10 March 2025
13 min read
#Property, Planning & Development
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The NSW Parliament has now introduced and passed its third wave of strata reforms, designed to boost confidence and strengthen accountability in strata and community land schemes. With a growing number of people living in these schemes and increasing public pressure for the government to address the housing crisis and rising living costs, the reforms mark a monumental shift for the sector.
The 3-pronged regime implements recommendations from the 2021 statutory review of the Strata Schemes Development Act 2015 (NSW) (SSDA) and Strata Schemes Management Act 2015 (NSW) (SSMA) (the Report), as well as reforms to address insurance commission scandals in the strata industry.
In this article, we outline the key changes introduced across the three waves of reforms:
These reforms impact the life cycle of strata and community land schemes – from cradle to grave. Whether you are a utility or insurance provider, strata managing agent, building manager, vendor, owner, developer, or part of an owners corporation or community land association; it is essential all stakeholders understand how the current and upcoming changes will affect your operations to ensure compliance.
The 2023 reforms, which commenced in December 2023, introduced several changes to the SSDA and SSMA.
Strata renewal process
Under the 2023 reforms, the Land and Environment Court of NSW (LEC) can approve strata renewals despite non-compliance with the strata renewal process, provided the defect or irregularity does not cause, or is unlikely to cause, substantial injustice.
The LEC is also required to consider whether a dissenting owner is acting in good faith or has a conflict of interest. These changes respond to past cases where the strata renewal process failed due to objections from dissenting owners who had a relevant interest or conflict in the collective sale process.
Original owner voting powers
Before the 2023 reforms, an original owner’s vote was reduced by two-thirds if their unit entitlement was at least half of the aggregate unit entitlement. Under the reforms, the original owner’s vote is now only reduced by two-thirds if:
If a scheme has only two lots and the original owner retains one of these lots, their voting power is no longer reduced by two-thirds.
Voting limits on company nominees and persons acting under powers of attorney
Clause 25A, Schedule 1 of the SSMA limits the number of owners a company nominee, or a person acting under power of attorney, may exercise voting rights on behalf of.
This amendment was introduced to prevent ‘proxy farming’: where individuals collect votes from other lot owners who do not attend annual and general meetings to gain a majority vote. However, since its implementation, this section has proved to be impractical and burdensome. For example, if a strata scheme has 19 lots and a company owns 10 lots, it must provide 10 separate company nominees to exercise the voting rights of each lot.
Clause 25A will be further amended under the 2025 reforms, which we discuss below.
Appointment of strata committee members
The 2023 reforms have clarified the process for nominating, appointing and electing strata committee members. Committee members can now be appointed by a resolution at both an annual general meeting (AGM) or an extraordinary general meeting. A nomination for a strata committee member can either be made in writing before an election is held or verbally at the meeting.
These changes provide greater flexibility, particularly in real-life situations like mass resignations of committee members. Strata schemes no longer need to wait until the next AGM to appoint new members.
The 2025 reforms passed parliament on 18 February 2025 but have yet to commence. These reforms are extensive and introduce considerable changes to the SSMA and CLMA, reflecting 37 recommendations from the Report.
The first AGM
The SSMA requires the original owner or lessor of a leasehold strata scheme to hold the first AGM of the owners corporation within 2 months after the initial period and to provide certain documents and records to the owners corporation before the meeting.
Under the 2025 reforms, failure to comply with the above measures could result in a maximum fine of 100 penalty units. The original owner could also face an additional fine of 2 penalty units for each day the offence continues.
The 2025 reforms also impose further obligations on original owners of multi-storey schemes – defined as a strata scheme with at least 1 building and more than 2 storeys above ground level (Multi-Storey Scheme). The original owner of a Multi-Storey Scheme will also be required to provide the owners corporation at the first AGM with, for example:
Failure to comply will result in a maximum penalty of 100 penalty units for an individual or up to 500 penalty units for other parties.
Initial maintenance schedule continued
The government will provide a prescribed form for the initial maintenance schedule and the original owner will be required to use the prescribed form when preparing the schedule.
The 2025 reforms also require that the initial maintenance schedule to be reviewed and certified by an independent surveyor before being provided to the owners corporation. An independent surveyor, being someone not connected to the original owner, must be either:
Utility supply contracts and embedded networks
Currently, section 132A of the SSMA provides an automatic end date for contracts entered into by the owners corporations for the supply of utilities to the strata scheme, such as gas and electricity, known as an exclusive supply network (Embedded Network). However, it does not account for utilities supplied through such networks. The 2025 reforms extend section 132A to include Embedded Networks to prevent uncompetitive contracts being on-sold to lot owners. These changes are mirrored in the CLMA.
For established schemes, vendors will be required to provide a warranty that, unless disclosed in the contract for the sale and purchase of land, the relevant strata or community land scheme does not include an exclusive supply network. This will be a prescribed warranty under the Conveyancing (Sale of Land) Regulation 2022 (NSW) (Conveyancing Regulations) and therefore cannot be contracted out of.
