Strata Reform Overview Sean Macfarlane, Senior Lawyer, Landgate

Status of the strata reforms Cabinet has approved drafting of the strata reform legislation package which will include: Strata Titles Amendment Bill and Community Titles Bill Timing of delivery into Parliament? there has been some great progress on the drafting of the Bills substantial drafting work is required to complete the Bills aiming to introduce both Bills to Parliament by mid 2018

Why reform? No major reforms to the old Act in 21 years How we use and develop strata is rapidly evolving Old Act is causing people in strata major problems Reforms will improve the way things are done in strata by: making strata better for owners and occupiers and introducing new land development options to drive economic growth

What are the reforms? Two new types of strata community title leasehold strata Flexible staged development Improved management of schemes Simplified dispute resolution Better information for buyers Safeguards for the termination of schemes

Community title scheme: what is it? A new type of strata which has: multiple sub-schemes within umbrella community scheme each sub-scheme has a strata company Strata Company Strata Company

Leasehold strata – what is it? Strata scheme set up for a fixed term (20+ to 99 years) Buyer (owner) acquires long term lease of lot (strata lease) Owner of strata lease issued with Certificate of Title Strata lease owner: can transfer lot and strata lease mortgage the lot without the lessor’s consent. Leasehold strata is used in NSW for development at train stations

Improve management of schemes Allow electronic notices, voting and record keeping Strengthen by-law enforcement Empower strata companies to improve common property Easier to get strata company approval for solar panels

Strata managers will be regulated Statutory duties imposed on strata manager: hold strata company funds in a trust account inform strata company of a conflict of interest or commission act honestly, with loyalty and in good faith have educational qualifications and PI insurance coverage Strata company may terminate strata manager’s contract if the contract or statutory duty is breached Strata manager / strata company disputes resolved by SAT

Simplify dispute resolution Currently strata disputes are heard in 4 different forums Research: SAT effective in resolving strata disputes SAT will become one-stop shop for strata disputes Strengthen SAT powers to resolve strata disputes quickly and cheaply

Better information for buyers Buyers will be given more useful information: full set of by-laws minutes of the most recent annual general meeting details of annual levies payable statement of strata company accounts Electronic disclosure will be allowed

Safeguards for termination of schemes Sean Macfarlane, Senior Lawyer, Landgate

Termination of schemes: current law Three ways to terminate a strata scheme now Unanimous resolution of all owners One owner or one mortgagee can apply to the District Court for an order to terminate a scheme (s31) One owner can apply to District Court for an order deeming the resolution to terminate was unanimous, if: a special resolution was reached the owner applying was part of the majority who voted to terminate Owners of Argosy Court v Wise District Court order to terminate strata scheme under section 31 Act Majority of owners (UE) opposed

Reform: Safeguards for termination Now no detailed termination proposal required no guidance for the District Court on whether to terminate the scheme Reforms will introduce safeguards for owners require a transparent process be properly followed require a full procedural and fairness review by SAT enable owners to terminate and receive fair market value before the building becomes unsafe or too expensive to maintain

More than just a vote: whole process There will be whole process that must be followed if you want to terminate a strata scheme. The vote is only one part of that process. Termination process: termination proposal must contain prescribed information proposal must be served on all owners and mortgagees all owners must be given at least 3 months before voting vote must be properly conducted all ratified proposals must then undergo a fairness and procedure review by the State Administrative Tribunal (SAT)

Vote required before SAT review Schemes of 4 or more lots: 75% of lots in favour 3 lot scheme: 2 lots in favour 2 lot scheme: 1 lot in favour If the required vote is attained, the proposal must then be reviewed by SAT

SAT review of termination No majority termination without a SAT Order SAT must be satisfied that: the termination process was properly followed each owner will get fair market compensation proposal is just and equitable Extensive guidance provided in the Strata Titles Act 1985 to assist SAT in deciding whether the proposal is just and equitable

What SAT is to consider To decide whether the proposal is just and equitable, SAT must consider a range of matters, including: the views of owners and mortgagees if there is a more appropriate order, such as the strata company should repair the building instead of terminating the condition of the buildings and cost to maintain whether a different vote would have been obtained if votes were cast using unit entitlement the use of proxies and whether they have been used in the best interest of the owner the impact of taxes and stamp duty whether owners have been offered a like-for-like replacement lot in the neighbourhood.

Safeguards for vulnerable owners Person seeking to terminate must provide funding to vulnerable owners to respond to the proposal Regulations will define who is a vulnerable owner and the funding requirements Vulnerable owners can use that funding to: pay for legal advice on the termination proposal pay for expert reports including valuation of their apartment SAT will have the power to declare who is a vulnerable owner if there is a dispute.

Importance of strata to the WA economy 300,000+ strata lots worth over $170 billion 40-50% of all new land subdivisions in WA are strata Strata is more than just apartment housing, it is used for: commercial and retail premises tourist accommodation retirement villages and industrial premises

Reform information Get more information and subscribe to the reform newsletter www.landgate.wa.gov.au/stratareform Contact the team StrataTitlesActReform@Landgate.wa.gov.au

Questions?

Disclaimer This presentation has been prepared for the purposes of informing stakeholders on the nature and scope of proposed strata reforms to legislation in WA. Every effort has been made to ensure the information presented is accurate at the time of publication. Because it avoids the use of legal language, information about the law may have been summarised or expressed in general statements. This information should not be relied upon as a substitute for professional legal advice or as a reference to current legislation, nor relied on as a guide for future legislation relating to strata title in Western Australia, or in relation to current or future development proposals, commercial transactions or dealings in strata title. Photographs courtesy of the Metropolitan Redevelopment Authority.