Strata Schemes Management Regulation

2016

Submission

OWNERS CORPORATION NETWORK OF AUSTRALIA

Level 5, 275 George St SYDNEY NSW 2000

P (02) 8197 9919

E eo@ocn.org.au secretary@ocn.org.au W www.ocn.org.au

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Summary of Recommended Changes Documents and records to be provided to owners corporation before first AGM (clause 6) 4 Tenant representatives (clauses 7 and 8) ..................................................................................... 4 Voting (clauses 14 through 18) ....................................................................................................... 5

Handling amended motions - additional clause .................................................................. 5

Other means of voting - clause (1) (a) ................................................................................. 5

Postal voting (clauses 16(5)(c) and 16(6)(b)) ..................................................................... 5 Payment plans for unpaid contributions (clause 19) .................................................................... 5

Accounting records (clause 23)....................................................................................................... 6

Common property memorandum (clause 27) ............................................................................... 7 Minor renovations by owners (clause 28) ...................................................................................... 8

Introduction (clause 28) .......................................................................................................... 8 Removal of carpet (clause 28(a)) .......................................................................................... 8

Installing a clothesline (clause 28(c)) ................................................................................... 9 Installing a solar panel (clause 28(e)) .................................................................................. 9

Installing a rainwater tank, air conditioner or heat pump (clause 28 (b,d,f)) .................. 9 Initial maintenance schedule (clause 29) .................................................................................... 10

Disposal of abandoned goods and payment of proceeds (clauses 32 and 33) .................... 11

Disposal Notice (clause 32(3)(e)) ....................................................................................... 11

Recovery of costs (clause 32 and 33) ................................................................................ 11

Removal of motor vehicles (clause 34) ........................................................................................ 11 Disposal Notice (clause 34(3)(e)) ....................................................................................... 11

Recovery of costs (clause 34) ............................................................................................. 11 By-laws for schemes before 1996 (clause 35) ........................................................................... 12 Occupancy limit by-laws (clauses 36 and 37) ............................................................................ 12

Intent of section 137 of the Act ............................................................................................ 12 Exemption for related adults (clause 36) ........................................................................... 12

Exemption for occupancy limits - residents (clause 37) .................................................. 13 Records and information about strata schemes ......................................................................... 13

Electronic voting records (clause 41) ........................................................................................... 13 A mediator may direct (clause 41(3)) ................................................................................. 13

Building Defects (clauses 44 through 56) .................................................................................... 14

Interpretation .......................................................................................................................... 14

Building inspectors ................................................................................................................ 14

Disclosure of previous employment by the developer ..................................................... 14 Interim reports section 199 (2) of Act ................................................................................. 15

Final Report section 201 (2) of Act ..................................................................................... 15 Building Bonds ....................................................................................................................... 15 Additional documents to be lodged with the building bond ............................................. 15

Payment of Building Bond .................................................................................................... 15 Review of Decisions .............................................................................................................. 16

Strata information certificate (Form 4 of Schedule 1) ................................................................ 16 10 year capital works plan - Part 7 ..................................................................................... 16

Pending By-laws - Part 15 .................................................................................................... 16

Distinguishing Model By-laws - Schedule 2 ...................................................................... 17 Distinguishing Model By-laws - Schedule 3 ...................................................................... 17

Model By-law 1 - Vehicles .................................................................................................... 17

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Model By-law 2 - Damage to common property ............................................................... 18

Model By-law 5 - Keeping of animals ................................................................................. 18 Model By-law 7 - Behaviour of owners, occupiers and invitees ..................................... 18

Model By-law 9 - Smoke penetration ................................................................................. 18

Model By-law 14 - Hanging out of washing ....................................................................... 19 Model By-law 15 - Disposal of waste ................................................................................. 19

Model By-law 16 - Change in use or occupation to be notified ...................................... 19 Model By-law 17 - Compliance with planning and other requirements ......................... 20

Additional matters to be covered in the Regulation ................................................................... 21

Dealing with proxies disallowed by Sch 1 Pt 4 Division 2 of the Act ............................. 21

Duty under section 106 (1) of the Act ................................................................................. 22

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Documents and records to be provided to owners corporation before first AGM (clause 6) While the original owner or lessor is prevented by section 26 of the Act from entering into contracts for the maintenance or management of the common property for a period beyond the first AGM, the original owner or lessor will have put in place agreements for services. The original owner or lessor should be obliged to provide to the owners corporation before the first AGM all agreements relating to utility services for water, gas and electricity.

