STRATA UPDATE: KEY CHANGES – AMENDMENTS TO THE STRATA TITLES ACT COMMENCED 1 MAY 2020 | Torrens Legal: Law Firm Perth

STRATA UPDATE: KEY CHANGES – AMENDMENTS TO THE STRATA TITLES ACT COMMENCED 1 MAY 2020

May 7, 2020
April Peterson
Comments Off on STRATA UPDATE: KEY CHANGES – AMENDMENTS TO THE STRATA TITLES ACT COMMENCED 1 MAY 2020

7 May 2020

Prepared by Darryl Kipping

On Friday 1 May 2020, the amendments to the Strata Titles Act 1985 (WA) (Act) came into effect. These amendments were introduced by the Strata Titles Amendment Bill 2018, with the objective to provide ‘a clear, modern, transparent and accountable legislative framework for creating and managing strata’.

Key Changes

The primary areas of change to the Act are as follows:

changes concerning the information that must be disclosed to buyers of strata titled property, including the introduction of:
- a new Precontractual Disclosure Statement;
- two categories of notifiable variations;
broadening of the powers of the State Administrative Tribunal (SAT) concerning strata disputes and enforcement of by-laws;
a new procedure, including the introduction of safety measures, for the termination of strata schemes;
reforms concerning strata by-laws, including categorisation of by-laws into Governance By-laws and Conduct By-laws;
the introduction of a requirement for 10-year maintenance plans and compulsory reserve funds for certain strata schemes;
strata management reforms, including:
- the introduction of statutory duties; and
- requirement for compulsory education, professional indemnity insurance and criminal record statements for professional strata managers;
permitting electronic options for scheme meeting attendance, voting and communications;
introducing provisions for leasehold schemes; and
provisions for more flexible staged strata subdivisions.

Precontractual Disclosure Statement

An increased amount of disclosure information must now be provided to any buyer of a strata titled property in the form of a Precontractual Disclosure Statement (this replacing the previous Form 28 Disclosure Statement).

The form of the Precontractual Disclosure Statement can be found here. The required disclosure includes:

estimated strata levy contributions over a 12-month period;
the most recent statement of accounts of the strata scheme;
any amount already owed to the strata company by the current lot owner;
the minutes from the most recent annual general meeting of the strata company or any extraordinary general meeting that’s been held since;
a full set of the scheme’s by-laws including any specific exclusive use by-laws; and
information about any termination proposal received by the strata company;
if the required disclosure is not provided to a buyer, the buyer may:
- avoid the contract if the buyer is materially prejudiced by the information not provided; or
- delay settlement for up to 15 working days after the latest date that the seller complies with its disclosure requirements.

Notifiable Variations

The notification requirements concerning any variation to information disclosed in a Precontractual Disclosure Statement has changed. There are now two categories of notifiable variations, Type 1 Notifiable Variations and Type 2 Notifiable Variations. When a buyer may avoid a contract because of a notifiable variation (including the failure by the seller to provide the buyer with notice of the notifiable variation as required by the Act) differs depending on whether the variation is a Type 1 Notifiable Variation or Type 2 Notifiable Variation.

Further details of what constitutes a Type 1 Notifiable Variation and a Type 2 Notifiable Variation and the rights of a buyer upon the occurrence of one of these, including where a seller fails to provide adequate notification, are set out in the form of the Precontractual Disclosure Statement a copy of which can be found here.

The Strata Titles (General) Regulations 2019 (Regulations) now also:

set out specific particulars that must be provided to a buyer when providing notice of a notifiable variation; and
specify the time that certain notifiable variation events occur, this being relevant for determining when the seller must provide notice of that notifiable variation.

Broadening of Powers of SAT

From 1 May 2020 all new strata disputes are to be heard in SAT, with the exception of the recovery of unpaid levies which will continue to be dealt through the civil Court system.

SAT will now be able to:

make monetary orders in excess of its previous limit of $1,000;
make summary decisions at directions hearings;
order a strata company to terminate or vary a contract for the provision of services or amenities to the strata company or owners; and
convert non-monetary orders to monetary orders with monetary orders being much easier to enforce. This means that where an order is made by SAT and a person fails to comply, SAT will have the power to order that person to pay a sum which equals that which would have been required to fulfill the non-monetary order.

