NSW Strata Reforms: Strata Managers connected with developers are ineligible for appointment

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One of the most significant changes that will come into effect on 30 November 2016, when the Strata Schemes Management Act 2015 (except for part 11) comes into effect, is that a developer or person who is connected with the developer cannot be a strata manager for 10 years after the strata plan is registered.

The definition of “connection persons” is contained in section 7 of the Act. It includes:

  • a relative of the developer,
  • an employee or business partner of the developer,
  • the employer of the developer; or
  • someone holding an executive position in the development company.

There is no mention in section 49 of the Act of related bodies corporate and related parties which had left open the possibility that related bodies corporate under the Corporations Act 2001 may not be “connected persons” under the Act. This possibility, has now been removed by clause 62 of the Strata Schemes Management Regulation 2016 which explicitly provides that connected persons will also include related bodies corporation or associated entities under the Corporations Act 2001.

What does this mean for your strata scheme? For new schemes it means that if a strata manager is a “connected person” that they simply cannot act as your strata manager. For existing schemes, section 49(3) of the Act and clause 62 of the Regulation will undoubtedly see some restructuring in the industry. This has already been seen with reports of Meriton selling its strata management business. See here for the SMH article:

http://www.domain.com.au/news/apartment-giant-meriton-selling-strata-business-due-to-changes-to-nsw-laws-20160929-grr0so/

What should you do? Ask the question of your strata manager. And ask for the response in writing.

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