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Strata Reform Newsletter 4
STRATA REFORM NEWSLETTER #4:
WELCOME
In the last newsletter issued in October 2019 we provided details of changes with the Strata Titles Reforms, relation to the duties of the Strata Manager, and the Council of Owners. This newsletter will give you another glimpse of several changes to come into effect with the Act.
MAKING IMPROVEMENTS TO COMMON PROPERTY
Currently a strata company only has a duty to maintain, repair and where necessary renew or replace the common property.
Reforms will give strata companies the power to improve or alter common property:
1. subject to the expenditure controls of the strata company; and
2. where the expenditure exceeds an amount provided in the regulations, a special resolution of the strata company will be required to approve the alteration or improvement of the common property (and details of that improvement / alteration will have to be provided to owners before the vote).
The expenditure controls of a strata company are:
1. the annual budget, which is approved by an ordinary resolution of the strata company.
2. spending (calculated on a per lot basis) that is less than the amount allowed by the regulations (currently $65) or another maximum amount per lot as approved by a special resolution of the strata company or
3. expenditure approved by the notice process. The notice process is: all owners and first mortgagees are given written notice of the purpose and amount of the proposed expenditure. The expenditure is approved unless, within 14 days, written objections are received from the owners or first mortgagees of either:
- 25% or more of the lots in the scheme, or
- 25% or more of the sum of the unit entitlements of all the lots in the scheme.
Disputes about the improvement of common property will be resolved by the State Administrative Tribunal.
SUSTAINABILITY AND UTILITY INFRASTRUCTURE
Reforms will also make it much easier to install sustainability infrastructure (like solar panels) or utility infrastructure on common property within a strata or survey-strata scheme.
The infrastructure (such as solar panels) can be owned by:
the strata company (as personal property)
all of the owners jointly (as common property)
one or some of the owners or
a third party (such as a renewable energy supplier).
If the infrastructure is owned by a third party or one / some of the owners, the strata company:
1. can approve the installation of sustainability or utility infrastructure
on common property by passing an ordinary resolution
2. the owner of the infrastructure will have access to the infrastructure
through a statutory easement and the details of the arrangement will be contained in an infrastructure contract between the strata company and the owner of the infrastructure.
INCREASE MINIMUM PUBLIC LIABILITY INSURANCE
At present, a strata company is required to insure the scheme against public liability for at least $5 million. This minimum will be increased to $10 million.
It was found most managed schemes already have at least $20 million cover, and the $5 million minimum, imposed in 1995, is no longer considered sufficient to cover potential liabilities and costs in the case of damage, injury or death claims.
The difference in annual costs for cover to increase from $5m to $10m is minimal for each lot.
Every scheme must also discuss the insurance arrangements at each Annual General Meeting (AGM). This is to make sure the owners have to regularly consider whether or not their insurance is adequate for the risks faced by their scheme.
GUIDANCE ABOUT BY-LAWS
Schedule 1 by-laws are about the operation of the strata company. Schedule 2 by-laws set out acceptable behaviour of owners and occupiers.
Each schedule has a different voting protocol. A current problem for strata companies is where a new or amended by-law may be incorrectly classified resulting in the wrong voting protocol being applied. The amended Strata Titles Act 1985 will provide clear guidance on what type of resolution is required to make, amend or repeal each bylaw.
By-laws will be classified as one of two types:
- governance by-laws which can be made, amended or repealed by a resolution without dissent
- conduct by-laws which can be made, amended or repealed by a special resolution.
A governance by-law means any of the following:
- the by-laws set out in Schedule 1
- the by-laws that deal with the governance of a scheme or the corporate affairs of a strata company
- the by-laws that deal with the subdivision or development of the land subdivided by the scheme
- the by-laws relating to exclusive use of common property in the scheme
- the by-laws that deal with the constitution or procedures of the council of a strata company
- the by-laws that deal with contributions, levies or money payable
by an owner to a strata company - an exclusive use by-law.
A conduct by-law means any of the following:
- the by-laws set out in Schedule 2
- a by-law which deals with specified
- conduct of an owner or occupier
- a by-law that deals with a matter
- relating to the management, control, use and enjoyment of a lot or common property.