Tenant representatives (clauses 7 and 8) Generally There needs to be further clarity in relation to:

The responsibilities of the representative

That the maximum number of persons permitted on a strata committee excludes the tenants’ representative

Clause 7 (1) The tenants’ meeting is required to be convened by ‘the person who convenes the Annual General Meeting.’ The implication of this is that the tenants meeting can only be convened once the Annual General Meeting has been convened. The period of Notice for convening the AGM is 7 days under the Act. Just who convenes the AGM may therefore be decided well after the expiry of the period for calling the tenants’ meeting. A literal interpretation of this clause would mean that the AGM would need to be convened no later than the last day for calling of the tenants’ meeting, leading to a minimum 21 days Notice instead of the statutory 7 days for convening an AGM. Clearly this is not the intent of the Regulation. To remedy this the clause should be amended to read: ‘A person entitled to convene an annual general meeting....’ Clause 7 (2) There is no date set before which a tenant’s meeting cannot be convened. The calling of the tenant’s meeting should be within a reasonable period of the convening of the AGM This clause should be amended to read ‘The person must give notice to each eligible tenant not more than 2 months before and not later than 21 days before the...’ Clause 7 (3) The tenants meeting should be chaired by the Chair or Secretary of the strata committee, or the strata managing agent. This provides some flexibility and conforms with meeting practice.

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Voting (clauses 14 through 18)

Handling amended motions - additional clause

Under schedule 1, 18 Motions require notice of the Act, a person at a meeting may put a motion to amend a motion. But with electronic, pre-meeting electronic and postal voting now enabled there should be a limitation on the amount a motion can be amended at a meeting without the input or knowledge of those absent voters who have already cast their votes. To limit the amount a motion can be shifted without a pre-meeting electronic voter’s knowledge, include in the regulations something like:

A motion to amend a motion (pursuant to schedule 1 clause 18 of the Act) must retain the intent of the original motion so much so that those who have cast pre-meeting votes would not be disadvantaged.

Other means of voting - clause (1) (a)

Methods of voting that may be adopted by resolution include ‘email or other electronic means while participating in a meeting from a remote location’. However clause 14 (1)(b) then refers to ‘...voting by means of email or other electronic means before the meeting...’ This is an inconsistent use of the concept of email voting which would only be appropriate to pre-meeting voting and could not be used by a person participating in a meeting from a remote location. Therefore the words “while participating in a meeting from a remote location” should be removed.

Postal voting (clauses 16(5)(c) and 16(6)(b))

Clause 16(5)(c) and 16(6)(b) of the Regulation, instructs a voter to give the vote to the secretary. The word ‘give’ implies there must be a physical handing over of the vote to the secretary which may not be the case and might impose an otherwise unintended limitation on the method of delivery. Better to use the generic phrase ‘provide to the secretary.’

Payment plans for unpaid contributions (clause 19) Clause 19(1)(g) requires that details of the member of the strata committee who is to be responsible for any of the matters arising in relation to the payment plan be contained in the Plan. In many schemes such matters as the administration of a payment plan will be delegated to the strata agent. As such, the agent would be included under delegation. For clarity it could be included as: ‘member of the strata committee or strata managing agent.’ Clause 19(2) requires that the strata committee must give a monthly written statement. While it is understood to mean members of the strata committee, it may be preferable to state as: ‘ the treasurer or strata managing agent must provide a monthly written statement.’

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Accounting records (clause 23) The list of accounting records specified in Regulation clause 23 is inadequate to provide accounting information of the type required to successfully manage a scheme. Furthermore typical accounting packages currently in use recognise this by providing additional information. Clause 23 as currently drafted in addition to nominating Receipts and a Levy Register provides only for a Cash Record and a Statement of Deposits and Withdrawals. Such records provide information on individual transactions but do not provide any aggregated information of a type that can be used for effective financial reporting. Accounting systems typically follow double entry principles and every income and expense transaction is posted to a Detailed Ledger Account including as interest, insurance recoveries, plumbing, strata management fees, etc. Such records are essential for the purpose of providing information to owners and preparing both budgets and financial statements. Clause 23 should be amended with the addition of: ‘(e) a detailed ledger of income and expense accounts sufficient from which to derive budgets and financial statements.’

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Common property memorandum (clause 27) Does the proposed Common Property Memorandum appropriately set out maintenance responsibilities? If not, what responsibilities or items should be amended and why? In respect of the items listed in the Common Property Memorandum, being Appendix 2 of the RIS, the following items should be added or modified: Owners Corporation responsibility

1. (a) columns and railings door, What is a ‘railings door’?

1. (e) ‘tiles and associated waterproofing affixed at the time of registration of the strata plan’.

Add ‘...but not including any tiles and associated waterproofing installed by an owner after the registration of the strata plan.’ Ref also Owners 5(e)

2. (c) Delete ‘ceiling cornices (other than painting, which shall be the lot owner’s responsibility)’. It is already covered in Owners Corporation Item 6. (c) in so far as it relates to common property walls

5. (c) ‘original floor tiles and associated waterproofing affixed to common property floors’.

