Throughout the property and strata industry, much has changed since 1985 as a boom in multi-residential development has led to dramatic growth in the number of strata schemes which are in place.
What has largely remained the same, however, are Western Australia’s strata title laws. Despite promises of change and bills for reform being introduced (but not passed), much of the legislation remains as it was when it was brought in more than 30 years ago.
Now, the state is trying again. Landgate, the government’s body for land information, is drafting up amendments to the Strata Titles Act 1985 which will be presented to Parliament next year that will enable community titles, create a new leasehold strata scheme, reform strata management, provide greater powers to the State Administrative Tribunal (SAT) to resolve disputes, change the information which is provided to buyers, simplify obligations on the part of developers with regard to obtaining consent for variations in the case of staged development and enable strata schemes to be terminated with the consent of 75 percent or more of the unit holders.
For the property sector, the lack of change has created immense frustration. In particular, the sector complains about the current lack of any allowance for community titles.
Unlike other states, a strata scheme in Western Australia can have only one singular strata company and one singular set of rules. This creates problems where there are different uses in a single building (such as a mix of retail, office and residential areas) or where common property needs to be restricted to one group or one building within a strata community. An example of the latter case is where there are multiple apartment buildings within the one complex but one building has a pool which owners of that particular building only maintain for their own particular use.
By contrast, community titles enable multiple strata schemes to be managed individually under one umbrella management structure. This enables a clear allocation of management responsibility and costs for each strata of the community. In the case of the pool example above, for instance, community titles would enable the pool to be managed within a specific strata scheme with costs allocated specifically to the owners of the particular building which in fact contains the pool whilst one community corporation would maintain areas used by everyone. Such schemes, the sector argues, enable amenities and common property across all schemes to be managed in a way which is cost effective and which preserves flexibility in development. Accordingly, introduction of these scheme will help to encourage much of the large-scale precinct type of development which is needed to provide for the greater density of housing which the state says it would like and also for a greater mix of housing options for residents.
Ever since South Australia introduced reforms in 1996, Property Council WA executive director Lino Iacomella said, Western Australia has been the only state which does not have legislation which enables community titles.
He says this is holding the sector back in terms of its ability to create greater housing choice and liveable communities, and has called on whoever wins power in the state election early next year to enact reform as one of its top priorities.
“Our antiquated strata laws are stifling sustainable growth in and around suburban centres and strategic infrastructure investments like train stations while stalling urgent urban regeneration,” Iacomella said.”
Mark Atkinson, owner and director of Perth based Atkinson Legal, acknowledges that on the positive side the law as it stands does offer good flexibility and that it was important that this be maintained through the reform process. Atkinson also cautions that reform must be done properly and well in order to avoid the need for constant ‘patch-ups’.
Nevertheless, he agrees that there are multiple areas of weaknesses in the law as it stands and says that reform is badly needed.
Outside of the absence of community titles, Atkinson said one further area of weakness revolves around the staging of development within strata schemes. Where developers elect to proceed with larger projects in stages, Atkinson says the legislation is overly restrictive about what can be done and what changes can be made in later stages of development. Take, for example, a scheme involving a two-stage development which was intended to consist of relatively large sized apartments. Where the market had turned by the time the second stage was to be developed and instead the developer wished to build twenty percent more apartments by making the apartments slightly smaller, current requirements would prevent them from doing that without unanimous agreement from all existing owners in the scheme and their financial institutions. Where the first stage involved one hundred lots or more, Atkinson says that obtaining consent from everybody involved becomes impractical.
Next, there are the buyer avoidance provisions, which allow purchasers who buy into strata lots to effectively avoid their contract on the grounds of developers failing to comply with obligations of disclosure. Whilst he acknowledges that buyers should have rights when important disclosures are omitted, Atkinson says the current legislation enables purchasers to walk away even where the non-disclosure was of relatively insignificant details. As things stand, he says, a purchaser who is inadvertently not told about a change to a strata scheme which resulted in the balcony of one lot on the other side of the scheme being larger than was originally contemplated could potentially walk away from their contract even though the change in question had no impact upon their own unit. This, Atkinson says, puts the developer at risk in terms of the settlement of their existing sales contracts to an extent which is well beyond what is reasonable.
Finally, having remained virtually unchanged for more than thirty years, Atkinson says the current regulatory environment remains largely paper based and is thus unduly costly from an administrative viewpoint. In one recent case involving an agenda and supporting documents for a relatively modest strata scheme involving 80 lots, more than $10,000 had to be spent merely copying and posting the supporting material to each owner. This is despite the fact that many owners nowadays have online access and would be happy to receive these documents via email.
Atkinson says the effects of these areas manifest themselves in a number of ways. By making strata more costly, he says they add costs for everyone involved, including the developer, the owner’s corporation, unit owners and ultimately commercial and residential tenants. In addition, he agrees with the Property Council that these weaknesses are inhibiting the ability of the sector to deliver greater areas of urban infill which the state says it needs.
Others agree that the system needs cleaning up.
Scott Bellerby, managing director of Bellcourt Strata Management and president of Strata Community Australia (WA) talks of a system which is lacking in governance and accountability and in which the main governance function is administrated by a group of unlicensed operators who are guided by a volunteer group of owners.
According to Bellerby, SCA does not support all of the amendments currently being proposed. A proposal to require strata management companies to disclose particulars of the accounts into which they pay money and the balance of those accounts at the time specified creates concerns around security, he says. What they should be requesting, he said, is information pertaining to whether a strata management company is a member of SCA (WA), the number of lots and schemes that are managed, the professional indemnity insurance held and the total insured replacement cost of the schemes.
In addition, he feels that the proposed amendments as they stand fall short in a number of areas. The quasi form of regulation proposed for the SAT will not be adequate over the medium term, he insists, whilst greater protection for people buying into new schemes will be needed and a developer retention fund will need to be introduced. Because of this, he says the passing of the current amendments being proposed will represent a first step only in terms of the necessary reforms to strata law.
Nevertheless, Bellerby says the current proposals will in fact deliver progress in important areas. In addition to community titles, he said the defining of a ‘strata manager’ for the first time and the detailed reference of a strata management contract which clearly defines the role of a strata company and the strata manager will deliver greater protection to residents. Greater disclosure at the point of sale will provider buyers with greater visibility with regard to the balances of administrative accounts and reserve and sinking funds, he said.
Atkinson says the crucial thing is to act and get change happening.
“Whoever is elected in the next state election, I would encourage them to have one of the first bills in Parliament be reform of the WA Strata Titles Act,” he said.
“That’s the key thing: just get it done and make sure that it is assigned the highest legislative priority so that it gets through Parliament as quickly as possible.”