Any disputes already commenced in a Court before 1 May 2020 will continue be heard in that Court.

Termination of Schemes

A new process for termination of strata schemes has been implemented. This is intended to be more streamlined and more fair. The process now provides:

for a two-stage proposal process, with an initial outline proposal and subsequent “full proposal”;
specific details of what the full proposal must contain; and
a requirement for the full proposal to be referred to an independent advocate to review and provide an independent assessment.
for strata schemes of 4 lots or less the decision to terminate must be unanimous.
for strata schemes of 5 lots or more, a number of safeguards have been put in place including:
- where 80% of the owners agree to the proposal to terminate however there are any dissenting owners, a requirement for the proposal to be referred to SAT for independent review; and
- dissenting owners being provided access to representation, at the proponent’s expense, at SAT proceedings, with vulnerable owners being provided with extra assistance such as financial guidance and the option of an interpreter also at the proponent’s expense.

SAT will only order a scheme to be terminated if it is satisfied that:

the termination process was properly adhered to;
the termination proposal is just and equitable; and
every owners will receive fair market value for their lot or a ‘like for like’ exchange.

Changes concerning By-laws

A number of changes affecting by-laws have been introduced including:

The following types of by-laws are now invalid:
- by-laws created without the power to make them;
  - by-laws that are inconsistent with the Act or any other law;
  - by-laws limiting the right of an owner to vote on a resolution (where the limitation is in addition to any set out in the Act);
  - by-laws prohibiting or restricting an owner selling their lot;
  - by-laws prohibiting the use of an assistance animal; and
  - any other by-law that is unfair, discriminatory, oppressive or unreasonable.
A new categorisation of by-laws into:
- Governance By-laws, which set out how the strata company is run or governed (for example, how the strata council is formed and how meetings are conducted). The creation, amendment or repeal of Governance By-laws will require a resolution without dissent (or unanimous resolution for a two-lot scheme); and
- Conduct By-laws, which set out how people are to behave in the scheme (for example, a by-law that addresses the drying of laundry items and signage). The creation, amendment or repeal of Conduct By-laws will only require a special resolution.
Various amendments to the default or standard by-laws provided in the Act;
A requirement for a consolidated set of by-laws to be lodged (this being a document including all current by-laws for the scheme) when, after 1 May 2020, any by-law is added, amended or repealed for a scheme. In the case of a strata scheme registered before 1 May 2020 this includes a requirement to incorporate any necessary changes arising from the amendments to the Act such as deletion of by-laws now invalid. Landgate’s guide to consolidating by-laws can be found here; and
An increase of the penalty that SAT may order a person pay for breaching a by-law to $2,000.00.

10-year Maintenance Plan and Reserve Fund

A 10-year maintenance plan and reserve fund is now required for:

a strata scheme with 10 lots or more; or
a strata scheme with less than 10 lots but a replacement value for buildings or improvements on the common property of no less than $5 million.

The Regulations set out the requirements for the 10-year maintenance plan, which must set out all common property that may require maintenance, repair, renewal, or replacement in the 10-year period and the estimated costs of the same.

The 10-year maintenance plan and reserve fund must be submitted at the first AGM that occurs after 1 May 2021 and must be reviewed and extended at least once every 5 years.

Statutory Duties on Strata Managers

Strata manager’s must now comply with the statutory duties to:

act honestly and in good faith;
use reasonable skill and care;
have a good knowledge of the Act. This includes being aware of the many new requirements, processes and statutory rights that have been introduced;
not use information or their position improperly;
inform the strata company of any conflict of interest as soon as practical;
disclose any commission, remuneration or benefit received or expected to be received concerning the management of a strata company in a year from any person that is $100 or more; and
hold strata company funds in an ADI trust account or ADI account of the strata company that the strata manager is authorised to use, with such account to be capable of being audited.

