Second Reading Speech

Debate resumed from an earlier hour.

Mr ANOULACK CHANTHIVONG (Macquarie Fields—Minister for Better Regulation and Fair Trading, Minister for Industry and Trade, Minister for Innovation, Science and Technology, Minister for Building, and Minister for Corrections) (12:17): Assistance animals play an important role in our society by supporting those with disability. They aid in providing a good quality of life and independence for many. That is why, under strata and community land scheme laws, a by-law cannot prohibit or restrict a resident from keeping an assistance animal or the use of an assistance animal on a lot or common or association property. Although a by‑law may require a person to provide evidence that an animal is an assistance animal, to strengthen the protections for residents and visitors with assistance animals, the bill clarifies that a by-law cannot restrict the use by, or impose an unreasonable burden on, any person in relation to the use of an assistance animal on a lot or common or association property.

That will ensure that by-laws cannot affect the ability of assistance animals to perform their duty. For example, a by-law that requires animals to be carried through common areas will not be able to prevent a vision‑impaired resident from using their guide dog to guide them through the common property. The by-law will apply to other residents who do not rely on an assistance animal. The bill also serves to maintain the privacy of persons with an assistance animal by clarifying the forms of evidence that schemes can request to establish an assistance animal's status. It will prevent schemes asking for medical or personal information about a person's disability, which ultimately would become information accessible via a search of the scheme's records. The bill allows for an owners' corporation to require evidence that the animal holds an accreditation or has received the training referred to in the Commonwealth Disability Discrimination Act 1992, or other evidence prescribed in the regulations. Those important reforms will improve the lives of strata and community land scheme residents with pets and assistance animals.

I now turn to another area of reform, being strata committees. The bill makes amendments to improve the accountability of committee members and the governance of strata and association committees. For simplicity, I will talk about strata committees and the changes made by this bill to the management Act. However, the changes relating to strata committees will also apply to committees under the Community Land Management Act 2021. A strata committee is responsible for the day-to-day running of a strata scheme and for making decisions on behalf of the owners' corporation. Committee duties can include approving renovation applications, approving applications to keep pets, hiring repairers, arranging insurance or issuing a notice to comply with a by-law.

It is important that each committee member carries out their duties for the benefit of the owners' corporation and with due care and diligence. Those duties are enshrined in the management Act, which also requires members to disclose if they have a direct or indirect pecuniary interest in a matter the committee is to consider. The strata committee then determines whether that member can be present or take part in the decision. Most committees do the right thing. However, some members do not always act in the best interests of those living in the scheme. Some committees may also find it hard to decide if a member with a conflict of interest should not vote on a matter. As a result, that may risk poor decisions, loss of confidence in committee decisions and an increase in disputes between owners.

The bill provides greater clarity about the duties of strata committee members by preventing members from participating or voting on a matter where they have a financial interest. That does not apply in the strata renewal context. The bill establishes a separate disclosure framework for strata renewal, which I have mentioned. That change provides clarity, enhances the accountability of committees, sets high standards about the conduct expected of members and helps to ensure that committee decisions are made in the interests of all owners. The bill also makes it easier to remove a committee member if the member is not performing their duties.

Currently under the management Act, a special resolution of the owners' corporation is required to remove a serving committee member. A special resolution is where no more than 25 per cent of the value of the votes cast are against the resolution. The bill makes it easier to remove a member of a strata committee by lowering the voting threshold from a special resolution to an ordinary resolution, which means that only a majority is needed to remove a member. Reducing the voting threshold ensures that the removal of a committee member still has majority support among lot owners, but prevents a minority from retaining a committee member who has lost the confidence of the majority.

Alongside this change, the bill prohibits a person from serving again on a strata committee for a period of one year after being removed. The changes may appear small but go a long way to improve governance and confidence in the decisions of strata committees. In addition to the changes on committees I have described, the Community Land Management Act 2021 will also be amended to increase the cap on association committee members from nine to 15. Community land schemes are often larger and more complicated than strata schemes because of their tiered structure. The bill gives flexibility to community land schemes to increase the committee size to 15 if they wish to help with the management of the scheme.