Wording should be amended to be identical to (amended) wording in OC 1(e) and OC 6(d). 6. (d) ‘tiles and associated waterproofing affixed at the time of registration of the strata plan’.

Add ‘...but not including any tiles and associated waterproofing installed by an owner after the registration of the strata plan’.

Lot Owner responsibility

3 (new) Add ‘Intercom handset serving one lot and associated wiring located within no- common walls’. New requirement - complements OC 3(d).

3(f) Add ‘smoke detectors in the building which are not connected to the fire board in the building.’ These detectors/alarms should be an Owners Corporation responsibility.

Detectors/alarms while not connected to the fire board, form part of a single comprehensive approved fire engineered solution for a strata building and are subject to annual inspection for functionality in the same way as detectors connected to the fire board (OC responsibility). They therefore become part of the Owners Corporation responsibility to maintain in order for it to be able to submit a complying Annual Fire Safety Statement.

5 (a) Amend ‘floor tiles affixed after registration of the strata plan’ to ‘floor tiles affixed by an owner after registration of the strata plan’.

5 (e) Delete ‘original floor tiles and associated waterproofing affixed to common property floors’. These should not be an owner responsibility but remain the responsibility of the OC

ref OC 1(e) . The OC, not the lot owner, should remain responsible for all original waterproofing. Refer OC 5(c) and 6(d) for consistency.

. 6 (new) Add ‘Clothes dryer’.

9 (b) Delete ‘locks additional to the original (or subsequent replacement of the original)’.

This is contrary to OC - 6 (b) (any window or door in a common property wall (including all window and door furniture).

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Minor renovations by owners (clause 28)

Overview

The intent of section 110 - Minor renovations by owners of the Act is to allow an owner with approval to perform works that are contained within the lot’s boundaries. In essence the intent of section 110 is, if the work performed has no impact on any other resident or owner, then the owner ought to be given an easier approval process for those works. Section 110(7) specifically excludes:

1. work that changes the external appearance of a lot, 2. work involving waterproofing

(These types of works are covered by Section 111 - Work by owners of lots affecting common property, and section 108 Changes to common property, of the Act.) It is therefore inappropriate for clause 28 of the Regulation to include any instances where the works would impact on:

1. the look and feel of the building, and 2. the maintenance obligations of the owners corporation. (Such works would need to be dealt with by a special resolution of the owners corporation and, where maintenance obligations exist, by means of safeguards contained in a special privileges by-law.)

Changes required

Introduction (clause 28)

In order to avoid misinterpretation of clause 28 by users of the Regulations, the introduction to clause 28 should be changed from:

‘Work for the following purposes is prescribed as minor renovations for the purposes of section 110 (3) of the Act.’

to: ‘Work for the following purposes is prescribed as minor renovations for the purposes of section 110 (3) of the Act provided that work:

1. is fully contained within the lot’s boundaries

2. does not change the external appearance of a lot

3. does not involve waterproofing, and

4. does not interfere with the peaceful enjoyment of the owner or occupier of another lot.’

Removal of carpet (clause 28(a))

Considering the RIS statement where it states that changes to flooring can sometimes cause ‘great distress’, it is clear that there is a significant and recognisable risk attached to removal of carpet and that it should, along with waterproofing, not be one of those works that can be subject to owners corporation, or delegated, approval under section 110 of the Act. Indeed many schemes would have a by-law in place prohibiting such works. Clause 28(a) - removing carpet or other soft floor coverings to expose underlying wooden or other hard floors, should be deleted.

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Installing a clothesline (clause 28(c))

Installing a clothesline would be inconsistent with section 110(7)(c) of the Act which states that: ‘This section does not apply to the following work: work that changes the external appearance of a lot’. Furthermore, model by-law 14(2) provides for options to restrict the visible hanging out of washing on the grounds of appearance. Clause 28(c) - installing a clothesline, should be deleted.

Installing a solar panel (clause 28(e))

Solar voltaic installations would typically be on common property roofs and would not be permissible under s107 of the Act for the reasons below

1. s110(7)(b) states that: ‘This section does not apply to …. work involving structural changes’ 2. s110(7)(c) states that: ‘This section does not apply to …. work that changes the external appearance

of a lot’. 3. s110(7)(d) states that: ‘This section does not apply to …. work involving waterproofing’.

They would also constitute changes to common property that require approval under s108. They would also require a by-law to define maintenance obligations. Clause 28(e) - installing a solar photovoltaic system or solar hot water, should be deleted.

