Strata Schemes Management Bill 2015

Strata Schemes Management Bill 2015

(Debate, 20 October 2015, Legislative Assembly, NSW Parliament)

More than three quarters of homes in the Sydney Electorate are apartments and apartments will make up a greater proportion of the housing mix across Sydney and the rest of the state to house our growing population.

Massive redevelopment is occurring or planned within and adjacent to my electorate including at Barangaroo, Darling Harbour, the Bays Precinct, Central to Eveleigh, Green Square and the Carlton United Brewery site. All new homes will be apartments.

Apartments are essential if we are to minimise environmental and social impacts however high density living creates challenges that require laws to protect owners and residents so that apartment living remains attractive, and is efficiently and equitably managed and sustainable.

Little reform has occurred since the initial legislation was introduced and many problems remain unresolved. I congratulate the minister and the government, including previous ministers, on introducing the Strata Schemes Management Bill – a bill that will bring much needed relief to owners and residents.

The house should also thank my predecessor Clover Moore, who long championed strata reform. In 2009 she began a process which included release of a discussion paper, a forum, public submissions, a think tank and a bill which was presented to Parliament in 2010 and again in 2011. It was in response to her bill that the government began its review. Many of the issues raised in her discussion paper and are in this bill.

Strata problems remain the biggest concern my constituents raise with me and I will discuss some of the most common issues that this bill will address. I will then speak on the Strata Schemes Development Bill, which I, and my constituents who contacted me, have a different view on.

One of the largest complaints from apartment owners to my office concerns proxy votes. Current practices allow one or a small group of persons to control management of a building by collecting an unlimited number of proxies, sometimes at the expense of most owners. I hear regular reports of situations where owners use proxies to make decisions that benefit themselves personally, despite opposition from the majority of owners, particularly in larger schemes and schemes with investors. This is unfair and undemocratic.

The bill would limit the number of proxies each person can hold to one if the scheme has fewer than 20 lots or five per cent of lots in larger schemes. This is a massive improvement on the current situation and will make it less likely for power to be concentrated in any one person.

It has been raised with me that in some buildings, someone with five per cent of lots would be able to control decisions because few turn up to meetings. I hope that the introduction of new ways to vote on items at meetings such as through conference calls will help reach quorums without proxies however I ask the government to monitor this situation and introduce further reforms if needed.

Another serious and common concern in apartment buildings is the overcrowding of lots. Unscrupulous landlords and subletting tenants cram people into bedrooms and living rooms for profit. Overseas students and new residents are targeted. Neighbours and owners suffer from the overuse of bathrooms and lifts, wear and tear of common property, fire risks, safety risks due to access manipulation, and extra rubbish and recycling. One CBD building that had overcrowding in more than 50 lots was unable to get a normal lift maintenance contract because overuse was identified and insurers refused to cover the building. The living conditions for those crammed in apartments are often abhorrent.

While councils can take action against overcrowding based on planning, building and fire safety breaches, they can be refused entry by owners and therefore fail to collect enough evidence to obtain an order.

The bill would allow an owners corporation to pass a by-law that limits the number of adults per bedroom in each lot to not less than two adults per bedroom. The owners corporation of those schemes that opt for such a by-law will be able to take action in the tribunal.

This is an improvement but it should be mandatory for all buildings because in some cases owners profiting from overcrowding could block the by-law.

Owners corporations are likely to face the same problems with collecting evidence as councils and I understand the government is working with stakeholders to establish further reforms. I look forward to working with the government to address overcrowding.

The bill does not address the problem of short term letting in apartments. In my electorate, some buildings have been turned into quasi hotels at the expense of neighbours’ amenity and owners’ costs. This matter must also be addressed and I understand is being reviewed by the planning committee.

Defects remain a serious problem in apartment construction. A City Futures Research Centre survey of 1,550 individuals, 106 strata managing agents and 11 peak body representatives found that 85 per cent of respondents in strata buildings built since 2000 had one or more defects present with 75 per cent reporting defects not yet fixed. This is alarming and demonstrates a clear need for reform that helps owners get faulty work fixed and discourages builders from cutting corners. I regularly hear from owners who have had to spend massive amounts on legal fees to pursue defect repairs – they want laws to promote well-constructed reliable buildings that don’t need to be fixed – homes that they can enjoy without the stress of pursuing litigation and rectification.

The defects bond and inspection regime in this bill, which requires the developer to lodge a bond of two per cent of the contract price that is either returned or used to fix any defects found in an independent defects report, would help home owners hold developers and builders to account. There is strong support for this regime and it should also be expanded to cover noncompliance of standards such as the Building and Sustainability Index, for which I understand there are high levels of noncompliance, and safety matters like windows.

