New strata title laws soon to affect NSW developers

Developers in New South Wales are about to be faced with changes from the middle of this year as reforms to the strata title laws are introduced.

These new strata title laws will affect developers in NSW who have created a strata community, whilst anyone who lives or works in an apartment complex will also be affected.

The Strata Scheme Management Bill and Strata Scheme Development Bill were both passed late last year by the Legislative Council. These Bills contain approximately 90 changes to the existing laws, on varying issues such as defects, levies and capital work funds, renovations, proxy farming, collective sale and parking.

So when do these new laws come into effect? According to Minister for Innovation and Better Regulation Victor Dominello, these new strata title laws will commence in July 2016.

Mr Dominello stated that, “Today more than two million people live and work in strata. The new laws will cater for the needs of 21st century strata living.”

He also added, “The new laws will modernise collective decision making processes, increase protections against unresolved building defects and improve out-dated regulation impacting on renovations.”

What new changes will developers face under the new laws?

1) Introduction of a Defects Bond
Under the new strata title laws, a building bond will be introduced and will apply for the construction of any high-rise strata building that is more than three stories high. Developers will have to pay a building bond (two per cent of the contracted price of the building work). This building bond acts as a security to fix defective works, with the advantage of the bond being returned to the developer sooner once all necessary defects are fixed. The building bond will also act to reduce time delays that have been a common problem until now. However if defects are not fixed, this building bond will be used to carry out the necessary repair work instead.

The Bond may also be claimed by the owners’ corporation to rectify any defective building work and must be claimed within two years after the completion date of the building work, or within 60 days after the final report produced by the building inspector (whichever is the latter).

2) Maintenance Schedule
The new laws also ask that the developer provides a maintenance schedule at least two days prior to the first annual general meeting to let the owners know or any maintenance obligations. The maintenance schedule will help to overcome difficulties in relation to building defects.

3) Mandatory Defect Inspection
A mandatory defect inspection report must also be prepared and an independent building inspector must be used to undertake the report, at their own cost. This must occur within 12 and 18 months of the completion of the building. If this does not occur within this timeframe, Fair Trading will appoint an inspector to conduct this inspection instead.

4) Strata Managers
Under the new strata scheme, original owners and anyone connected with the developer are prohibited from being strata managers for the first ten years. Before this, developers used management firms to retain their control of the strata scheme to use this to their advantage such as for further development considerations.

5) Levies and capital works funds
Under Fair Trading, the new reforms state that developers now need to set “realistic levies” from the registration of the strata plan until at least one third of the apartments have been sold and for the subsequent year after.

Outstanding levies that are primarily used to pay for the scheme’s day to day expenses will also be far easier to recover by corporations according to Fair Trading.
Published on 21st of March 2016 by Marty Stanowich
Marty Stanowich
Marty Stanowich


Sign up to the iBuyNew newsletter to receive more article and property news straight to your inbox

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Off the plan

Want access to exclusive opportunities in off-the-plan property?

Sign up to our Free VIP membership for a personalised service.

Learn more