A strata title (or scheme) is a way that individuals or companies can communally own properties such as units, townhouses, warehouses, factories etc. This term essentially describes how the legal ownership of a property has been divided up into lots.
Strata schemes can be used for both residential and commercial purposes, and in NSW there are around 75,000 of them. When creating a strata scheme, you must establish a Strata Management Statement, an Ownership Corporation and also abide by strata management law. To understand what this entails, keep reading.
- How to establish a strata scheme
- What is a Strata Management Statement?
- Can rules in SMS be changed?
- Disputes and Compliance
How to establish a strata scheme
The process of setting up a strata scheme usually involves a developer submitting a strata plan for approval and registration at the NSW Land Titles Office. Once approved and registered, the NSW Land Titles Office issues certificates of title for each lot. There is also one certificate of title for the property as a whole, which is owned by the Ownership Corporation (OC).
The Ownership Corporation
An OC is formed on the formation of the strata scheme. It is made up of all the lot owners. Usually, the first owner is the developer of the scheme. As people or companies buy lots in the scheme, they become members of the OC.
The Strata Management Statement
Once the OC is formed, a strata management statement (SMS) is created. The SMS (Strata Management Statements) is a set of rules that outlines how people can use the property. The purpose of the SMS (Strata Management Statements) is to try and help lot owners and/or residents to live/work in relative harmony.
Usually, rules in an SMS (Strata Management Statement) cover how the common parts of the property should be used, for example, where rubbish should be collected or where washing should be hung. Strata Management Statements also usually cover the behaviour of residents, for example, noise levels, use of shared facilities or pet ownership.
In addition, Strata Management Statements usually cover aspects such as the landscaping, maintenance, and upkeep of the property.
Copies of the SMS (Strata Management Statements)
All lot owners and potential lot owners should have a copy of the SMS (Strata Management Statements). This is especially important if you are considering buying a lot. You will need to read through the SMS (Strata Management Statement) carefully to make sure you can live with and abide by the rules.
While the purpose of the SMS (Strata Management Statements) is to ensure that residents live in harmony, do not rely on the idea that you will find all the rules reasonable. For example, if you are a pet owner, you need to make sure that the SMS (Strata Management Statements) does not prohibit pet ownership. Similarly, if you would like to make alterations to the lot you want to buy, make sure you are fully aware of all the rules and restrictions surrounding the alteration of the property.
You should be able to get a copy of the SMS (Strata Management Statements) from the OC. If for some reason, the OC will not provide you with one (which may be an indicator of problems), you should be able to obtain a copy through the NSW Department of Finance and Services’ Land and Property Information Division.
Can rules in SMS be changed?
The rules in the SMS (Strata Management Statements) can be changed or repealed. This is usually done in a general meeting of the OC. If, as a potential purchaser, there is a certain rule that you cannot live with, then do not buy the lot on the assumption that you will be able to change the rule.
Changing the rules requires voting – and changing certain rules can require a unanimous vote of all the lot owners. If you cannot live with the rules as they stand, then you should consider not buying the property.
Disputes and Compliance
Both tenants and owners must comply with the SMS (Strata Management Statements). The penalties for failing to comply can include fines.
In the first instance, resolution of disputes among lot holders and/or the OC should be attempted by discussion. Failing that, the NSW Office of Fair Trading provides a mediation service for the resolution of strata scheme related disputes.
Finally, if a dispute cannot be resolved through mediation, an application can be made to the NSW Civil and Administrative Tribunal’s Strata and Community Schemes adjudicator.
The NSW Government is currently reforming the laws governing strata schemes. This is the first major reform of the strata title management laws since the original strata laws were enacted in 1973.
The purpose of the reforms is to bring the scheme up to date, with reforms that will enable a strata scheme to:
- Keep and issue electronic records
- Communicate with lot owners via email
- Allow lot owners to attend meetings virtually (if they cannot attend in person).
The proposed reforms will also streamline the management of strata schemes and the enforcement of the SMS (Strata Management Statements).
The proposed changes have not yet been enacted into law. The final date for public comments on the changes was 12 August 2015. If you wish to be kept informed about the changes, you can register your email address with the NSW Government’s Fair Trading Department.
Have questions about NSW strata management, conveyancing or Strata Management Statements NSW? Contact the experienced mortgage and conveyancing lawyers at Owen Hodge Lawyers. Our strata lawyers (Sydney) would be happy to work with you to achieve the best possible outcome in your circumstances. Call us today at 1800 770 780 or contact us via [email protected].