Modernisation of WA strata laws

by Dentons
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Modernisation of WA strata laws has been a long time coming and is now one step closer following the passing of the Strata Titles Amendment Bill 2018 and the Community Titles Bill 2018  on 1 November 2018 and 6 November 2018 respectively.

The Strata Titles Amendment Bill 2018 and Community Titles Bill 2018 were passed by the WA Parliament on 1 November 2018 and 6 November 2018 respectively, bringing strata reform one step closer in Western Australia.

The Strata Titles Amendment Bill 2018 and Community Titles Bill 2018 seek to reform WA strata laws in the following five key areas:

  • Introduction of 2 new types of strata, leasehold and community titles;
  • Additional buyer information/disclosure and protection;
  • Resolving strata disputes;
  • Management of strata; and
  • Termination of strata schemes.

Leasehold Strata

Leasehold strata schemes will be a new type of strata in WA. The key components of a leasehold strata scheme are:

  • The scheme is created for a fixed term of 20 to 99 years.
  • All lots in the scheme terminate at the same time, being at the end of the fixed term.
  • Leasehold certificates of title will be issued for each leasehold lot.
  • Leasehold lot owners can buy and sell leasehold lots without the need for consent from the land owner.
  • Leasehold lot owners and financiers can grant and take security such as mortgages over the leasehold certificate of title without the need for consent from the land owner. Financiers with registered mortgages will have power of sale protection.
  • Rates and taxes will be levied against each leasehold lot and the leasehold lot owner is to pay those rates and taxes.
  • The same person can be both the land owner ('landlord') and leasehold lot owner ('tenant'). This is a departure from the normal leasing principles as normally if the same person is both landlord and tenant then their interests merge.
  • Forfeiture and re-entry of a leasehold lot can only be done pursuant to an order of the State Administrative Tribunal.
    It is envisioned that leasehold strata will allow land owners, particularly government agencies, not for profits, churches and universities, to develop land they may have otherwise not developed given land owners will retain ownership of the land subject to the leasehold interests.

Community Titles

Community title schemes will be a new type of strata in WA allowing for land to be subdivided into a multiple schemes that together comprise the community scheme. Community title schemes will allow mixed use developments to have a scheme for each type of use.

Modernisation of WA strata laws

The key components of a community title scheme are:

  • Community schemes can have up to three tiers as shown below.
  • Each tier has its own common property (if any), scheme plan, unit entitlements, by-laws and body corporate.
  • The Tier 1 scheme may have its own common property for the benefit of all tiers. The Tier 2 scheme may have its own common property for the benefit of Tier 2 and Tier 3. The Tier 3 may have its own common property for the benefit of Tier 3.
  • Tier 1 will have a body corporate (called a 'community corporation') which will have the overarching management of the whole scheme.
  • Each community scheme will have a community development statement which will set out how the land will be subdivided and developed.
  • The WAPC must approve the community development statement prior to subdivision of the land.
  • The development period is 10 years from registration of the Tier 1 scheme. This period may be extended by the WAPC.
  • During the 10 year development period, the registered community development statement is binding on owners, developers and planning decision makers.
  • Planning decision makers must approve subdivision or development applications that are consistent with the registered community development statement. Owners and developers will need to carefully draft the community development statement to encompass all future subdivisions otherwise they will need to obtain approval before undertaking those future subdivisions if they are inconsistent with the registered community development statement.
  • Community certificates of title will be issued for each lot in the community title scheme. These certificates of title can be transferred, mortgaged or otherwise encumbered or dealt with a freehold title under the Transfer of Land Act 1893.

Additional buyer information/disclosure and protection

The key changes:

  • New disclosure forms for strata, survey-strata, leasehold strata schemes and community title schemes.
  • Electronic disclosure will be permitted provided both the buyer and seller agree, the buyer provides an email address and acknowledges receipt of the disclosure.
  • Buyers will receive more information regarding the lot they are buying including:
  • estimated strata levy payments for 12 months after settlement;
  • minutes from the most recent AGM; and
  • any termination proposals received by the strata company.

Resolving strata disputes

The State Administrative Tribunal will essentially become the one stop shop for resolving strata disputes, replacing the four different forums where disputes are currently heard (State Administrative Tribunal, Magistrates Court, District Court and Supreme Court).

The Tribunal is currently restricted to making monetary orders to a limited of $1000.00, the reform will remove this limit. Additionally the Tribunal will now have the power to convert a non-monetary order to a monetary order. This addresses the current difficulty faced in enforcing non-monetary orders as the Tribunal will now be able to order that a person pay money to compensate equally to the cost of carrying out the non-monetary order.

Management of strata

Statutory duties will be imposed on strata managers to better regulate the industry and hold strata managers more accountable.

To better encourage voluntary participation in strata councils, owners who act in good faith when performing their duties in the strata council will not be liable in civil proceedings.

Statutory duties will also be imposed on members of the strata council to act honestly, in good faith and to exercise due care and skill. Council members will not be able to vote where they have a conflict of interest.

Owners can apply to the State Administrative Tribunal for the removal of a council member who has breached a statutory duty.

Voting and notices will be able to be undertaken and sent electronically.

Strata companies for larger schemes will now have to prepare 10 year management plans and have a reserve fund.

Termination of strata schemes

Currently there are 3 ways to terminate a strata scheme:

  1. All owners vote to terminate;
  2. One owner or one mortgagee successfully applies to the District Court for an order to terminate; and
  3. One owner successfully applies to the District Court for an order deeming that a resolution was made by owners to terminate.

Now an owner of a lot must follow a three part process and a termination cannot proceed without an order from the State Administrative Tribunal.

The three step process consists of:

  1. The proposal to terminate;
  2. Voting on the proposal; and
  3. State Administrative Tribunal review and order.

The proposal to terminate in itself is not a simple matter. First an owner or buyer prepares an outline of the proposal to terminates which is provided to the strata company. The strata company then registers a notification with the Registrar that a termination proposal has been made and serves the outline proposal on all owners and mortgagees within 14 days of receipt. After 3 months the strata company will put the outline proposal to a general meeting and if an ordinary resolution is passed in favour of the outline proposal then it must go to the WAPC for subdivision approval. If the WAPC approves the subdivision, then the owner or buyer must prepare a detailed termination proposal which then goes to the second stage, being the vote.

The Strata Titles Act and Regulations will prescribe the information that must be set out in the outline proposal and detailed proposal.

The State Administrative Tribunal can only order termination if the termination process was properly followed, any owner who has objected will receive at least fair market value for their lot and the proposal to terminate must be just and equitable.

 

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