Navigating Notifiable variations under the amended Strata Titles Act

Apartment developers and other sellers of strata lots have an ongoing obligation to disclose various changes that occur to the strata scheme after the contract date. These changes are referred to as “notifiable variations” in the Strata Titles Act (Act) and are colloquially referred to as “NVs”. Common NVs result from changes to the strata plan, schedule of unit entitlements, by-laws and strata company service contracts.

Failure to comply with these onerous disclosure obligations (most often inadvertently) has traditionally had significant consequences for apartment developers. It is one of the most common technical grounds that off the plan buyers have used to exit their contracts in a falling market.

Thankfully, amendments to the Act significantly reduce the likelihood of an off the plan buyer successfully exiting a contract under the NV regime.

This article highlights some of the important changes to the NV regime and practical implications for apartment developers.

Two disclosure regimes currently operate

It is important to note that the new and less onerous disclosure regime does not apply to contracts signed before 1 May 2020.

The new disclosure regime only applies to contracts signed on and from 1 May 2020.

Many developers have a mix of pre and post 1 May contracts for their current projects. Practically, this creates some additional complexity and administrative burden for most developers as they must:

  1. understand both disclosure regimes; and
  2. ensure that the correct disclosure is given to buyers based on the contract date.

Most important change - Implications of not disclosing

The most important difference between the two disclosure regimes is the consequence of failure to comply.

Under the old regime, failure to disclose minor changes that had no impact on a buyer would still enable the buyer to avoid their contract. For example, an undisclosed change to any by-laws or the unit entitlement allocated to the penthouse would give all buyers the right to avoid the contract (even a buyer of an apartment on the ground floor).

Under the new regime a buyer must establish that they have been materially prejudiced by a change. Buyers may now only avoid a contract as of right (without needing to establish material prejudice) if there is a major change such as a reduction to their lot area or unit entitlement of 5% or more.

This gives apartment developers comfort that inadvertent and minor non-disclosures cannot be a technical ground for opportunistic buyers to exit their contracts.

Timing of Disclosures

Under the old regime, all changes must be disclosed as soon as the seller becomes aware of the change.

This strict timeframe for disclosure, coupled with the buyer’s automatic termination right if disclosure was not given in that time, imposed a significant ongoing burden on sellers.

Under the new regime, sellers are afforded a reasonable period to make disclosure (the timing varies depending on the nature of the disclosure) and the consequences of failing to disclose in the required timeframe only provide buyers with a right to avoid in limited circumstances.

Disclosure can be given by email

Previously, disclosure could only be issued by traditional service methods and not by email.  This could be an administratively cumbersome task given there are often bulky or lengthy documents to be disclosed.
In certain circumstances, NVs can now be issued by email.

Summary

The changes to the disclosure regime are a significant improvement as they protect the rights of buyers without being unnecessarily onerous on developers.
Lavan regularly advises on these disclosure obligations. Please do not hesitate to contact us if you have any queries or would like any further detail.