PROPERTY UPDATE: 10 days to the commencement of the Strata reforms

Friday 1 May 2020 (Commencement Day) is a big day for anyone involved in strata with the amendments to the Strata Titles Act 1985 (Amended Act) taking effect.

Statutory duties imposed on strata managers starting 1 May

From Commencement Day strata managers will have to comply with statutory duties to:

• act honestly and in good faith;
• use reasonable skill and care;
• not make improper use of information acquired or their position to:
  • gain an advantage for the strata manager or any other person; or
  • cause detriment to the strata company or an owner;
• have a good working knowledge of the Amended Act;
• disclose to the strata company any conflict of interest, commission or other benefit received or expected to be received; and
• hold strata company funds in a trust account that can be audited.

The commission or other benefit (including a non-monetary benefit) that a strata manager must disclose is any commission or benefit received or expected to be received from a single supplier worth more than $100 in one year.

Strata management contracts: 6 months to comply

Strata managers will have 6 months from Commencement Day to ensure their strata management contract with each strata company complies with the Amended Act.

The requirements for strata management contracts detailed in the Amended Act and the Strata Titles Regulations 2019 (Regulations) are extensive and include that the contract must contain:

• details of what trust account the strata company’s money is held in;
• a provision that the strata manager must give the strata company written reports about the strata manager’s performance of functions;
• the text of or draw attention to the provision under the Amended Act that gives the strata company statutory rights to terminate a strata management contract; and
• provisions under which the strata manager warrants that they will:
  • conduct criminal record checks for themselves and for specified employees, agents and contractors;
  • give the strata company a criminal record statement;
  • hold and maintain professional indemnity insurance; and
  • ensure the strata manager and all specified employees, contractors and agents performing a key role will hold the required educational qualifications before the end of the four year grace period.

Non-compliant contracts will be void from 2 November 2020

Any strata management contract that does not comply with the Amended Act six months after Commencement Day will cease to have effect.

Other obligations imposed on strata managers

In addition, within six months of Commencement Day, strata managers will have to:

• conduct criminal record checks for themselves and for specified employees, agents and contractors who perform functions of the strata company; and
• give each of the strata companies they manage a criminal record statement confirming:
  • that those criminal record checks have been done; and
  • whether they 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 imposed on strata managers and criminal record checks for each specified person will need to be done at least once every 3 years.

Within six months of Commencement Day, strata managers will also need to obtain and maintain professional indemnity insurance of not less than $1,000,000 for any one claim.

Another of the statutory requirements is that the strata manager and all specified employees, contractors and agents performing a key role will need to obtain the required educational qualifications as detailed in the Regulations before the end of the four year grace period.

A good working knowledge of the Amended Act?

Strata managers will have a statutory duty to be aware of the many the new requirements, processes and statutory rights introduced by the Amended Act including:

• the requirement to consolidate by-laws;
• the ability to hold general meetings remotely and to make resolutions outside of general meetings;
• the express power for a strata company to improve common property;
• the improved enforcement of by-laws;
• the expanded options to resolve strata disputes through the State Administrative Tribunal; and
• the importance of section 119, which imposes a duty on the strata company to not act in ways that are unreasonable, oppressive, discriminatory or unfairly prejudicial.

Lavan Comment

After waiting decades for the Strata Titles Act 1985 to undergo major and much needed reform, strata managers, councils, owners and developers will have to comply with the Amended Act in just 10 days.  

Obtaining specialist legal advice on how to comply with and benefit from the Amended Act is essential during this transitional period.

If you require any advice on strata management, strata disputes, subdivision of strata, seller disclosure or majority termination under the amended Strata Titles Act 1985, please contact Tim Morgan or Sean Macfarlane.