Missing the NSW Strata Forest for the Trees

I've been asked to blog some more about NSW strata law reforms for the Office of Fair Trading public consultation programme so have written about an important but off-centre issue.


Sometimes we don’t see what’s obvious because we’re too focused on small details and miss the bigger picture. 

And, I think there’s a real danger of missing one of the most important issues for strata owners and residents in this current strata law review for exactly that reason.  If we’re too focus on strata law details under the Strata Schemes (Freehold Development) Act 1973 and the Strata Schemes Management Act 1996 we’ll miss other really important changes that don’t have anything to do with those laws.

My best example of that is strata building construction quality, Building Code of Australia compliance levels and defect rectification mechanisms for strata buildings and owners.

Over the last 15 years NSW strata owners have experienced a steady and consistent decline in the quality of new buildings and they contain more prevalent and serious building defects (including non-compliance with BCA requirements). That been the result of changing development, building and certification processes, economic pressures and (up until recently) a buoyant real estate market.

At the same time the protections available to strata owners about those buildings have been gradually reduced so that larger buildings (over 3 storeys) no longer enjoy the protection of the Home Owners Warranty insurance, time limits for defect claims have been reduced, more insurance exclusions have been allowed and Court decisions have complicated the legal claims process. So, today most strata corporations have a tougher time getting builders, developers and others to properly address their building defects.

What this really means is that the most significant part of a strata scheme (the building) becomes a problem for everyone rather than a source of stability and certainty (as it should be).  No matter how well meetings are run, how accurately records are kept and how promptly owners pay levies, if your strata building has construction faults that don’t get fixed then everyone’s experience of strata is seriously affected:

• Owners suffer property damage, property value reductions, amenity loss, rent losses (if they’re investors) and increased levies. 
• Tenants suffer similar problems.  
• Executive committee members and managers have to deal with more work, conflicts with owners and others, difficult technical and legal issues and financial challenges. 
• Regulators like local councils, fire officers and safety authorities end up with more non-compliant buildings.

And, it’s no answer to say that strata corporations can make insurance claims or take legal action. Regardless of the adequacy of the claim and legal processes available to strata owners to redress building defects, even those that exist are not being well utilised because the nature of strata title owners and ownership.  By a combination of strata owner capacity issues including lack of knowledge and experience, poor communication channels, strata scheme operational formalities, confused objectives and the incorporeal nature of strata corporations, strata owners miss out on legal remedies.

What’s needed is better construction practices, improved checking and certification systems and easier ways to get defects fixed.  And, some ideas for changes in include –

• Better home warranty insurance schemes.
• Incentives for builders to build to a better standards
• Tighter standards and protocols to prevent poor construction work
• Better equipped systems for complaints and legal challenges
• Better education for owners and other stakeholders about building quality issues
• Preventing conflicts of interest within strata corporation that cause delays for rectification
• Statutory assignment of contractual rights against the builder/s from developers to strata corporations
• A building rating system for construction quality, building documentation completeness and integrity & defect rectification progress/results
• Improved and more sophisticated building handover strategies from developers to strata owners

Better quality strata buildings will make more of a difference to strata owners (and others) than many of the necessary but more procedural strata law reforms that are likely to be made in NSW.

Francesco ...