As a result of clearly classifying two types of bylaws, some by-laws previously in Schedule 1 will be moved to Schedule 2 to reflect their
‘conduct’ nature. These are:
- vehicles and parking
- use of common property and
- decoration of common property.
COMPLIANCE WITH EXCLUSIVE USE BYLAWS
A by-law that grants exclusive use rights over the common property to a person within the scheme is an exclusive use by-law. Exclusive use of common property is where the common property is used exclusively by:
- one owner or
- several owners.
Typically, an exclusive use by-law may impose conditions (to do certain things or pay specified sums of money) on the person(s) who
is given the exclusive use of the common property.
LIMITING THE USE OF PROXIES TO PROTECT OWNERS
The reforms will also protect owners against the abuse of proxy votes.
- the regulations may impose limitations on a strata manager being appointed as a proxy, including limitation on how many lots the strata manager can wield a proxy vote for.
- if both an owner and the person the owner appointed as their proxy are at a general meeting, only the owner may vote.
POWER TO ENFORCE A BREACH OF A BYLAW
Enforcing by-laws is difficult under the current Act. The Tribunal can only make an order imposing a penalty for breach of a by-law, if that by-law specifically states that a penalty is to be paid. Most schemes do not have any penalties stated in their by-laws. Before the Tribunal can order a penalty be imposed for breach of a bylaw, the strata company must establish that the owner has wilfully and persistently breached the by-law.
Reforms will give the Tribunal the power to:
- make an order imposing a penalty for the breach of any by-law (whether or not that by-law specifies a penalty for breach)
- make an order that the person who breached the by-law must take action to:
- stop breaching the by-law; or
- fix the breach of the by-law.
The strata company, owners and occupiers can apply to the Tribunal for an order to enforce a bylaw (including an order that a penalty be paid).
If the Tribunal finds that:
1. the breach of the by-law is serious or
2. that the by-law has been breached by
that person on 3 occasions or
3. that the strata company served notice on a person notifying them they have breached a by-law and that person then breaches the same
by-law again the Tribunal can order the person who breached the by-law to pay a penalty to the strata company.
OBLIGATION TO ACT REASONABLY TO OWNERS
A strata company will be required, in performing its functions, to have the objective of achieving outcomes that are not, having regard to the use and enjoyment of lots and common property:
1. unfairly prejudicial to or discriminatory against an owner or occupier or
2. oppressive or unreasonable
Strata Reform Newsletter 3
STRATA REFORM NEWSLETTER #3:
WELCOME
In the last newsletter issued in May 2019 we provided details of changes with the Strata Titles Reforms, in relation to the duties of the Council members, developers and meeting changes. This newsletter will give you another glimpse of several changes to come into effect with the Act for Strata Managers and Council of Owners. We have delayed issuing this newsletter as we were waiting on the release of the draft regulations, which have now been released,but are still subject to change by Landgate prior to delivery to Parliament in November 2019.
STANDARDS FOR STRATA MANAGERS
A manager is not authorised to perform functions as a Strata Manager unless a contract is in force between the Strata Company and the Strata Manager.
- must act honestly and in good faith to the strata company
- must exercise a reasonable degree of skill, care and diligence
- must hold minimum education requirements as set out in the Regulations (the draft regulations currently require a principal of the business of a strata manager to hold a Certificate IV in Strata Community Management if they do not hold a licence as a real estate agent under the Real Estate and Business Agents Act 1978 or are not a local legal practitioner whom also must have completed 2 core units in Certificate IV Strata Community Management as well as 2 specific elective units in Certificate IV Strata Community Management and a designated person whom is not a principal must have completed 2 core units in Certificate IV Strata Community Management as well as 6 specific elective units in Certificate IV Strata Community Management)
- must hold a current police clearance must have a good working knowledge of the Strata Titles Act
- must not make improper use of information acquired as strata manager for a strata company to gain an advantage for themselves or someone else, or cause a detriment to the strata company
- must not make improper use of the position of strata manager to gain an advantage for themselves or someone else, or cause a detriment to the strata company
- must take reasonable steps to ensure that the strata manager’s employees comply with the Act
- must have professional indemnity insurance to cover any loss arising from any act or omission of the strata manager
- must inform the strata company in writing as soon as a they are aware that they will obtain a financial benefit which conflicts with their duty to the strata company (ie: a conflict of interest)
- must inform the strata company in writing as soon as they are aware that they:
- have received a commission or
- are likely to receive a commission (such commission will have to be above a specified value as set out in the regulations and won’t include a small gift, such as a box of chocolates)
- must control the funds of the strata company in a trust account.
