NSW Strata Reforms: Strata Managers there are clouds in the distance prepare for new rules now

Paradise - clouds

The long awaited strata reforms in NSW are just around the corner. With the draft regulations out for public consultation there should be nothing stopping the regulations being finalised and the reforms commencing on 1 November 2016 as expected.

It is not going to be a paradise to implement the changes and strata managers should be aware of potential clouds in the distance and start preparing for the changes now. Some of the changes are:

1. Strata managers can only be appointed for an initial term of 12 months at the first annual general meeting or after the first annual general meeting for a term of three years: s50(1) Strata Schemes Management Act 2015 NSW (the 2015 Act).

2. Strata management agreements can be extended (note this is not an automatic rollover) however this is part of a complicated regime whereby:

  • there can be a three month extension of term (up to the date of the next AGM): s50(4) 2015 Act; OR
  • If the term is not extended by the owners corporation and the owners corporation did not provide three months’ notice of termination to the strata manager and the original appointment was for 3 years then there is a statutory option of a further 3 month term that the strata manager can take up. Note: the strata manager must give notice they are taking up the option: s50(7) 2015 Act.

3. Strata managers or strata management firms that are “connected with” the developer of a strata scheme are not entitled to be appointed as the strata managing agent for the scheme for a period of ten years after the registration of the scheme: section 49(3) 2015 Act. Section 7 of the 2015 Act defines connected persons very broadly and it includes persons employed by or engaged by or a business partner of the principal person (in this situation read developer for principal person). This means that strata managers appointed by or partnered with a developer will not be eligible to be a strata manager until the scheme’s tenth birthday.

4. Existing strata management agreements with terms of less than three years will terminate either at the end of the existing term or six months after the commencement of section 50(1) of the Management Act.

5. Existing strata management agreements with terms of more than three years will terminate either at the end of the existing term or six months after the commencement of section 50(1) of the Management Act.* See update below

6. Strata Managers must continuously formally disclose any benefit or training received in the course of their duties and must not request or accept a gift unless it is less than the prescribed amount (the draft regulations set this amount at $60). Failure to disclose is an offence under the 2015 Act and can incur penalties.  Disclosed training, commissions and remuneration are exceptions to this: s57 & 60 2015 Act.

7. The NSW Civil & Administrative Tribunal (NCAT) will have the jurisdiction to make orders in regards to strata managers and strata management agreements including the power to terminate or vary an agreement: s72 2015 Act.

These are some of the key changes affecting strata managers. There are other significant changes affecting how schemes are to be managed that will be addressed in future blogs.

UPDATE: 8 November 2016.

  1. All but part 11 of the Strata Schemes Management Act 2015 will commence on 30 November 2016.
  2. The Strata Schemes Management Regulations 2016 have now been published and they provide that: If a strata management agreement is in a rollover phase or was for a term of over three years and it is now been in effect for three years or more then it will end on 31 May 2017. If an existing strata management agreement is for a three year term then it will end at the end of the three years.

2 responses to “NSW Strata Reforms: Strata Managers there are clouds in the distance prepare for new rules now

  1. I think there is a mistake in your point 5.
    You write that:
    5. Existing strata management agreements with terms of more than three years will terminate either at the end of the existing term or six months after the commencement of section 50(1) of the Management Act.

    But the change that is going to be introduced, as per s66 of Strata Schemes Management Regulation 2016, says this:
    “The term of appointment (…) ends on the following day:
    if the agent was appointed or reappointed for a term (inc any roll over or extension) of 3 years or more, on the day that is 3 years after the term commenced or that is 6 months after the commencement of section 50 (1) of the act, whichever is the later, or (…).”

    So this means that if the agent was appointed for a term of 5 years for argument’s sake, than, according to your interpretation in point 5, it would finish at the end of 5th year. But in fact, it should finish on the day that is 3 years after the term commenced.

    Please can you review and advise.

    • Hi Joanna, Thank you for your comment. You are correct. My post was written before the final version of the Regulations was produced. Essentially, if a strata management agreement is in a rollover phase or was for a term of over three years and it is now been in effect for three years or more then it will end on 31 May 2017. If an existing strata management agreement is for a three year term then it will end at the end of the three years. Allison

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