Installing a rainwater tank, air conditioner or heat pump (clause 28 (b,d,f))

Clauses 28(b, d, f) adds installing rainwater tank, air conditioner or heat pump to section 110 of the Act - Minor renovations by owners. Any installation on common property would require a by-law in relation to ongoing maintenance obligations and therefore be ineligible for approval under this section of the Act. Under limited circumstances referred to in this clause could be acceptable for approval through the process of section 110 of the Act. Clause 28 should explicitly provide that section 110 approval is only available where the work

1. is fully contained within the lot’s boundaries,

2. does not change the external appearance of a lot,

3. does not involve waterproofing, and

4. does not interfere with the peaceful enjoyment of the owner or occupier of another lot.

Such limiting conditions should be attached to ALL minor renovations identified in clause 28 of the Regulation.

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Initial maintenance schedule (clause 29) Clause 29(1) list is incomplete and needs to have further items added in order to comprehensively cover a building’s anticipated maintenance requirements. A. Existing items should be expanded/amended as follows: (e) windows (e) windows, window fixtures and fittings, (f) doors (f) doors (including garage doors), locks and door hardware, (g) gates (g) gates and roller doors (i) gutters (i) gutters and downpipes, (q) drain tiles and sumps (q) drain gratings, agricultural pipes, and sumps B. The following further items should be added:

● fascia boards and roofing ● roof anchor points and alternative safety access systems ● common property floor coverings and carpet ● lighting, lighting fixtures and fittings, ● intercom systems ● TV and internet reception and distribution ● CCTV and security access systems ● common hot water systems, valves and plumbing ● common property toilets/bathrooms/washrooms/wet areas ● installed gym equipment ● roof waterproofing membranes ● mechanical garbage handling equipment

The amended schedule should be organised in two sections: 1. Structural 2. Building services

Clause 29(3) provides for the inclusion of an inspection schedule in the maintenance schedule. The schedule needs to be completed to the extent that any servicing, inspections or other maintenance work has already been carried out at the time of handover of the schedule. Therefore the following should be added to clause 29(3) ‘...including an accurate record of servicing conducted to date’

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Disposal of abandoned goods and payment of proceeds (clauses 32 and 33)

Disposal Notice (clause 32(3)(e))

Compliance matters of this sort are frequently dealt with by a delegated person such as a building manager or strata agent, rather than by a member of the strata committee and the Regulation should allow for this. Contact details ‘...member of the strata committee…’ should be replaced by ‘...office bearer, strata managing agent, building manager or other person delegated by the owners corporation…’

Recovery of costs (clause 32 and 33)

Clause 32 covers the recovery of costs where the sale of the goods exceeds the cost of disposal. But in the majority of cases what is left on common property has no saleable value. For the majority of cases, the regulations should provide a means for the owners corporation to recover the cost of disposal from the resident, owner or person.

Removal of motor vehicles (clause 34)

Disposal Notice (clause 34(3)(e))

Compliance matters of this sort are frequently dealt with by a delegated person such as a building manager or strata agent, rather than by a member of the strata committee and the Regulation should allow for this. Contact details ‘...member of the strata committee...’ should be replaced by ‘...office bearer, strata managing agent, building manager or other person delegated by the owners corporation...

Recovery of costs (clause 34)

In clause 34 there is no provision for an owners corporation to recover costs (eg tow truck hire). The Regulation should contain a process to recover costs from the resident, owner, or person.

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By-laws for schemes before 1996 (clause 35) The inclusion at Schedule 2 of the Regulation of the Model By laws relating to pre 1996 schemes is a confusion and distraction. Their inclusion is accounted for by the wording and referencing of s134 of the Act. A person seeking information from the Regulation will be confused by the fact that they contain

Model by laws that were applicable to pre 1996 schemes

Model by-laws that are applicable to schemes created after the commencement of the 2015 Act BUT

No Model by-laws for those schemes created between 1996 and 2016 The Regulation typically relates to the implementation of the provisions of the 2015 Act. The pre 1996 Model by laws, however, whilst they may need to be referenced by schemes having those earlier Model by laws; are not included in the Regulation for the purpose of being adopted. They are there as historical information only. In order to mitigate the widespread confusion as to which model by laws might currently be adopted, a clear statement is required to the effect that the by-laws in force for a strata scheme are those by laws in existence at the commencement of the 2015 Act including any amendments or repeals subsequently registered ( irrespective of whether the by-laws came into existence before or after 1996).

Occupancy limit by-laws (clauses 36 and 37)

Intent of section 137 of the Act

Section 137 of the Act is to give strata schemes a method to prevent chronic overcrowding of lots which in turn can lead to:

● fire safety issues when a lot is reconfigured to take more people than it was originally designed to take,

● health issues where shower and bathing facilities are limited, and ● social issues where overcrowding occurs in one lot in an otherwise residential strata scheme.

