MARSHALL ALERTS: Smarter Strata - Changes to Strata Laws

Key Takeaways

  • Changes to the Strata laws introduce simpler, more efficient processes;
  • Disputes resolutions processes are clarified and simplified;
  • These reforms are significant and address substantial existing issues.

Changes to the Strata Titles Act 1985 (WA) came into effect on 1 May 2020. These changes seek to provide strata property owners and prospective buyers with better information and greater clarity on strata management and how to address disputes.

The reforms aim to address common issues or difficulties within the current system, particularly:

  • Inadequate Buyer Information/Education;
  • Confusing and Inefficient Dispute Resolution Processes;
  • Unfair Termination schemes;
  • Ineffective Management Guides; and
  • Burdensome Restrictions.

Buyer Information

Sellers of strata properties are now required to provide buyers with more information about the property, including:

  • Estimated levy contributions;
  • Statements of accounts; and
  • Strata scheme by-laws.

Where this information is not adequately provided, it may give buyers the right to delay settlement or avoid the transfer altogether. This will provide greater protection and disclosure to potential buyers and ensure they enter any transactions fully aware of their position.

Dispute Resolution

Dispute resolution processes have been consolidated and placed under the jurisdiction of the State Administrative Tribunal (SAT). This eliminates any confusion about how and where to address disputes and provides a more cost and time-effective alternative to courts. The SAT has been granted greater powers under the reforms, allowing them to adequately respond to (almost) any disputes that might arise.

Termination Processes

Fairer terminations processes will protect owners from forced termination of strata schemes. The reforms close loopholes which allowed solitary owners to apply to the District Court for termination and avoid any consultation, voting requirements, or other safeguards. They require that schemes involving 4 lots or fewer be terminated ONLY by unanimous agreement and implement a new process for schemes of 5 lots or more.

This process requires that at least 80% of owners agree to termination. The proposal must then be referred to SAT for determination to ensure that the proposal is just and equitable. Each owner must either receive full market value for their lot, or a ‘like-for-like’ exchange. These reforms balance protections for minority owners against the risk of ‘hold-out’ owners delaying termination processes solely to achieve an above-market return for their lot.

Management Regulation

The reforms introduce statutory duties for strata managers. Managers are now required to (among other things):

  • Act honestly, with reasonable skill and care;
  • Have a good working knowledge of the Act;
  • Disclose certain benefits;
  • Attain educational qualifications;
  • Have written contracts outlining their functions;
  • Maintain professional indemnity insurance; and
  • Lodge annual returns to Landgate.

Breaches of these duties represent proper grounds for termination of a strata management contract.

Additionally, copies of up-to-date by-laws must be lodged with Landgate to ensure that every owner and prospective buyer has access to a complete copy. These by-laws face tighter regulation regarding how they can be altered and could now be void if they are unfair, discriminatory, oppressive, or unreasonable.

These reforms come alongside new ‘staged development’ changes. They clarify what changes will require owner-consent, providing greater flexibility and efficiency to development projects whilst maintaining protections for owners who buy into early stages of developments.

Leasehold Strata

Leasehold Strata is a new form of land interest involving long-term leases (between 20-99 years). It is particularly relevant for landowners who are unable to sell their land but wish to have it developed (for example universities or churches).

Purchasers of lots in such a leasehold scheme are essentially able to deal with the land as if it was their own – they are issued a certificate of title, are able to mortgage the property, and can sell their interest without consent of the registered proprietor. However, at the end of the leasehold term the interest (wherever it lies) will expire.

Our Take

These reforms are comprehensive and expansive. They address significant issues that have arisen since the introduction of strata laws. Greater regulation of strata management, increased disclosure requirements for sellers, and consolidated dispute resolution processes will ultimately provide higher levels of protection for owners. Although counter-intuitive, these complex reforms provide much needed simplification for strata property owners and buyers.