I will now outline the changes made by the bill to improve the governance of meetings of the owners' corporation or community association. The changes will encourage active participation and democratic decision‑making at meetings. Again, for simplicity, I will talk about the meeting changes relating to strata schemes. However, the changes will also be mirrored in the Community Land Management Act 2021. The first amendment will extend from seven to 14 days the minimum period for giving notice of the annual general meeting of the owners' corporation. Owners' corporations must convene an annual general meeting each year to discuss various financial and management matters, such as the setting of levies and election of committee members.

The meeting can include considering complex matters such as entering into utility agreements, appointing strata managing agents, considering significant repair requests, considering recovery action for unpaid levies, and reviewing capital work fund plans. The annual general meetings ensure the continued effective running of the scheme. Feedback to the statutory review indicated that the current seven-day notice period is not sufficient, as it can be difficult for some owners to make arrangements to attend the meeting and to review information before the meeting. The bill will give owners an extra seven days to consider matters. That change will help enable owners' active and informed engagement in the management of their scheme. The change will not increase the administrative burden on owners' corporations or strata managing agents because the same information needs to be provided but it will have a positive impact on owners.

In keeping with this change, the bill will also require the original owner of a strata scheme, who is often the developer, to provide key documents at least 14 days before the first annual general meeting of the owners' corporation. That also aligns with the amendments to the notice period for the annual general meeting. The current notice period of two days is not enough time for owners, particularly new strata owners, to review important, foundational scheme documents. Many of the documents can be complicated and lengthy, such as valuations, maintenance and service manuals, the initial maintenance schedule, utility agreements and building contracts. Those documents inform decisions, including important decisions that will be made at the first annual general meeting, so it is important they are provided to owners, including new owners, well ahead of the meeting. Owners should have sufficient time to review documents and come to the meeting prepared, informed and empowered to make decisions and ask questions that will impact their finances and the liveability of the scheme.

Another way the bill will improve governance of meetings is by closing a loophole in the current legislation which enables proxy farming by using powers of attorney or company nominees. An owner can give a proxy to another person, granting them the right to exercise the owner's vote at meetings. The management Act limits the number of proxies a person may hold. For schemes with 20 lots or less, a person can hold one proxy. For schemes with more than 20 lots, the number of proxies the person may hold is not more than 5 per cent of the total number of lots. The purpose of those laws is to prevent proxy farming, which is when a person holds proxies, and hence voting power, on behalf of multiple lot owners. Proxy farming allows some individuals or small groups of people to wield disproportionate control over a scheme.

The practice undermines democratic decision-making at general meetings and disenfranchises other owners who participate at meetings in good faith. However, some owners are using company nominees and powers of attorney as a way of getting around the proxy limits in the management Act. In response, the bill places restrictions on how many owners a power of attorney or company nominee can represent. The bill does not restrict who can be a company nominee or hold a power of attorney for an owner. An exception is made in the bill if the holder of the power of attorney is a member of the owner's family. This will ensure a fairer process and that decisions made within a scheme are representative of all those living in the scheme.

I will now turn to the changes in the bill that aim to improve the overall governance of strata and community land schemes. The bill contains three amendments to strengthen and clarify the financial management requirements for schemes. First, the bill clarifies the rules around the repayment of money that has been transferred between the administrative and capital works funds, or has been paid from one fund for expenses that should have been paid from the other fund. The bill clarifies existing provisions that schemes must make a resolution within three months of the transfer or payment at a general meeting about whether the money is to be repaid, and the amount that will be transferred from one fund to the other or raised as a levy.

Secondly, the bill gives flexibility to schemes to request payment of levies in 14 days, instead of the usual 30 days, for repairs that are necessary to mitigate a serious or imminent threat to the health or safety of the occupants, as those funds are more urgent to collect. Thirdly, the bill extends to all strata and community land schemes the current requirement on large strata schemes to obtain at least two quotes for proposed expenditure over $30,000. This ensures that competitive quotes are obtained for significant expenditure, regardless of the size of the scheme.

The bill also includes amendments to strengthen record-keeping requirements and notices to tenants in schemes. First, the bill will improve record keeping and make it easier to find records by requiring owners' corporations and associations to store records in electronic form. This change will apply to records made six months after the bill commences. It does not apply retrospectively and does not prevent the keeping of hard copies. Secondly, the bill will require a landlord's agent to provide notice of a tenancy to the owners' corporation or association of the scheme. The landlord's agent must also give a copy of the by-laws and other relevant documents to a tenant, unless the strata scheme's by-laws have already been provided to the tenant under the Residential Tenancies Act 2010. Those notice obligations, including penalties for non-compliance, already apply to landlords. The bill will extend the obligations, including any penalties, to agents.