Additionally, section 184 certificates (or section 174 certificates for an association scheme under the CLMA) will be required to state whether the scheme includes an Embedded Network and outline the services provided. This enables buyers to test the prescribed warranty provided under the Conveyancing Regulations.
Off-the-plan
Developers selling lots off-the-plan will be required to specify in the disclosure statement attached to the contract whether the development includes, or is likely to include, an Embedded Network and the type of service provided. Developers must notify the purchaser before settlement if the disclosure changes. The purchaser may have a right to rescind under Division 10 of the Conveyancing Act 1919 (NSW) if a purchaser is materially affected by this change and can show they would not have purchased the property had they known about the Embedded Network before exchange.
Sustainable infrastructure
By-laws restricting the installation of sustainability infrastructure due to external appearances will be prohibited, except if the common property is heritage-listed or within a heritage conservation area. Strata and association schemes will also be required to consider environmental sustainability at each AGM, including annual energy and water consumption expenditure.
New duties for strata committee members
The 2025 reforms introduce new statutory duties on committee members to act with honesty and fairness, due care and diligence and in the best interests of the owners corporation or association.
Committee members will also be required to complete training, as prescribed by the regulations. If a committee member fails to do so, the owners corporation or association will have the power to cease their role by notice.
Voting limits on company nominees and persons acting under powers of attorney
Under clause 25A, Schedule 1 of the SSMA, as introduced under the 2023 reforms, a company nominee was previously limited to exercising only some of the company’s voting rights at a general election. The 2025 reforms will remove this limitation, allowing company nominees to exercise all of a company’s voting rights.
Duty of the owners corporation to repair and maintain the common property
The owners corporation has a duty to maintain and repair the common property. However, under section 106(4) of the SSMA, the owners corporation can defer this duty if they are seeking damages from another party, such as a developer, so long as the deferral does not affect the safety of the building, structure or common property. This is mirrored under section 109(4) of the CLMA.
The 2025 reforms tighten the circumstances in which an owners corporation can defer its statutory duty to maintain and repair the common property. If the deferment affects a person’s access to, or use of, the common property or a lot, the owners corporation will be in breach of its statutory duty.
The limitation period for an owner to bring a claim against the owners corporation under section 106 has been extended from 2 years to 6 years, from when the owner becomes aware of the loss. However, it is unclear whether the extended period applies to losses that occurred before the commencement of the 2025 reforms, where the original 2-year limitation period has expired. Owners corporations should err on the side of caution with the view that they may incur liability for such claims once the 2025 reforms are enacted.
Accessibility
The 2025 reforms amend the threshold for passing a special resolution for accessibility infrastructure, meaning infrastructure to facilitate a disabled person having access to the property, from 75% in favour of the resolution to a majority vote. The owners corporation must also consider a range of financing and installation matters including:
These changes will be mirrored in the CLMA.
New statutory duties on building and facilities managers
These new statutory duties reflect those introduced for strata managing agents under the Managing Agents Act. See our discussion in the next section.
Reforms relating to agents
NSW has the most reporting and disclosure obligations on strata managing agents, especially since the commencement of the Managing Agents Act.
The 2025 reforms will also implement statutory duties on building and facility managers, mirroring those introduced under the Managing Agents Act, and make further changes to the regulation of strata managing agents.
The Managing Agents Act
The Managing Agents Act amends the SSMA, the Property and Stock Agents Act 2002 (NSW), CLMA and their corresponding regulations to strengthen the disclosure obligations of strata managing agents. These changes, effective since 3 February 2025, aim to increase transparency for strata owners and bolster NSW Fair Trading’s compliance and enforcement powers.
Key changes include:
Strata managing agents, developers and businesses providing goods and services to owners corporations, or otherwise pay commissions to agents, should be aware of these changes.
Providers also need to be aware that agents now must provide reasons as to why providing their goods and services to the strata scheme is in the owners corporation’s best interest. Agents are also obligated to notify the owners corporations of any commissions received or expected, along with details of their relationships with service and goods providers.
Further changes to come
The 2025 reforms build upon the changes introduced under the Managing Agents Act, including:
The 2025 reforms also introduce a defence for agents when they breach a duty or delegated function. The agent can use the defence if they can demonstrate the breach was caused by the owners corporation and that they took reasonable steps to prevent the breach.
The NSW strata reforms change how we develop, live in, regulate, and terminate strata and community land schemes. All stakeholders need to be aware of their increasing obligations and the consequences for non-compliance. This includes developers’ duties to disclose embedded networks in off-the-plan contracts and to provide an initial maintenance schedule, as reviewed and certified by an independent surveyor, as prescribed by the SSMA.
Legal practitioners should pay particular attention to the impending changes under the 2025 reforms and how they may impact their clients once in force.
If you have any questions about the above changes or would like more information about how the reforms may impact your business, please get in touch with our team below.
Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.
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