I welcome the ban on developers being involved in decisions about defects and bans on the developer or any person connected with them from being the strata managing agent within 10 years of the registration of a scheme, reducing their influence on the pursuit of defects. Under the bill, the owners corporation will also be able to apply for a compensation order if the levies set by the developer are too low. I strongly support this provision – underestimations can occur to attract buyers and owners may end up with increases they cannot afford – I have heard of cases where owners have had to sell their homes.  

Smoke drift is a growing problem in apartments and I increasingly hear from constituents subject to passive smoke in their homes, particularly parents with children who are more at risk of long term damage.

Everyone should be able to live in a smoke-free home and I strongly support changes that ensure smoke from another apartment or common property can be considered a nuisance that interferes unreasonably with the enjoyment of a home thereby ensuring residents can seek an order and protect their health.

I support the proposal to provide tenants an opportunity to participate in decisions that affect them. Tenants use common property and are affected by decisions like waste management. Tenants generally care about their homes as much as owners and their input would be beneficial.

An annual general meeting must take place within the one month anniversary date of the first annual general meeting with the Consumer, Trader and Tenancy Tribunal required to approve it outside this period. This is onerous, particularly given that it is desirable that as many owners as possible attend. The bill would allow flexibility so that one annual general meeting is held each financial year.

The bill includes a number of important reforms to improve transparency in management including requirements for managing agents to declare commissions and bans on receiving gifts.

I am pleased the minister restated the government’s commitment to encourage more apartments to become pet friendly. The initial commitment was made when I asked a question in this place over two years ago to a former minister and I welcome the introduction of the new pet friendly model by-law. Bans will no longer be the default and hopefully fewer people moving into apartments will be forced to give up their beloved pet and more apartment residents will be able to enjoy the benefits of a fury companion.

I have received a number of complaints about compulsory management from constituents who say it is undemocratic. Unfortunately the bill does not address this issue. I agree with owners who say they should be able to contribute to the way their building is managed. I have heard from owners who say compulsory managers use owners’ levies to pay legal fees against them or fail to pursue defective work. The government should look at limits on compulsory management and mandatory audits on expenditure. It should explore other avenues to help an owners corporation perform its duties. Compulsory strata management should be a last resort with limits and I ask the minister to review current provisions.

I commend the government on this bill and congratulate the minister for bringing these important reforms that will make a difference to the lives of my constituents to the house.

I now turn to the Strata Schemes Development Bill.

The bill establishes a new regime to allow for majority termination of strata schemes, replacing the current requirement for unanimous agreement.

I have thought carefully about this bill and have consulted widely with my community and I cannot support it.

There is great fear that this bill will force people out of their homes, where they want to live for the rest of their life. This will be especially a problem for old, frail, poor and people with a mental health problem or physical disability. Vulnerable people do own homes. Tenants will be at risk of eviction because more schemes will be terminated.

I acknowledge that the minister has included an important safeguard to protect owners with the Land and Environment Court required to approve renewal plans. The court must be satisfied with the distribution of sale proceeds and that owners will be adequately compensated based on just terms. However I do not believe this is enough of a guarantee for vulnerable people.

In the inner city, many apartments are owned by older people who live by themselves. If they are forced to move, they will have trouble finding a home in their community that they can afford, especially if they only receive the market value of their home plus disturbance costs. They may be forced to move from their networks and services. They may not have the means or anyone to help them find a new home.

The health and mental health impacts of being forced to move can be disastrous.

Shelter NSW points to City Futures modelling that suggests less than three per cent of buildings could be redeveloped at levels considered affordable. Poor people will be further priced out of inner city areas where values are rising and housing diversity is declining. Apartments with high levels of investor owners are more likely to be terminated.

Given the bill allows developers to put forward redevelopment proposals, there is real risk of a mass termination of schemes in gentrified areas like the inner city, particularly where there are gardens, large common property areas or high ceilings that allow space to squeeze more units. Developers are known to invest in buildings where they believe they could profit through a termination and the strata renewal committee could be made up entirely of the developer. The potential to bully other owners is real.

I believe this bill is being driven by developers. It is to the detriment of vulnerable people and to housing diversity particularly in the inner city.

There is already a process for terminating schemes that cost too much to maintain. While I understand this has not been widely used, the process could be reformed to allow termination or renewal where maintenance is too difficult and expensive. Reforms to this effect should be explored. This bill allows for the termination of strata schemes with few problems.

The bill allows people to lose their homes for the profit of others and I cannot support it.

Let's work together to celebrate and protect our great city!