Exemption for related adults (clause 36)

Clause 36 makes any by-law limiting the number of adults to two per bedroom not applicable to people who are either blood related or kinship related. So if the owners corporation has concerns about safety, health, and social issues due to chronic overcrowding then the owners corporation can place limits on the couples and tenants but they cannot place an occupancy limit for related adults. It is illogical to exclude certain groups from any law which is addressing safety, health, and social issues. The exemptions enable a two bedroom apartment to be occupied by some two dozen people so long as they are blood or kin related. To restate; is it suggested that because people are related, they are somehow immune to causing safety, health, and social issues? Clause 36 should be reconsidered and amended in a manner that, whilst allowing reasonable levels of occupancy, provides for the maintenance of social, health and fire safety standards.

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Exemption for occupancy limits - residents (clause 37)

Clause 37 makes any by-law limiting the number of adults to two per bedroom not applicable to people who stay less than three months. This allows a scheme to control overcrowding by overseas students, but not to limit overcrowding by rotating Airbnb type clients. The social, fire and safety issues arising from these two types of overcrowding are similar. Indeed the overcrowding by casual tenants may pose even greater risks than overcrowding by longer term tenants with greater familiarity of a building. The overcrowding provisions of the Act are directed towards arrangements where typically unregistered tenants occupy lots on a multiple occupancy basis. Retaining clause 37 would defeat the purposes of the Act. Clause 37 should be removed.

Records and information about strata schemes The RIS document posed the question, ‘should electronic storage be encouraged by setting lower fees that may be charged for inspection of paper records?’ and clause 60 and Schedule 4 set out the fees for the inspection of records which are currently set at $31 for the first hour and an additional $16 for each half-hour after that. Part of the problem that the RIS question addresses is that some strata management companies are purposely making the inspection of records difficult so as to extend the search time beyond the first hour and thereby increase the title search payment to the company. Also there are significant fees charged if the title search required copies of documents. It may be impractical to require all schemes to keep electronic records as not all will find it easy to adopt the position of implementing electronic record management. Encourage the larger schemes, strata agents, and others, to adopt electronic storage and provision of records, by setting the fees for inspection of records to access for;

● electronic records: $40 to inspect and, if required, $20 for a digital copy of the records, or ● paper records: $31 as a flat rate.

Electronic voting records (clause 41)

A mediator may direct (clause 41(3))

Under Part 12, Division 2 - Alternative dispute resolution by secretary, of the Act there is no scope for a mediator to direct any action or thing on any party. Nor is there any provision for the Regulation to add to the powers of the mediator. The power to judge and to direct is only provided to the Tribunal (refer Part 12, Division 4 - Orders that may be made by Tribunal of the Act) and cannot be legally extended to a mediator. Therefore the reference to mediator should be removed so that Clause 41 (3) reads

‘The owners corporation must not provide, or disclose the contents of, any such voting papers unless required to do so by the Tribunal, or a court.’

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Building Defects (clauses 44 through 56)

Interpretation

Clause 44 The definition of developer in Part 11 of the Act should be modified by the Regulation to close the loophole whereby responsibility can be avoided by interposing a $2 company between the developer and the builder. As it currently stands, Part 11 will not apply at all for building work that is not “carried out by or on behalf of a developer”. In Baron Corporation Pty Ltd v Owners of Strata Plan 69567 [2013] NSWCA 238, the NSW Court of Appeal found that work carried out “on behalf of” a developer was only applicable where the developer directly contracted with the builder. In that case, a landowner developer avoided responsibility for defects under the Home Building Act by interposing a $2 company controlled by the director between the developer and the builder. Whilst that loophole has been closed by amendment to the Home Building Act, the definition used in Part 11 of the Act perpetuates the same loophole.

If a developer wanted to avoid the obligation to arrange building reports or pay a bond, it would simply have to put a $2 company between it and the building contractor.

A building inspector who is connected to the landowning developer could be retained without disclosure to an owners corporation as the building inspector would not be connected to the ‘developer’ as defined in section 190 even though the inspector is connected to the landowner who is the real developer.

Building inspectors

Clause 45 Inspectors must be appointed from an independent panel which stipulates qualifications and a Code of Conduct, and requires PI insurance. The NSW Building Professionals Board (BPB) already has the framework in place for building certifiers and the process would be cost neutral to government by simply charging an accreditation fee as the BPB already does for building certifiers. Cause 45 The cost of the building inspections to the developer under the Act should not be limited except to the extent that the Regulation could set a percentage of the final contract price, including variations, as a guide. This aligns with the calculation method for the bond, and will also align with the size and complexity of the building.

Disclosure of previous employment by the developer

Clause 46 The clause should be amended to read ‘a building inspector must disclose previous employment with, or contractor work for, the developer or builder that occurred at any time within the period of 2 years before appointment as a building inspector on this project.’

