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The Owners Corporations Amendment Act 2021:

Here’s what it means for property developers

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Amendments coming into effect 1 December, include increased responsibilities and obligations for developers, while also providing positive opportunities to improve transparency between developers and the owners corporations they create.

Appointment of an owners corporation manager

One of the most important steps for a developer is appointing a knowledgeable manager.One that will not only ensure the owners corporation (OC) runs smoothly and effectively, but one that also gives life and maintains the developer’s vision.

Offering peace of mind to your clients, the new legislation clarifies that a developer must not engage themselves or one of their associates to be the initial owners corporation manager, and the developer cannot seek payment for the right to a strata management contract. This aims to create a more equitable environment to attract the right manager with the appropriate skills and expertise necessary to manage the style and complexity of the property.

It’s also interesting to note, the Owners Corporations & Other Acts Amendment Act 2021 (the Act) goes further to extend protection to consumers and provides that a manager’s contract of appointment must not exceed a duration of three years. It will be terminated if entered into prior to the first meeting, and must not include terms such as:

  • A term that permits the manager to renew the contract at the manager’s option; and
  • A term that permits an automatic renewal of the contract.
  • Understanding the duties and functions of the strata manager, the obligations of the OC and entering into a management contract that is valid and accurately reflects the needs of your property is also one less issue for a developer when working with a professional manager.

    3 year limit on contracts

    Developers also need to be aware of contract terms that can be invalidated by provisions of the Act. Changes limit the tenure of any other owners corporation contract entered into by the developer where they receive benefit by setting a maximum term of three years. These can include a number of agreements, such as service agreements and licenses over common property which are commonly approved at the first annual general meeting of the owners corporation.

    First meeting obligations

    The Act also aims to improve transparency and promote fairer access to information for purchasers, and now increases your requirements for disclosure at the first meeting of the owners corporation.

    Minutes must now disclose any relationship that the developer might have with the manager, including any expected financial benefits and any specific benefits which arise or flow to them, as a result of the relationship.This will work to remove any hidden benefits at the owners corporation expense, and re-build trust that has slowly been worn away with activities in the media spotlight.

    Also of significant importance are the following documents which must be handed over to the owners corporation.These details, while always in the hands of the developer, are often overlooked as a valuable resource for the ongoing reference of the OC. Once collated and provided they will set a strong foundation for the ongoing upkeep and protection of the building as an asset, your clients as their investment and their home, and for developer’s as their legacy.

  • A building maintenance manual
  • An asset register
  • Copies of any warranties
  • Any reports, permits or certificates and
  • Any orders or notices relating to plans of subdivision.
  • While the additional requirements are numerous, you can lean on the experience of your strata manager to provide professional advice and guidance as you progress the varying stages of development, when and as needed.

    The initial OC budget

    For your prospective buyers, the budget of an owners corporation is a critical factor to consider in their decision to purchase a lot. An experienced manager knows that when not adequately factored in to a lot owners living expenses, it risks creating an unexpected financial strain on the lot owner and generates disharmony in their living environment. Owners express feelings of being deceived, not being openly made aware of what it actually meant to buy in to the property. Consequently, the amendments now require developer’s to ensure the initial OC budget is accurate and sustainable.

    A valuable asset in these situations, is an objective owners corporation manager. They can set an accurate budget from their knowledge of similar buildings and facilities, to assure purchasers are able to trust that the fees being presented to them are on target, and aim to avoid potential sharp increases in subsequent years.

    Extended and mitigated obligations

    And for those developers who retain a majority of lot entitlement after the plan of subdivision is registered, the Act now extends your obligations for the peace of mind of your clients. You must continue to act honestly and with due care and diligence in regard to the interests of the owners corporation, for a period of 10 years, instead of 5 and you cannot vote when it comes to decisions on defects.

    For owner’s corporations as a whole, the amendments to the Act strive to provide greater protection and benefits, making strata living more desirable than ever. These changes will also assist developers to maintain an admirable business reputation and offer the opportunity to build better functioning owners corporations that run under the guidance of appropriately skilled managers.

    Seeking further advice?

    Ace has been engaged in strata title/body corporate management since 1995, and currently manages over 65,000 units. If you wish to discuss any strata community matters further with an Ace Body Corporate Manager, we are here to help. Get in contact with your local manager today.

    Ace Body Corporate Management
    Disclaimer: This is not advice and should only be referred to for general information purposes. Strata management contracts often vary, so we recommend you contact your local Ace manager for more information, or seek expert legal advice. This article is not intended to be personal advice, and you should not rely on it as a substitute for any form of advice.Ace Body Corporate Management offers this newsletter to clients to assist in updating them on company and industry news. The content within this newsletter is of a generic nature and may not be applicable to all owners corporations. Ace Body Corporate Management attempts to provide the most up-to-date and accurate information for our clients. However, we strongly recommend that individuals and committees seek further advice before acting on any information in this newsletter.