On 1 May 2020, substantial changes to the Strata Titles Act 1985 (WA) came into effect. Those changes to the Act are included in the Strata Titles Amendment Act 2018 (WA) – which was passed some time ago but has remained inoperative until the corresponding updated regulations were prepared. The Strata Titles General Regulations 1996 (WA) will be repealed by the Strata Titles (General) Regulations 2019 (WA), also with effect from 1 May 2020.
In this note the Strata Titles Act is referred to as the ‘Act’ and the amended Strata Titles Act is referred to as the ‘Amended Act’. The key changes made to the Act are set out below.
1. Scheme documents
Under the Amended Act, a ‘Scheme Notice’ is required to be registered in order for a strata titles scheme to be registered (and titles created for lots in the scheme).
The Scheme Notice contains basic information including the name of the scheme and the address for serving of notices. The Scheme Notice will be lodged with the application to register the strata titles scheme and will be registered on the strata plan.
2. Additional disclosure required to buyers before contract
Under the Amended Act, a seller of a strata lot is required to provide more information to the buyer before the contract of sale is entered into. The additional information is intended to provide the buyer with an insight into the overall financial status of the scheme and the recent matters that have been the subject of discussions between owners at the general meetings of the strata company.
The additional information that a seller will now need to provide a prospective buyer in relation to the strata scheme or proposed strata scheme is:
- the Scheme Notice (only for new schemes registered after 1 May 2020);
- the scheme plan including the exact location of the lot on the plan;
- in relation to a leasehold scheme, the strata lease for the lot;
- the minutes from the most recent annual general meeting of the strata company or any extraordinary general meeting that’s been held since; or
- if the minutes are not kept then a statement to that effect; or
- a statement of why the seller is unable to obtain a copy of the minutes;
- the most recent statement of accounts; or
- if the statement of accounts are not kept then a statement to that effect; or
- a statement of why the seller is unable to obtain a copy of the statement of accounts;
- any notice received from the strata company proposing termination of the scheme;
- the levies payable for the previous 12 months for the lot and the due date for payment and if the scheme is new then an estimate of levies for the next 12 months;
- information relating to debts owed by the seller to the strata company;
- details of exclusive use by-laws that apply to the lot; and
- any voting right restrictions (eg a proxy or power of attorney granted to the seller).
If the scheme is not yet created, a reference to a document to be disclosed (eg scheme plan, schedule of unit entitlements, by-laws) is a reference to the latest draft of that document.
A new approved form has been created to provide the necessary disclosure to buyers and that also includes the general information on strata schemes. The new disclosure form can be provided by email if the buyer has consented to receive it by email.
The information that is designated in the new disclosure form as being specific to the lot (ie Part B of the approved form) must be included in the contract in a prominent position (such as the front page).
If the disclosure information is not provided, a buyer can avoid the contract if the buyer can demonstrate that if the buyer received the information, the buyer would be materially prejudiced. In addition, if the buyer is provided with the disclosure information after the contract is signed, the buyer will now have a period of 15 working days (an increase from 7 working days) to terminate the sale contract, subject to proving that it has suffered material prejudice. Previously there was no requirement for a buyer to show material prejudice in order to terminate the sale contract due to the information not being provided or being provided late.
The provisions of the Amended Act regarding disclosure to buyers do not apply to contracts of sale, and buyers under contracts of sale, entered into before 1 May 2020. The regime under the unamended Act continues to apply to those contracts and buyers.
3. Additional disclosure required to buyers after contract
Under the Amended Act, the obligation on the seller to give a buyer notice of changes to the disclosure information that occur after the contract is entered into (ie notifiable variations) is retained, however, there are now 2 types of notifiable variations:
(a) A Type 1 notifiable variation – which is:
(1) the lot size is more than 5% smaller; and
(2) the lot unit entitlement is 5% different (bigger or smaller).
(b) A Type 2 notifiable variation – which is:
(1) the scheme plan is amended (in a way that is not a Type 1 notifiable variation);
(2) the unit entitlements are amended (in a way that is not a Type 1 notifiable variation);
(3) the by-laws or proposed by-laws are amended;
(4) an agreement for services to the scheme is entered into or varied; and
(5) a lease, licence, right or privilege over common property is granted or varied.
The seller must notify the buyer of a notifiable variation within 10 working days of the change occurring (unless settlement is due within 15 working days in which case notice must be given as soon as practicable).
