The challenges confronting strata titled properties: lessons learned Strata Title Workshop Brunei Darussalam 7 & 8 May 2018 Dr Nicole Johnston Deakin Business School Deakin University Deakin University CRICOS Provider Code: 00113B
Presentation Overview • Examples of strata schemes in Australia • Implementation of Strata Systems – The Value of Research • Legislative Framework Federal system Language complications • The Challenges and Lesson Learned (recent reforms) Planning and Design Scheme Establishment - Registration (workshop focus) Governance and Management - Lot Entitlements / liabilities (workshop focus) - Sinking Funds (workshop focus) Termination and Redevelopment 2 Deakin University CRICOS Provider Code: 00113B
Eureka Tower – Vertical Scheme 3 Deakin University CRICOS Provider Code: 00113B
Currumbin eco-village - Horizontal Scheme 4 Deakin University CRICOS Provider Code: 00113B
Sphere – Staged Scheme (medium density & townhouses) 5 Deakin University CRICOS Provider Code: 00113B
Implementation of Strata Titling – the Value of Research Challenge The key challenge in most jurisdictions is the lack of research. In the absence of research, constant reform will be required. Changes to the legislation are often prompted by complaints made by lot owners to the government and the reform process is often based on submissions made by various stakeholders in consultation rounds. Rarely is reform based on empirical based evidence. Need to understand how people live, their perceptions of community living, level of apathy (involvement), what they read, other systems and how those systems impact upon strata, expectations in relation to communal living Example: Disclosure regime (How much needs to / should be disclosed? How do humans process complex information?) 6 Deakin University CRICOS Provider Code: 00113B
Legislation – Challenge Northern Territory Unit Titles Act Unity Title Schemes Act Queensland Body Corporate and Community Management Act 1997 Module Regulation: Two-Lot Schemes Small Schemes Standard Schemes Commercial Schemes Accommodation Schemes Western Australia Strata Titles Act 1985 New South Wales Strata Schemes Development Act 2015 & Strata Schemes Management Act 2015 Community Land Developments Act 1989 & Community Land Management Act 1989 South Australia Australian Capital Territory Strata Titles Act 1988 Unit Titles Act 2001 & Unit Titles (Management ) Act 2011 Community Titles Act Victoria 1996 Owners Corporation Act 2006 & Subdivision Act 1988 Numerous ancillary legislation must also be considered Tasmania Strata Titles Act 1998 7 Deakin University CRICOS Provider Code: 00113B
Language – Challenge Queensland Community Title Schemes Body Corporate Western Australia Strata Title Strata Company New South Wales Strata Title & Owners Corporation Community Title & Associations ACT South Australia Unit Titles & Owners Corporation Strata Title & Strata Corporation Community Title & Community Victoria Corporation Subdivision with Owners Corporation Owners Corporation Tasmania Strata Title & Community Title Body Corporate 8 Deakin University CRICOS Provider Code: 00113B
Planning and Design Challenges arise both in relation to LGA planning schemes and how individual strata schemes are designed. • One area of common dispute in Australia relates to short-term letting (rise of Airbnb etc). It is dependent upon the zoning of land and what the planning scheme has allowed. Disputes in areas close to tourism or city centres are prolific. Problem – owners v short-term tenants. Use can be different (residence / accommodation) and leads to conflict (noise, parties, traffic flow through building (bags), damage). – Consideration: LGAs need to understand the level of conflict arising from mixed tenancies and ensure approvals include conditions to alleviate common concerns. • Effective designs are critical to scheme success and alleviating disputes. Issues arise relating to lot layout, storage, privacy and ventilation. In relation to the building, issues relate to the design of common areas - minimising the transmission of noise and smells, car spaces, moving in and out, laundry, pets etc. Care also needs to be taken in relation to equipment choice, maintenance and energy costs. – Consideration: guidelines, educational seminars, developer / builder incentives to ensure quality of product • Determining lot boundaries is critical (next slide) to scheme success 9 Deakin University CRICOS Provider Code: 00113B
Design – Lot Boundaries Challenges Challenges Lot Boundaries – what is common Considerations property and lot property? 1. Should lot boundaries be Disputes relating to responsibility - determined on an individual 1. Determined in conjunction with Common property v lot – need to scheme basis? developer & surveyor – scheme clear about definition of common dependent and need to view plan of 2. If not, where should the property survey to determine boundaries boundary lines be? 2. Median line (centre) – centre of doors, 3. Who is best positioned to More problematic in states where walls, slab. Governed by legislation maintain the property? Lot boundaries can only be determined owner or body corporate? 3. Inner face (airspace) – boundary is by reviewing the plan of survey inner face of walls, doors, floor, roof. 4. Impacts on body corporate (inconsistent) – reliance of experts Governed by legislation funding 4. Car spaces and storage – separate lot, 5. Should car space, storage Lot owners are generally more part lot or common property with spaces etc be a separate lot, reluctant to maintain and repair rights to use (licence or lease) part lot or common property? (absence of mandated requirements) 6. Requirement for operational plan (clarity of responsibility) Car spaces / storage – rights change depending on ownership 10 Deakin University CRICOS Provider Code: 00113B
Scheme Establishment – Planning and Registration Registration: each jurisdiction in Australia has different requirements relating to registration documentation. • Community Management Statements (in some jurisdictions) – includes entitlements / liabilities, calculation methodology used, by-laws, architectural and landscape codes (if applicable), leases and licences, shared agreements. • Plan of subdivision • Lot entitlements / liabilities and basis for the allocation • Rules / by-laws Governance planning: each jurisdiction in Australia has different requirement relating to pre-sale information disclosure • Aspects of governance and management are determined (necessitate effective running from outset) – bylaws, management, levies, leases and licences etc 11 Deakin University CRICOS Provider Code: 00113B
Scheme Establishment Scheme Establishment Challenges Considerations Developers necessarily need to make Developer control: often developers 1. Disclosure requirements? arrangements for the transition in want to control the B/C until all lots 2. What information should be governance once the scheme is are sold and the developer exits the provided upon registration? registered. That is, before the development. Decisions are made 3. How much information to scheme is registered and the B/C is that may be in the best interests of disclose? created, the developer needs to the developer and not the B/C. 4. Use of proxies and powers of make decisions regarding lot E.g.: setting levies (underestimated), attorney (limitations) entitlements, budgets, management, negotiate contracts that advantage by-laws. The developer also has 5. Limitations on developers developer or associated entity, control for a period of time post- powers (pre and post bylaws that benefit retained lots, lack registration and holds all the voting registration) of documentary handover, leases power. favouring developer or associate 6. Regulations / prohibitions regarding developer-initiated arrangements 12 Deakin University CRICOS Provider Code: 00113B
Governance • Legislation creates a governance framework • Body corporate (entity) is responsible for governance and management (although management is often delegated) • Challenges are vast – owners lack of knowledge, apathy, complexity of schemes / legislative environment, various attitudes to compliance (different from living in free standing dwelling) • Next slides highlight lessons learned / reform ideas from Australia • South Africa has implemented new Ombuds system – bodies corporate are required to lodge an annual return. Once the information provided in the return meets the requirements of the Act, the Chief Ombud issues a compliance certificate. Purpose of the system is to regulate the conduct of parties; to regulate, control and quality assure all scheme governance documentation; provide dispute resolution services, provide stakeholder training, consumer education etc. Each body corporate must pay a levy to the Ombuds service 13 Deakin University CRICOS Provider Code: 00113B
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