New strata laws change the playing field

Changes to strata laws will commence in NSW on 30 November, but if you own property in any Australian State or Territory, you would be wise to take note of how the changes play out.

Strata what?

For the uninitiated, strata laws govern the management of property owned under a strata title.

Strata title allows individual ownership of part of a property (called a ‘lot’ and generally an apartment or townhouse), combined with shared ownership in the remaining areas of the property (called ‘Common Property’ e.g. foyers, driveways, gardens) through a legal entity called the owners corporation — or body corporate, strata company or community association, depending on your state or territory of residence and the type of scheme.

The concept only came into being 50 years ago and there are now more than 270,000 such schemes encompassing more than two million individual lots across Australia. In Sydney, strata now accounts for more than half of all residential sales and leases because of its popularity with investors. An increasing number of commercial and retail properties are also strata titled. In Western Australia there are even strata-titled vineyards.

After years of archaic red tape, the new NSW strata laws herald the change many owners and tenants have been hoping for.  In a great move, the NSW government has taken a deep dive into the legislation with more than 90 changes to flow over the next few months.

Big ticket item

One of the key changes which will be in force from 30 November 2016 is the change to collective sale and renewal of properties.  Many older strata title properties are located o n large parcels of land and built to a limit of one to two storeys.  With zoning changes rapidly rolling out through local councils, many properties can now be built to seven or more storeys.

The new legislation will make it much easier for owners to end or wind up a strata scheme so the property can be sold or renewed.  The reforms will ensure that owners receive at least the market value of their lot, plus an extra amount for costs like those associated with moving.  Any plan for renewal will be referred to the Land and Environment Court for final consideration as a guarantee of full checks and balances.

The Court will be able to reject a renewal plan if:

  • it has not followed proper processes or been developed in ‘good faith’
  • the amount to be paid to a dissenting owner was less than the compensation value of the lot
  • the terms of settlement were not just and equitable in all the circumstances.

Similar collective sale and renewal models already operate in New Zealand, the majority of states of North America, and the United Kingdom.

Plenty of opportunities

These changes offer opportunities for owners to either develop sites themselves or in a joint venture with a developer, or collectively sell the site for an attractive price.  The flipside is that this will unlock considerable development opportunities.

However, while land / site shortage is a key issue driving prices up in Sydney, these changes may have a downward pressure on acquisition costs.  As a minimum, it may bring balance back to a currently overweighted market.

One to watch

Of note for developers is the new building defect bond scheme which will come into force on 1 July 2017.  Once again, a welcome change that will protect property buyers as well as quality developers.  We will wait with interest to see how many truly bad developers decide to take their money and move onto another line of work, as the scheme holds significant penalties for poor building practices that to date have been borne by purchasers.

Other reforms include :

  • strengthening the accountability of strata managers
  • allowing owners to adopt modern technology to conduct meetings, vote, communicate and administer their scheme
  • the need for owners to review by-laws (strata community rules) within 12 months, which can be customised to suit their lifestyle – such as whether to allow owners to keep a pet by giving notice to the owners corporation
  • a simpler, clearer process for dealing with disputes
  • broadening tenant participation in meetings
  • a new option to manage unauthorised parking through a commercial arrangement between a local council and a strata scheme
  • a clearer and simpler three-tier renovations process, which waives approval for cosmetic renovations within the strata lot (for example, installing handrails for safety)
  • further measures to reduce red tape, such as simplifying financial statements for owners.


Buy smarter = limitless ways to build lifetime income

Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property.  A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income. 

Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.

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Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.


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