On 22 November 2023, the Strata Legislation Amendment Bill 2023 (the Bill) passed both houses of NSW Parliament. Notably, the Bill amends provisions of part 10 of the Strata Schemes Development Act 2015 (NSW) (SSDA). These are the first set of substantive changes to part 10 of the SSDA since the provisions came into effect in November 2016.
As a refresher, part 10 of the SSDA provides the strata renewal framework which allows strata schemes to collectively sell or redevelop their strata scheme without the onerous task of seeking unanimous support of lot owners.
The amendments to the SSDA commenced on 11 December 2023 (the Amendments). Whilst there are no changes to the overall framework of strata renewal, there are several important changes that owners corporations, lot owners, strata managers and prospective buyers will need to be aware of before proceeding with a strata renewal.
New definition of “relevant interest”
The new section 154A of the SSDA provides a definition for the term relevant interest as:
“a direct or indirect pecuniary interest or other interest a person has in the proposed collective sale or redevelopment of a strata scheme.”
A direct or indirect pecuniary interest may include:
- being employed by the proposed purchaser or developer including a related entity;
- being employed by a prospective purchaser who has made an offer to purchase or redevelop the scheme;
- someone who has entered into an agreement (including an option agreement) with a proposed or prospective purchaser; or
- someone who does not own in the scheme but may be impacted by the proposed strata renewal.
Someone who may receive an amount from a proposed collective sale or who is set to benefit from a redevelopment will not necessarily have a direct or indirect pecuniary interest.
Disclosure of conflicts of interest and disclosure of pecuniary or other interests
The Amendments require someone with a conflict of interest to disclose this conflict before their election to the strata renewal committee (SRC). Using the new definition of “relevant interest”, a person has a conflict of interest if their relevant interest appears to raise a conflict with proper performance of the SRC’s functions.
If a person discloses a conflict, the owners corporation must consider that conflict at a general meeting and determine if that person should be elected to the SRC and if so, whether that person should be permitted to be present in deliberation and be involved in decisions related to the conflict.
In the event a member of the SRC becomes aware of a conflict of interest after they are elected to the SRC, that person must notify the secretary of the owners corporation. The secretary must then convene a general meeting of the owners corporation to consider whether the owners corporation should remove that person from the SRC or allow the person to remain on the SRC with or without restrictions as to their involvement in deliberations and decisions related to the conflict.
Disclosure of a relevant interest extends to members of the strata committee when they are considering whether a strata renewal proposal warrants further consideration by the owners corporation. Members of the strata committee who make a disclosure must not be present during deliberations of the strata renewal proposal or take part in any decisions related to the strata renewal proposal. Lot owners are now also required to disclose relevant interests when considering the strata renewal proposal or the strata renewal plan (SRP) at general meetings of the owners corporation.
Extension of period of operation of an SRC
An SRC will now operate for a default 2-year period after its establishment rather than the previous default 1-year period. An owners corporation can still make a special resolution to extend the SRC’s term beyond the 2-year period.
Minor defects or irregularities in the SRP
Section 182 of the SSDA is the guiding checklist for the Land and Environment Court to consider before making orders for a strata renewal. The Amendments now provide that the Court can make orders to give effect to an SRP where there is a procedural defect or irregularity in preparing the SRP or serving notices, provided these defects or irregularities did not and is not likely to cause substantial injustice.
Further, when considering an objection to the application, the Court must now consider if any objectors to an order to give effect to an SRP did not make their objection in good faith.
Costs of strata renewal proceedings at the Land and Environment Court
The default position is still that the owners corporation is to pay the reasonable costs incurred by a dissenting owner (without striking a levy for those costs). However, the Court is now able to order costs are assessed on the ordinary basis or an indemnity basis. Additionally, the Court is empowered to make costs orders against dissenting lot owners who have not acted in good faith in failing to give, or withdrawing, a support notice.
The team at Project Lawyers are highly experienced and appear before the Land and Environment Court on a regular basis. They have overseen many successful strata renewals since the commencement of part 10 of the SSDA and are well equipped to assist owners corporations, developers and dissenting lot owners with their strata renewal claims. If you have any queries in relation to the Amendments or strata renewal more generally, please do not hesitate to contact us.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
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Author: Maysaa Parrino & Akeel Sumar
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