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Interim reports section 199 (2) of Act

Clause 47 The report must identify a scope of works to achieve compliance with warranties, including a reasonable time for carrying out repairs, and critical stage inspections. The Act s.199(2)(b)) stipulates “Defective building work of a kind required by the regulations to be reported on”. This needs to be defined in the Regulation. No draft form approved by the Secretary has been provided for comment and is required

Final Report section 201 (2) of Act

Clause 48 The Final report must include a scope of works to achieve compliance with warranties, including a reasonable time for carrying out repairs, and critical stage inspections.

Building Bonds

Clause 50 (1) The ‘contract price’ must be defined as per the longstanding definition for ‘contract price’ in section 3 of the Home Building Act, with a clarification that it is to be the contract price as at when an occupation certificate is applied for. That will tie in with the section 207(6) of the Act and avoid situations where the bond provided is less than it should be due to substantial variations between the original building contract price and the cost of what is subsequently built. Without that clarification, developers will be able to easily manipulate the amount of the relevant ‘contract price’ leading to them paying a lesser bond than appropriate. The developer definition also creates a loophole in the proposed s.198 requirements for the independence of the building inspector. Due to this developer definition, a building inspector who is connected to the landowning developer may be retained without disclosure to an owners corporation as the building inspector would not be connected to the ‘developer’ as defined in section 190 even though the inspector is connected to the landowner (who is the real developer).

Additional documents to be lodged with the building bond

Clause 52 (f) Delete the current wording which fails to take into consideration variations to the contract. Refer clause 50 (1) above. Replace with ‘(f) evidence of the basis upon which the contract price is calculated’

Payment of Building Bond

Clause 55 (1) requires the secretary to give 14 days notice to the owners corporation of the proposed payment of the bond back to the developer. Giving schemes just 14 days notice could cause schemes to miss the opportunity to object to the release of the funds. The tight timeframe is exacerbated for new schemes where the new owners are typically disorganised and unfamiliar with the workings of strata. The notice period also needs to be sufficient for any committee or general meeting necessary to authorise the action to be called plus the clear days of service required. Therefore, a more appropriate timeframe would be 28 days notice.

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Review of Decisions

Clause 56 (3) requires an application to review a decision of the Secretary to be made within 14 days of the decision. Allowing just 14 days could cause schemes to miss the opportunity to apply for a review. The tight timeframe is exacerbated for new schemes where the new owners are typically disorganised and unfamiliar with the workings of strata. The notice period also needs to be sufficient for any committee or general meetings necessary to authorise the action to be called plus the clear days of service required. Therefore, a more appropriate timeframe would be 28 days notice.

Strata information certificate (Form 4 of Schedule 1)

10 year capital works plan - Part 7

Schedule 1, Form 4 part 7 introduces a new item: Proposals for funding matters set out in the 10 year capital works plan. The intention of this item appears to be to disclose the current actual balance of the Capital Works Fund and how it relates to the projected balance as set out on the 10 year Capital Works Fund Plan, thereby showing whether the Capital Works Fund is running ahead of or behind its long term budget. The form provides little guidance as to how this should be shown. Items to be disclosed on the form should be disclosed as:

Capital Works Fund at beginning of current financial year Balance as per the capital works fund 10 year plan Actual balance

Capital Works Fund at close of current financial year Balance as per the capital works fund 10 year plan Balance as per approved budget for year

Pending By-laws - Part 15

Schedule 1, Form 4 Part 15 By-laws requires Particulars of any by-laws made by the owners corporation within the 2-year period before the date of this certificate that have not been lodged at the office of the Registrar-General as at that date. This 2 year period was appropriate for the 1996 Act that allowed up to 2 years to register a by-law. But s141(4) of the 2015 Act requires a by-law to be registered within 6 months. Accordingly the period referred to in the form should reflect that new period. Therefore amend Schedule 1, Form 4 Part 15 By-laws to:

‘Particulars of any by-laws made by the owners corporation within the 6-month period before the date of this certificate that have not been lodged at the office of the Registrar-General as at that date.’

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Model By-laws

Distinguishing Model By-laws - Schedule 2

The inclusion at Schedule 2 of the Regulation of the model By laws relating to pre 1996 schemes is a confusion and distraction. Their inclusion is accounted for by the wording and referencing of section 134 of the Act. A person seeking information from the Regulations will be confused by the fact that they contain

Model by-laws that were applicable to pre-1996 schemes

Model by-laws that are applicable to schemes created after the commencement of the 2015 Act BUT

No Model by-laws for those schemes created between 1996 and 2016. The Regulation typically relates to the implementation of the provisions of the 2015 Act. The pre-1996 Model By-laws however, while they may need to be referenced by schemes having those earlier model by-laws; are not included in the Regulation for the purpose of being adopted. They are there as historical information only. To mitigate the widespread confusion as to which model by-laws might currently be adopted, a clear statement is required to the effect that the by-laws in force for a strata scheme are those by-laws in existence at the commencement of the 2015 Act including any amendments or repeals subsequently registered (irrespective of whether the by-laws came into existence before or after 1996).

