The strata management industry is in for a significant shake up with the “once-in-a-generation” changes to strata laws being introduced on November 30, 2016.
What the New South Wales Government is hailing as “modern,” “flexible” and “reflecting 21st-century strata living” will be the kiss of death for many agency agreements, as some strata managers face the prospect of their income disappearing overnight.
One of the government’s selling points is “stronger accountability for strata managers and caretakers” and under the new laws developers and people connected with them will be banned from being managing agents for 10 years from the registration of the strata plan.
That means many managing agents won’t be eligible for reappointment when their existing agreement comes to an end, and for some that could be as early as the end of December.
This presents significant opportunities for independent managing agents to win new business.
For strata managers, the rollover of agency agreements has been an industry-wide practice. By not being presented with a contract for renewal, but simply asked to roll over a contract, executive committees have a much easier path. They do not have a decision to make and invariably maintain the incumbent.
Strata managers have tended toward the use of the rollover practice knowing that executive committees are unlikely to devote time to researching potential new providers of strata management services. As with a doctor or a lawyer, people tend to stick with what they know.
Even when there is dissatisfaction with the service provided, the time involved in searching out alternative providers is a deterrent because searching out suitable alternatives and assessing them is not a simple process.
But the new legislation changes things as it will not permit what is currently common, which is the continuation of the agency appointment after the initial term without formally re-contracting, but instead just rolling over until either party gives notice of termination, which is usually a three-month period.
When the new legislation comes into force, agency agreements between the strata managing agent and the owners corporation will be limited to a maximum term of three years. After that, the strata committee (currently known as the executive committee) would then be able to extend the appointment in three-month blocks, but only until the next annual general meeting.
At every annual general meeting, the managing agent will have to disclose the services (and amount thereof) provided in respect of commissions received by the agent during the previous 12 months from entities such as insurers contracting with the owners corporation.
Strata managers also won’t be able to receive gifts and other benefits from suppliers.
Many new requirements will not impact strata communities immediately. This includes allowing time for pre-appointed strata managing agents, building managers and executive committee members to continue in their roles once the law reforms start.
For owners in a strata building, there are some changes which are long overdue. The headline news for those interested in development is that 75 per cent of owners in apartment blocks will be able to sell the entire building to developers, regardless of objections from the other 25 per cent.
Pet owners are getting a break; standard bylaws will include a default option that allows pets unless they are excluded.
And the management of the strata scheme is moving into the electronic age, where a scheme can adopt social media, video and teleconference to hold meetings. Voting can occur electronically and through secret ballots, with the possibility of sending papers by email.