NSW’s Strata Title Laws Shake-up: What Does It Mean For Developers?

The development industry is set for a major shake-up mid-2016 when NSW introduces sweeping reforms to the strata title laws.

The new laws will affect developers who have created a strata community in NSW, as well as those living in or working in the complexes.

The Strata Scheme Management Bill and Strata Scheme Development Bill, which passed the Legislative Council late last year, contains around 90 changes to the existing laws, on issues including defects, levies and capital work funds, collective sale, renovations, proxy farming, defects and parking.

Minister for Innovation and Better Regulation Victor Dominello said the new laws would come into effect in July 2016.

“Today more than two million people live and work in strata. The new laws will cater for the needs of 21st century strata living,” Mr Dominello said.

“The new laws will modernise collective decision making processes, increase protections against unresolved building defects and improve out-dated regulation impacting on renovations.”

Public consultation on draft regulations to accompany the new Acts, including model by-laws, commenced in early 2016.

The key changes affecting developers include:

Introducing a defects bond to fix building defects early in new developments

Developers will be encouraged to fix defects quickly under new changes.

To ensure accountability of developers and builders, a building bond will be introduced for the construction of high-rise strata buildlings over three stories in height. The developers must pay a bond that is two per cent of the contracted price of the building as a form of security to fix defective works.

A maintenance schedule must also be prepared and tabled at the first annual general meeting to inform owners of maintenance obligations.

Under the changes, a mandatory defect inspection report must be prepared. Developers must engage an independent building inspector to carry out the report, at their cost, between 12 and 18 months after the completion of the building. Fair Trading will engage an inspector if the owner’s corporation does not agree to the appointment or the developer goes out of business after work is complete.

The building bond will be used to carry out repairs if defects are not rectified. If they are fixed, the bond will be returned to the developer.

Levies and capital works funds 

According to Fair Trading, the reforms will require developers to set “realistic levies” from when the strata plan is registered to when at least one third of the unit entitlements in the scheme have been sold and for the subsequent year after.

Fair Trading stated that corporations would be able to more easily recover outstanding levies that are mainly used to pay for the scheme's day-to-day expenses.

Find out more about the reforms at www.fairtrading.nsw.gov.au.