Distinguishing Model By-laws - Schedule 3

The role and purpose of the Model By-laws in Schedule 3 needs to be clarified. There is a misconception among many strata owners and letting agents that the Model by-laws are the same as the operative by-laws for a scheme. This misconception needs to be addressed with clear wording that the model by-laws are, in effect, sample by-laws that schemes can choose to adopt as a suite or individually. There needs to be a statement to the effect that: ‘The Schedule contains by-laws that may be adopted by strata schemes either as selected individual by-laws or as their body of by-laws. Schemes may have by-laws that differ from the Model by-laws.’

Model By-law 1 - Vehicles

In the current vehicles parking by-law there are no restrictions as to where a visitor may park and who is responsible to ensure a visitor only parks in the visitor parking areas. Therefore add to the current proposed vehicles by-law:

‘Where there are designated registered visitor parking areas, an owner or occupier of a lot must take all reasonable steps to ensure that invitees of the owner or occupier only park their cars in the designated visitor parking area and only for a reasonable length of time.’

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Model By-law 2 - Damage to common property

The by-law should be more appropriately titled ‘Installation of devices on common property’. The by-law is concerned with the conditions for installation of devices on common property and the liability for damage is just one aspect of this. The by-law makes no reference to, and is not concerned with, damage caused by other means such as the conduct of occupants. Revising the title of the by-law would add clarity to the by-law. Clause (4) uses the phrase ‘Despite section 106....’ This indicates that the by-law may somehow be seen to be in conflict with the Act, which it cannot be. This should be amended to ‘Pursuant to s136 (1) of the Act’ to indicate an intended compliance with the appropriate section of the Act.

Model By-law 5 - Keeping of animals

Option B requires written approval that should not be reasonably withheld. Option B should be the default option. It would be particularly difficult for a scheme to start with a model by-law based on Option A (notification) and to move from there to Option B (approval) at a later date, were it to find the level and type of pet ownership had become unacceptable. It is also necessary to define what an ‘animal’ is. It is not necessary to return to previous by-law definitions of ‘small dog’, but without a definition of ‘animal’ an occupier could keep chickens, pigs, snakes, etc. Additionally, there should be a prohibition on the keeping of ‘restricted breed dogs’. Option A (notification without approval) should only be available for traditional pets - cats, dogs, and fish.

Model By-law 7 - Behaviour of owners, occupiers and invitees

In this by-law, there ought to be recognition of the landlord’s role and responsibilities in governing the tenant’s behaviour. Every tenant agreement includes a clause that prevents the tenant causing a nuisance, and the landlord has the power to enforce that agreement. Failure of a landlord to act to prevent the tenant causing a nuisance could be seen as the landlord being complicit in the breach of the strata by-law. This interpretation is backed up by the NSW case; Jean Whittlam v Sara Hannah & John Hannah [2011] Downing Centre Local Court 63913/11. To clearly define the landlord’s role in tenant’s behaviour, this by-law ought to include a clause:

‘Where a lot is tenanted or subleased, the owner or sublessor must take all reasonable steps to ensure that his/her tenants comply with this by-law.’

Model By-law 9 - Smoke penetration

Option C should be the default option. Option A is not required and should be deleted. Option B stands, but B (2) is redundant.

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Model By-law 14 - Hanging out of washing

Clause 14(2) refers to the need for washing to not be visible from ‘street level outside the parcel.’ This means that permitted washing could be visible from the common areas within a scheme/parcel at ground level and comply. 14(2) should be amended to read ‘...provided that the washing will not be visible from street level either within or outside the parcel.’

Model By-law 15 - Disposal of waste

This by-law is excessively long compared with all other by-laws and is too prescriptive and detailed for what it seeks to achieve. It will contribute to the bloating of a scheme’s by laws and should be rewritten more succinctly having regard to the following points. The by-law is written for two types of schemes - shared bins or common bins. The by-law would be more succinct and appropriate if these two cases were offered as an Option A or Option B to be selected depending on the building configuration. Further drafting amendments are required in respect of the following:

3(b) and 4(a) should be drafted much more succinctly by reference to current LGA recycling guidelines and requirements. This is also largely covered in (5) (a) in any case. (4)(b) places the onus on the owner or occupier to clean up the common shared bins area. In a shared bin scenario the responsibility for cleaning up should rest with an owner or occupier solely for that which they themselves have spilled – not that spilled by others or the scheme’s contractor. Amendments should reflect this. (5)(b) The obligation to notify the local council in relation to any loss or damage to bins should rest on an owner or occupier only in a non-shared bins scenario. Ref subclause (3). The drafting of 5(b) should be amended to reflect this. (6) It is unnecessary to empower the OC to be able to ‘post signs.’ The by-law should be amended to provide for owners and occupiers to observe waste handling instructions provided by the OC which are consistent with local council requirements.