- must be able to account separately for money that the strata manager pays or receives on behalf of the strata company
- must provide the strata company, within a reasonable time-frame, with accounting information about:
- the name and number of each account operated by the strata manager on behalf of the strata company
- the balance of money held in those accounts
- details of money paid to or received by the strata manager on behalf of the strata company, and
- details of any transaction that the strata manager enters into on behalf of the strata company
- must give the strata company’s auditor access
and any other information in relation to
accounts operated on behalf of the strata
company.
To date there is no prescribed licensing of Strata Community Management Businesses in Western Australia. It is currently a voluntary self-regulated process to ensure professionalism. Until such time as there is an industry approved Strata Community Management model of rules and regulations pertaining to Strata Community Management, SCA WA (peak body for Strata Community Managers launched in 2018 a Strata Management Practice Standard, a business certification program for strata management businesses and through an independent audit processes companies would be able to be audited on their internal procedures as well as contractual relationships with Strata Companies. We are so thrilled to announce that All Strata Management Services was the first and still is the only Strata Management Business Nationally that has been certified to date.
NEW CONTRACTS
Requires that contracts between the Strata Company and Strata Manager are in force within 6 months of the commencement date of the Act (The aim is for the Strata Titles Amendment Act 2018 to come into operation in the first or second quarter of 2020, though this timing is subject to completing the regulations)
If no contract is currently in place, new contracts must be executed.
If a current contract is in place, it must be updated to comply with new rules and must disclose any monetary or other interest they (Strata Manager) has that may conflict with the performance of their duty and the amount or value of any remuneration or other benefit that they reasonably expect to receive from persons other than the Strata Company in connection with the performance of their functions.
WHAT A STRATA MANAGER CANNOT DO
Strata managers will not be permitted to perform these scheme functions:
- authorising a person to perform a scheme
function other than as an agent, employee or
contractor of the strata manager (more
information on this will be covered in the
regulations) - determining contributions
- entering into, varying, extending or
terminating a contract with another strata
manager - terminating a contract for amenities or
services where that contract has run for more
than 5 years - commence an action on behalf of the strata
company in a court or tribunal - authorising a person to sign documents on
behalf of the strata company, the council or
an officer of the strata company - perform a scheme function declared in the
regulations as something that should not be
performed by a strata manager.
If the Act requires the strata company to pass a resolution in a general meeting of the strata company before the strata company can perform a specific function, that function can only be performed by the strata manager if the required resolution has been passed.
COUNCIL MEMBERS ARE PROTECTED
To encourage people to volunteer for the council, the Act will state that a council member is not liable in any civil proceedings for any act that they do in good faith when performing the role of a council member.
STRATA MANAGERS TO PROVIDE INFORMATION TO LANDGATE
The draft regulations require strata managers to lodge an annual return in the approved form at the office of Landgate. The Annual return must be lodged within 3 months after the end of the calendar year to which it relates and it must contain information such as:
- The total number of strata title schemes for which the strata manager is providing services as a strata manager
- the total number of lots in those strata title schemes
- an estimate of the total amount of money held by the strata manager on behalf of all of the strata title schemes
- general description of the type of services the strata manager provides
- the number of employees, contractors or agents who are employed or engaged by the strata manager to provide services in respect of those strata title schemes.
Landgate may choose to publish a list of the names of strata managers who provide this information. Landgate advises that this information will be kept confidential.
Strata Reform Newsletter 2
STRATA REFORM NEWSLETTER #2:
WELCOME
In newsletter 1 issued in March 2019 we provided details of one of the changes occurring with the Strata Titles Reforms, being the establishment of a Reserve Fund and having a building maintenance plan for schemes with 10 units or more (or a specified replacement value yet to be confirmed by the regulations). This newsletter will give you another glimpse of several changes to come into effect with the Act.