The Amended Act provides some guidance as to what information the seller has to give – the seller must provide the buyer with particulars of the notifiable variation that a reasonable person would consider sufficient to enable the buyer to make an informed assessment as to whether the buyer is materially prejudiced by the notifiable variation. The seller’s notice must identify the type of notifiable variation and inform the buyer of its rights to terminate the contract when that type of notifiable variation occurs.
The regulations set out when a particular type of notifiable variation is taken to have occurred.
The consequences of not providing that notification will depend on the type of notifiable variation and when notification is provided. The table below summarises the position:
|When notice given||Type 1 Notifiable Variations – consequences||Type 2 Notifiable Variations – consequences|
|No notice given||Avoid at any time (without reason)||Avoid at any time if buyer can show material prejudice|
|Notice given within 10 working days as required||Avoid within 15 working days if buyer can show material prejudice||Avoid within 15 working days if buyer can show material prejudice|
|Notice given late (ie after 10 working days)||Avoid within 15 working days (without reason)||Avoid within 15 working days if buyer can show material prejudice|
The provisions of the Amended Act regarding notifiable variations do not apply to contracts of sale, and buyers under contracts of sale, entered into before 1 May 2020. The regime under the unamended Act continues to apply to those contracts and buyers.
4. Stage developments
The regime under the Act to implement staged strata subdivisions gave a developer limited flexibility to make changes to future stages. If the stage documents did not match the documents in the stage by-laws, a developer was required to obtain consents from existing lot owners in earlier stages and parties who had an interest in those existing lots – and those owners and parties could simply refuse to provide that consent.
The Amended Act marks a shift in this ‘balance of power’ by making the process for delivery of strata schemes in stages less cumbersome for developers, while still protecting the rights of owners who bought into earlier stages of the development.
Under the Amended Act, details of the staged development can still be set out in the scheme by-laws and these are now called staged subdivision by-laws. If the subdivision proceeds in accordance with these by-laws, the developer can progress the staged subdivision in accordance with those by-laws without requiring further consents.
However, the Amended Act introduces the concept of a ‘significant variation’ to an agreed stage of a subdivision, which includes:
- the unit entitlement of an existing lot changes by more than 10%, whether increased or decreased;
- the number of lots in the next stage is modified by 10%, whether increased or decreased; and
- a change to a registered easement or restrictive covenant has an adverse material impact on existing lots within the scheme.
Determination of whether the variation is significant or not is to be made by an independent licensed valuer. If the change in the scheme documents from those disclosed in the by-laws is not a significant variation, the developer can proceed to register the stage documents.
Where the variation is considered a significant variation the following applies:
- the developer will need to obtain a unanimous resolution from the strata company;
- the holders of a designated interest must have been given notice and have given their consent or if no response with a written objection is received by the end of the 60 day period in which they have to respond, then consent is taken to be given;
- consent has been obtained from the WA Planning Commission (where required);
- written consent of the owner of the leasehold scheme (if relevant) and each affected owner must be given; and
- the developer can apply to the State Administrative Tribunal for an order to disregard an objection on the grounds that the objection is unreasonable.
5. Leasehold strata schemes
The Amended Act will introduce a new form of strata being a leasehold scheme. This allows for freehold and conditional tenure land to be subdivided and a leasehold scheme created in respect of that land. Certificates of title will be issued in respect of each leasehold lot.
The owner of the leasehold scheme will be considered the lessor, while the owner of the leasehold lot will be considered the lessee. Together the lessor and lessee will enter into a strata lease in respect of the leasehold lot.
A strata lease commences when the leasehold lot is created on the registration of the leasehold scheme and will expire on the same date that the scheme expires. The scheme will have a fixed life-span, with a term that must be longer than 20 years and not exceed 99 years, with all strata leases in a leasehold scheme expiring on the same day.
The lessor’s role in the day to day operation of the leasehold scheme is limited. The lessor cannot interfere with the use and enjoyment of a lot or common property and cannot terminate a lease unless authorised by SAT.
A lessee of a strata lease will have a strata leasehold estate in the lot and an undivided share of the strata leasehold estate in any common property as tenant in common with the other lessees, which is proportional to the unit entitlements of their respective lots (adopting similar concepts to freehold schemes).
A lessee can transfer, mortgage or sublet the leasehold strata lot, without the lessor’s consent and is a member of the strata company of the leasehold scheme.
Leasehold strata schemes give the freehold land owner (lessor) an opportunity to develop land which they otherwise wouldn’t or couldn’t develop. This is of particular benefit to organisations such as churches and universities who need to retain ownership of their land and make it available for development. Private landowners can contract with a developer to construct a strata building and to sell leasehold interests, without being actively involved in the maintenance of the building. The lessor then has a limited role in the leasehold strata scheme decisions during the term of the scheme.