Professional Indemnity Insurance, Compulsory Education and other reforms concerning Strata Managers

In addition to the imposition of statutory duties, the Act has been amended to include a number of other reforms concerning strata managers. These reforms include:

Starting 1 May 2020 for any new strata management contracts and by 1 November 2020 for a strata management contract entered into prior to 1 May 2020:
- a strata manager must have a written contract between them and the strata company that complies with the Act. This contract must include:
  - details of each scheme function that the strata manager is to perform and any conditions that are to apply to that performance;
  - a requirement that the strata manager provide the strata company with written reports about the performance of the strata manager’s functions under the contract;
  - details of what account the strata company’s money is held (such account must comply with the requirements of the Act);
  - warranties from the strata manager that the strata manager will undertake the following, as required under the Act:
    - conduct criminal record checks and provide a criminal record statement;
    - maintain professional indemnity insurance;
    - ensure the required educational qualifications are met; and
    - the text of, or draw attention to, the provision of the Act that gives the strata company statutory rights to terminate a strata management contract;
- a strata manager must take out and maintain the required level of professional indemnity insurance (this currently being no less than $1 million for any one claim);
- a strata manager must conduct criminal record checks for themselves and specified employees, contractors and agents performing functions of the strata company and give each strata company they manage a statement:
  - confirming that those criminal record checks have been done; and
  - whether the strata manager or their specified employees, agents and contractors have been convicted of a property or dishonesty offence as specified in the Regulations,

conducting and renewing the criminal record checks is an ongoing requirement which must be done at least once every 3 years by a strata manager;

a strata manager and its specified employees, contractors and agents performing a key role must obtain educational qualifications, as detailed in the Regulations, by 30 April 2024;
a strata manager must lodge an annual return with Landgate containing general information of each scheme under their management. The first annual return will need to be lodged with Landgate between 1 January 2022 and 31 March 2022, and then annually thereafter; and
express right for a strata company to:
- terminate a strata management contract if the strata manager breaches the contract or one of their duties under the Act; or
- seek an order for damages from SAT against a strata manager where a breach by the strata manager of its duties or the strata management contract causes the strata company financial loss.

Electronic Communication and Records

Electronic options are now available for strata meetings, voting and communications. A strata company is now also able to keep its records in an electronic format and execute documents electronically.

Leasehold Schemes

A new form of leasehold strata tenure has been introduced.

A leasehold strata scheme will involve a strata lease for each lot in the scheme that expires on the same date. These leases will have a fixed term of 20 to 99 years. The owner of a lot in a leasehold scheme (defined as the Lessee) has a long-term lease of a lot (Strata Lease). That Strata Lease will have its own separate certificate of title (separate to the certificate of title for the freehold of the land over which the leasehold scheme is registered).

The Lessee can mortgage or transfer their Strata Lease, without the consent of the owner of the freehold of the land the leasehold scheme relates. The Lessee will be a member of the leasehold scheme and partake in deciding how the scheme is run.

Once the leasehold scheme expires or is terminated, the land including any buildings will revert to the owner of the freehold of the land the leasehold scheme relates.

Staged Strata Subdivision

The Act has been amended concerning the staging of the development of strata schemes. Details of staged strata developments are to now be set out in the scheme by-laws and known as staged subdivision by-laws.

The amendments to the Act concerning staging of the development of strata schemes are intended to provide developers with more flexibility to deliver strata schemes in stages, clarifying when the consent of owners will be required to any changes in what is to be developed in the stages while still protecting the rights of owners who bought into earlier stages of the development.

WE CAN HELP

The amended Act will have a significant impact on strata schemes, and it is important that affected parties familiarise themselves with the implications these changes may have, or obligations they may be subject to. If you require any advice in relation to the changes to the Act and how they may affect you, please contact us here.

All information is current as of 5:00pm on 6 May 2020, based on publicly available information.

Disclaimer: This update does not intend to provide legal advice and should not be relied upon as such. If you require independent legal advice or would like to discuss any of the issues raised that may be applicable to your situation, please do not hesitate to contact our team.

Liability limited by a scheme approved under Professional Standards Legislation.