DUTIES OF COUNCIL MEMBERS
With effect from the commencement date a Councillor must:-
At all times act honestly, with loyalty and in good faith in the performance of functions as a member of the Council
Must at all times exercise the degree of care and diligence in the performance of those functions that a reasonable person would reasonably be expected to exercise. Not make improper use of their position for their own or another’s gain, or to cause detriment to
the Strata Company; and
Inform the council in writing of direct or indirect pecuniary (monetary) or other interest that may conflict with the performance of a function as a member of the Council and must not vote on any matter to which they have such an interest.
The Strata Company or an Owner can apply to The State Administration Tribunal (SAT) for an order to remove a Council member who is in breach.
STATUTORY DUTIES ON DEVELOPERS
Developers who own a lot in a scheme cannot vote on resolutions relating to building defects Scheme Developers also have a duty to provide key documents to the Strata Company at the first Annual General Meeting. SAT can order a developer to pay money to the Strata Company to acquire any missing scheme documents.
Scheme Developers must disclose any remuneration or other benefits they have received or may receive from contracts for the provision of service or amenities to the Strata Company or members or that bind the Strata Company. They must also disclose any monetary interest (direct or indirect) that they, or an associate, has in any contract, lease or licence.
SAT can order the developer to pay to the Strata Company any commission received that was not disclosed.
MEETINGS
If a quorum is not present after 30 minutes has elapsed from the time appointed for a general meeting, the persons entitled to vote who are
present at the meeting are taken to constitute a quorum.
Owners will now have the ability to vote on resolutions without a general meeting. A person (including a proxy) may vote at a meeting of the Strata Company by telephone, video link, internet connection or similar means of remote connection (provided that provision of relevant facilities, does not place an unreasonable burden on the Strata Company). A person attending a meeting by remote communication is taken to be present at the meeting.
Recourse will be available at SAT for scheme disputes, including in respect of unreasonable or oppressive by-laws and resolutions.
Strata Reform Newsletter 1
STRATA REFORM NEWSLETTER #1:
The Strata reforms aims to make Strata better and provide more flexible and sustainable housing options to benefit Strata Owners, Residents, Tenants, Investors and Developers.
Every Strata property registered as a Strata Title at Landgate are subject to the Strata Titles Act 1985 and will all be subject to changes when the Strata Titles Amendment Act 2018 comes into operation by proclamation.
The Strata Titles Amendment Bill 2018 on the 1st November 2018 was passed through parliament, and will come into operation on proclamation. A proclamation is a public announcement with statutory authority published in the Government Gazette and made by the Governor in Executive Council, which will occur after the regulations to support the amended Strata Titles Act 1985 have been drafted, the aim of Landgate is for the Strata Titles Amendment Act 2018 to come into operation in the third quarter of 2019, though this timing is subject to Landgate completing the regulations.
Over the next few months we will provide to you a one page update on each of the key changes to the act. The first one being compulsory Reserve Funds and Building Maintenance Plans for every strata scheme that has 10 or more units.
RESERVE FUNDS /BUILDING MAINTENANCE PLAN
Reserve Funds and Building Maintenance Plans are now compulsory for every Strata Company that has 10 or more lots, each scheme must establish a fund for the purpose of accumulating funds to meet contingent expenses, other than those of a routine nature, and other major expenses of the Strata Company likely to arise in the future and determine the amount’s to be raised for payment into a reserve fund and raise those amounts by levying contributions on the owners in proportion to the unit entitlement of the respective lots.
The building maintenance plan must set out the common property and the personal property of the Strata Company that is anticipated to require maintenance repair, renewal or replacement, and this plan must be revised at least once in every 5 years and when revised the plan must then be extended to cover the 10 years following the review and to obtain the estimate costs for the maintenance, repairs, renewal or replacement and other information that may be required by the regulations once known.
We are recommending that each Council of each scheme instruct us to obtain a minimum of 2 quotes for this Building Maintenance Plan and forward it to the Council of Owners for consideration and instruction via a tear off, so that the report can be obtained closer to the end of the year in preparation for knowing the figure required for the Reserve Fund at the 2020 Annual General Meeting.
REGARDS – MANAGEMENT – ALL STRATA MANAGEMENT SERVICES