Clauses 3, 4, and 5 could be expanded to stipulate that people are not allowed to place items outside of the bins but better if clause (1) were expanded to read:

An owner or occupier of a lot must not deposit or throw on the common property any rubbish, dirt, dust or other material or discarded item except with the prior written approval of the owners corporation. This includes (but is not limited to) depositing any rubbish, dirt, dust or other material, or discarded item on the floor, or on the ground, in the area designated for bins.

Model By-law 16 - Change in use or occupation to be notified

Short term letting for periods of less than 3 months is a significant change in use or occupation with social, safety and insurance ramifications for a scheme. Short term letting should be included in the examples set out in the by-law.

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Model By-law 17 - Compliance with planning and other requirements

Defining ‘non compliance’ by reference to activities ‘prohibited’ by law is inadequate. The by-law needs to address typical non compliant situations. Add: ‘The owner or occupier of a lot must ensure that the lot is not used for any purpose other than purposes permitted under the Development Consent or other planning instrument’.

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Additional matters to be covered in the Regulation

(Matters not canvassed in the RIS or appearing in the draft)

Part 2 Owners corporations & strata committees

Dealing with proxies disallowed by Sch 1 Pt 4 Division 2 of the Act

Schedule 1 Pt 4 Division 2 of the Act at clause 26(7) provides for a limitation to the number of proxies that may be held by one person. However neither the Act nor the Regulations make any provision for the treatment of proxies received in excess of the limits set out in the Act. The Issue Neither the Act nor the Regulations makes any provision for:

● the treatment of proxies received exceeding the limits set out in the Act

● the manner in which the valid proxies will be dealt with eg validation on a ‘first in’ basis in order of receipt by the secretary or strata agent

● the manner in which owners would be notified in cases where their proxies were among those invalidated and that their input/vote didn’t count as they had anticipated

Given traditional proxy patterns there is a significantly high likelihood that the Secretary and Chairperson will exceed the new proxy holding limits. However, owners choosing their proxy may be unaware at the time of whether their nominated proxy holder will be legally able to represent their view. The consequent loss of proxy representation disenfranchises the owner who has provided a proxy. Trying to mitigate the practice of proxy farming maladministration has already spawned the beginning of proxy panels. Unfortunately, limiting the number of proxies to be held will also have a negative impact and consequence on responsible owners as well. The Proposal If an owner was notified that their preferred proxy holder had exceeded their limit, they could decide to either attend a General Meeting in person or provide their proxy to another person. The Regulation needs to establish the procedures to be followed in the event that a proxy holder receives in excess of the number of proxies permitted.

(1) The Notice of General Meeting to include mandatory items as set out in the Act at Schedule 1 pt 2 clause 8 (1). The Regulation should stipulate that the Notice of General Meeting should also contain a warning to owners to the effect that an owner’s proxy may be invalid by virtue of its being held by a person who already holds the maximum number of proxies as allowed by Schedule 1 Pt 4 Division 2 of the Act at clause 26 (7).

(2) The Regulation needs to provide that, for the purpose of determining which proxies are valid and held within the limits set out in the Act, the date and time of lodgement of a proxy with the Secretary determines its validity, on the basis that proxies are valid until such time as the maximum permitted number is reached.

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Part 4 Property management

Duty under section 106 (1) of the Act

The effect of s106 of the Act will be that every unit owner is entitled to sue the owners corporation (OC) for damages for a widely interpreted definition of failure to ‘properly maintain’. The most unreasonable and those with the deepest pockets will gain at the expense of all the other innocent owners. In addition, without a clear definition of ‘properly maintain’ the way is open for insurers to extend the practice of adopting a hard line on indemnifying owners corporations for losses occasioned by building failure. The regulations should clarify what to "properly maintain" requires. In other words, it should provide that if the OC acts in a reasonable fashion without undue delay it will have discharged its duty under s106(1). It should also provide that when compliance under 106(4) is deferred then damages are not payable for losses incurred during that deferral period unless it can be shown that the actions of the OC were not reasonable. Damages should only be available if negligence can be shown. Finally, the contributory negligence (and failure to mitigate) of the claimant must be taken into consideration when allowing damages. The Regulation should define clearly "properly maintain" The definition should provide that:

1. If the OC acts in a reasonable fashion without undue delay, it will have discharged its duty under s106(1).

2. When compliance under 106 (4) is deferred, then damages are not payable for losses incurred during that deferral period unless it can be shown that the actions of the OC were not reasonable.

3. Damages should not be available unless negligence can be shown. 4. Any contributory negligence (and failure to mitigate) by the claimant must be taken into

consideration when allowing damages.