6. Scheme management matters
6.1. Maintenance plans
Under the Amended Act, if the scheme has 10 lots or more or the cost of replacing the buildings and improvements on the common property is more than $5million, the strata company must ensure that there is a 10-year plan for the maintenance, repair, renewal or replacement of common property.
The 10-year plan must be submitted at the first annual general meeting that is after 1 May 2021 and the plan must be revised every 5 years to cover the next 10 years after the revision.
6.2. Categorisation of by-laws
The standard by-laws under the Amended Act are still contained in schedules 1 and 2, however the name of each schedule has changed to ‘Governance by-laws’ (schedule 1) and ‘Conduct by-laws’ (schedule 2).
Some of the by-laws have been re-categorised from the schedules under the previous Act and some of the previous by-laws in Schedule 1 of the Act have been included in the body of the Amended Act, which means that they cannot be amended. These provisions relate to the requirements of general meetings of the strata company, including in relation to voting and appointing proxies.
When a strata company makes a new by-law or amends or repeals an existing by-law, the strata company is required to register a consolidated set of the current by-laws with Landgate. This is designed to improve access to a complete set of scheme by-laws for existing owners and prospective buyers.
The Amended Act also includes a list of circumstances when a by-law will be invalid, which includes where, having regard to the interests of the owners use and enjoyment of the lots and common property, the by-laws are unfairly prejudicial or discriminatory against 1 or more of the owners, or the by-laws are oppressive or unreasonable.
6.3. Regulation of scheme managers
The Amended Act includes statutory duties that require strata managers to:
- act honestly, with reasonable skill and care;
- have a good knowledge of the Amended Act;
- not improperly use information or their position;
- inform the strata company of any conflict of interest as soon as practical; and
- disclose any benefit/remuneration that is more than $100 from one source in a year.
A strata manager will also need to:
(a) attain educational qualifications by 1 May 2024;
(b) have a written contract with the strata company, specifying the functions they are contracted to perform;
(c) obtain a current national criminal record check for themselves and employees who perform strata management functions;
(d) have professional indemnity insurance coverage; and
(e) lodge an annual return to Landgate with general information about the schemes they manage (the first annual return will need to be lodged between 1 January 2022 and 31 March 2022, and then annually after that for the next four years).
Schemes can still have a volunteer strata manager. A volunteer strata manager is subject to the statutory duties of a strata manager and must also:
- have a written agreement or contract with the strata company;
- own one of the lots; and
- cannot earn more than $250 for each lot in the scheme, over a full year.
However, volunteer strata managers do not need to attain educational qualifications or hold professional indemnity insurance.
6.4. Termination of schemes
The Act previously required all lot owners to unanimously agree before a scheme could be terminated.
The Amended Act has sought to introduce a scheme that allows for termination of schemes with 5 lots or more without requiring a unanimous decisions but with safeguards for all strata owners.
Briefly the steps involved are as follows:
- an outline of the proposal is prepared by a lot owner or a person who has a contract to buy a lot, which sets out what will be done to the land and what funding will be provided;
- the outline proposal is provided to lot owners to allow them to obtain advice on the proposal;
- if a resolution (50% majority) of the strata company is passed in favour of the outline proposal, then a full proposal must be prepared within 12 months from the vote, which contains more detailed information including what is offered for each lot, details of the new development and a termination infrastructure report;
- the strata company must vote on the full proposal and if:
- the vote is unanimous then the scheme proceeds to termination;
- the vote is 80% or more than the full proposal is referred to the State Administrative Tribunal (SAT) for a ‘fairness and procedure’ review; and
- the vote is not least 80% in favour then the proposal is rejected;
- SAT will review the process followed, the full proposal and submissions from dissenting owners and make a decision as to whether the scheme is to be terminated.
For schemes of 4 lots or less the decision to terminate must be unanimous for the termination to proceed.
6.5. Dispute resolution
Changes to the Act are intended to make the State Administrative Tribunal (SAT) a ‘one-stop’ shop for strata disputes (with only very limited exceptions).
SAT is an independent tribunal with less formal and more flexible procedures than traditional courts, and is seen as a more cost-effective and efficient dispute resolution forum.
The Amended Act gives SAT broader powers to resolve strata scheme disputes and enforce by-laws so that essentially all strata disputes will be heard by SAT (the exception being disputes relating to the recovery of unpaid levies which are still to go through the civil courts).