New South Wales strata and community land scheme laws, including clarifying the role of the chairperson of an owners' corporation or association by prescribing obligations on how they carry out their duties; updating inspection and record‑keeping obligations, including allowing for digital inspections; and increasing the fee for inspections to reflect the cost to agents in facilitating this service. The bill is an important next step in the Government's reforms to improve the lives of residents, modernise and bolster strata and community land scheme laws, and restore trust and confidence in community living. These reforms target areas of need, including uplifting developer and strata management professional accountability, enhancing the way owners' corporations look after their buildings, making it easier for people to get the help they need to live in their homes, and ensuring that strata living is sustainable and affordable.
In addition to those who contributed to the statutory review, I thank key strata sector stakeholders who have supported the development of the bill, including the Strata Community Association NSW, the Owners Corporation Network, the Real Estate Institute of New South Wales, the Law Society of New South Wales, the Australian College of Strata Lawyers, the Property Council of Australia, Animal Care Australia, the Financial Rights Legal Centre, Financial Counselling Australia, Marrickville Legal Centre, Redfern Legal Centre, the Economic Abuse Reference Group of New South Wales, the Urban Development Institute of Australia NSW, the Australian Resident Accommodation Managers Association, and Australian Apartment Advocacy.
The bill shows that we are committed to implementing recommendations of the review, as well as addressing other issues facing strata and community land schemes in New South Wales. The Government is determined to deliver reforms that improve the lives of strata and community land residents in New South Wales. I commend the bill to the House.
Debate adjourned.
