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Legislative Assembly 6545 LEGISLATIVE ASSEMBLY Wednesday 25 February 2004 ______ Mr Speaker (The Hon. John Joseph Aquilina) took the chair at 10.00 a.m. Mr Speaker offered the Prayer. AUDITOR-GENERAL'S REPORT Mr Speaker announced the receipt, pursuant to section 52A of the Public Finance and Audit Act 1983, of the report entitled "New South Wales Auditor-General's Report—Financial Audits—Volume One 2004". Ordered to be printed. STRATA SCHEMES MANAGEMENT AMENDMENT BILL Second Reading Debate resumed from 4 December 2003. Ms KATRINA HODGKINSON (Burrinjuck) [10.00 a.m.]: The Opposition will not oppose the Strata Schemes Management Amendment Bill. However, during consultation stakeholders raised a number of concerns about several aspects of the bill and the way in which some of its provisions will impact on strata management practices. I will read onto the Parliamentary record a collection of the stakeholders' comments about the proposed legislation. I take the opportunity to thank the many stakeholders who were contacted for their response to the legislation, in particular, the Property Owners Association of New South Wales for its detailed submission and the Institute for Strata Title Management Ltd and the Retirement Village Residents Association for their respective submissions. Strata living is an important feature of a considerable segment of the State's population. The Strata Titles Act and its successor, the Strata Schemes Management Act, were designed to deal with relatively small blocks of units for a group of residents who were able to manage the property, often assisted by a strata managing agent. Such residents are now called an "executive committee" in this bill. In recent years, the trend has developed for large high-rise blocks, not only in the city central business district and suburbs but also in regional cities and rural areas. The change in the scale of operations and the consequent problems associated with these blocks, which often contain several hundred units, have necessitated amendments to the Act. The amendments provide additional legal support and provisions to meet the new requirements of the blocks. The Opposition believes that institutional changes should be introduced to cope with the management of multiunit blocks. We predict that this bill is the beginning of a series of amendments that inevitably will be needed to provide for the requirements of this rapidly expanding property sector. In 2001 approximately 13 per cent of private dwellings in Australia were flats or apartments and more than 75 per cent separate houses. The percentage of flats and apartments has doubled over the past 40 years. In 2000-01 nearly 33 per cent of all dwellings constructed were in the flat or apartment category. Statistics provided in a report following the Campbell inquiry estimated that the percentage of multiunit dwellings constructed in the Sydney metropolitan area compared to the construction of detached dwellings will continue at a proportion of 55 to 45 for the foreseeable future. I refer to "Living in Strata Developments", which is an issues paper that was distributed by the Government last May. Some suburban areas will have a much higher proportion of multiunit dwelling construction than others. Because of the issue of available space, residential construction in the Sydney central business district will be 100 per cent multiunit. In the past 10 years the number of people living in inner Sydney has risen by 40 per cent, which is an extraordinary figure. In the last financial year banks have advanced $43 billion in loans for investors around Australia, and 80 per cent of those loans were made for the construction of apartments. One-third of the 173,000 new dwellings that are estimated to be built to the end of 2003 will be under strata title. Therefore, the Government, given its knowledge of this information, has a responsibility to promote regional development in this State and to expand residential programs into rural and regional areas. It should provide 6546 LEGISLATIVE ASSEMBLY 25 February 2004 incentives for industry to relocate and provide greater assistance to people who want to start their own businesses in rural areas away from the Sydney-Newcastle-Wollongong areas. There has never been greater proof that the Government is failing in its responsibility in the regional development portfolio than the statistics to which I have just referred. I now speak to the specific aspects of the Strata Schemes Management Amendment Bill. The bill seeks to provide a mechanism whereby larger schemes can be treated differently to smaller schemes. The inclusion of such a provision recognises the great difference between managing a city apartment block and a suburban block of six to ten units. The bill defines any scheme with 100 or more blocks as a large scheme and is intended to enable the owners corporation to tailor its scheme to its particular requirements. The Opposition notes, however, that parking lots and utility lots, such as storage rooms, will not be counted when calculating the 100 lots. The intention of the bill is to provide a large scheme with sufficient flexibility to alter its administrative arrangements for ease of management. Further, this provision is in recognition of the greater accountability of owners corporation funds that are required by large schemes. The bill intends that regulations contain provisions that will prescribe different processes and requirements in matters such as the conduct of meetings, the functions of office bearers, the management of finances and the operational powers of the executive committee. While a great deal of the changes to the administration of large schemes will be handled by regulation, some matters have been addressed in the bill. For example, the bill provides that the financial accounts of large schemes will be subject to an audit on an annual basis by a suitably qualified person. In addition, owners corporations will need to obtain two quotations for large items of expenditure. An executive committee for a large scheme will be limited to spending no more than 10 per cent above any approved budget item. All unit owners are required to be notified personally of upcoming executive committee meetings and to be notified of any decisions made by the executive committee at such meetings. The practice of conveying the notification of decisions made at meetings by placing them on the noticeboard will no longer be regarded as sufficient. Further, proxy votes to be used at a meeting of the owners corporation will need to be submitted to the secretary at least 24 hours before the meeting takes place. As to the 10-year sinking fund, the bill seeks to introduce changes to the way sinking funds are managed by owners corporations. It requires owners corporations to adopt a structured approach to their sinking fund reserves. At present if inadequate owners corporation funds have been set aside and the maintenance of the strata scheme has been neglected, a large one-off levy may be imposed upon all unit owners. The bill will make it a mandatory requirement for all new schemes to implement 10-year sinking fund plans that will need to be reviewed at 5-yearly intervals. Also, 10-year maintenance and expenditure plans with associated budgeting will be required of all new strata schemes. This provision is designed to make an owners corporation face up to the likely capital expenditure that a scheme will incur over the ensuing decade and to plan the sinking fund budget accordingly. The bill also provides owners corporations with the option of drawing on the expertise of professionals to formulate a 10-year sinking fund plan. Although the sinking fund provisions will apply only to new schemes, they may be extended to existing schemes by regulation if deemed appropriate. The bill seeks to establish a procedure to be followed prior to the commencement of any form of legal action by an executive committee. It has been argued that owners should be made aware of the cost of legal action and its likelihood of success prior to the commencement of such action. The commencement of legal action by an executive committee on strata scheme matters is at times an area of disagreement among owners. The bill requires that if an executive committee is contemplating taking any type of legal action all owners are to be provided with a written estimate of the cost of the action in accordance with the Legal Profession Act. The bill further provides that a meeting of the owners corporation must be called prior to taking action to afford owners the opportunity of expressing a view on the matter. These provisions will cover not only the initiation of legal proceedings but also the obtaining of legal advice. The bill seeks effectively to prevent executive committees from undertaking legal action on their own initiative to ensure that the decisions taken will not be subject to claims that the committee has not acted in the interests of all owners. In addition, owners corporations will be required to consider whether any restrictions are to be placed on the decision-making powers of executive committees at an annual general meeting for the ensuing year. This provision is designed to ensure that an executive committee will only perform the functions the owners corporation has mandated. The bill also clarifies the situation of a disagreement between the owners corporation and its executive committee. The owners corporation will be regarded as the superior body and may override a decision of the executive committee in the event of a dispute between the two tiers of management. The bill contains a further provision that confirms the right of an owners corporation to dismiss its executive committee by special resolution, should circumstances deem that necessary. In relation to fire safety, 25 February 2004 LEGISLATIVE ASSEMBLY 6547 the bill clearly recognises the importance of having the necessary fire safety measures in place in strata buildings and the need to provide adequate access to fire authorities for the purposes of inspection.
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