Thirdly, the bill enables tenants to provide their own notice of tenancy to the owners' corporation or association where the landlord or agent has failed to do so. A regulation-making power has been included in the bill to allow further evidence of tenancy to be prescribed, if needed. Strengthening the tenancy notice provisions will enable greater participation by tenants in scheme matters. This will ensure that schemes have updated information about tenants living there and can notify tenants of upcoming general meetings so tenants can attend. It will also assist schemes to identify whether 50 per cent of the strata scheme or neighbourhood scheme's lots are tenanted. This is important because it is the threshold needed to appoint a tenant representative on the strata or neighbourhood committee.

The bill also includes amendments to correct some unintended consequences of the management Act in relation to two-lot strata schemes. The first amendment will allow an owner in a two-lot scheme to issue a notice to comply with a by-law to the other owner without requiring the agreement of that other owner. Currently a notice to comply can only be issued following a resolution by majority vote of the owners' corporation. This is generally impossible in two‑lot schemes as the second owner is unlikely to support a resolution against themselves. Secondly, the bill maintains the original owner of a strata scheme's full unit entitlement and voting rights when voting in a two-lot scheme. Under the current Act, the original owner's voting rights are reduced by two‑thirds if the original owner continues to own at least half of the voting rights in a scheme. That is to prevent the developer from continuing to control a strata scheme. However, this is not appropriate in a two‑lot scheme as an owner would then hold a controlling interest over the original owner.

I will conclude this section about the governance of schemes by highlighting two other changes made by the bill. First, the bill will allow the Commissioner for NSW Fair Trading to apply to the NSW Civil and Administrative Tribunal to seek the appointment of a compulsory managing agent. Owners and certain other people, such as a creditor, can already apply to the tribunal to appoint a compulsory managing agent in situations where the scheme is not functioning or the owners' corporation or association has failed to perform its duties. In those situations the appointed managing agent takes over some or all of the functions of the owners' corporation, the committee, or both. Allowing the Commissioner for NSW Fair Trading to apply for appointment of a managing agent will provide an avenue for Fair Trading to protect owners or others where a scheme is so dysfunctional that it is not undertaking its core duties.

Secondly, the bill will require strata managing agents to give notice of the expiry of their contract with the owners' corporation or association within three to six months before contract expiry. That gives schemes time to consider renewing the contract or explore alternatives. The change prevents the practice of some agents who are giving notice at the beginning or middle of the contract term. That notice can easily be forgotten, which sees owners' corporations or associations caught unaware when the contract ends. That may limit the time that schemes have to shop around and consider alternative managing agents.

Finally, the bill makes several other minor and editorial changes to strata and community land scheme laws. Those minor changes clarify when changes to strata by-laws take effect; that a consolidation of strata by‑laws needs a special resolution, even though the consolidation does not add, delete or vary an existing by‑law; and that by‑laws made under previous Acts must comply with all relevant provisions in the current laws. Another minor change harmonises community land scheme laws with strata laws so that the appointment of strata managing agents, facilities managers or others who assist with the management, maintenance or repair of association property ends at the first annual general meeting. This was an omission when the community land scheme laws were rewritten in 2021 to align with strata laws. The bill also modernises the laws to support service of notices by electronic means. The editorial changes in the bill include changes to avoid duplication, remove unnecessary words, correct terminology errors and clarify the meaning of certain words. They do not change the operation of the laws.

The bill makes important and urgent changes to strata and community land scheme laws. The changes will improve the lives of those living in strata and community land schemes, which comprise a growing share of housing in New South Wales. In particular, the bill continues to modernise strata and community land laws and addresses pain points identified by stakeholders over the last few years. Importantly, it will help increase confidence in and demand for properties in the strata sector, which is an essential part of the Government's housing supply strategy. The bill's reforms will address significant issues identified in the statutory review, including some developers' manipulation of safeguards intended to protect vulnerable owners in a strata renewal. The reforms will also uplift strata and association committee governance, improve the performance of schemes, remove impediments to keeping pets in strata and community land schemes, and better recognise the unique position and challenges faced by two‑lot schemes.

I thank everyone who contributed and provided feedback to the review in 2020 and 2021. I also thank key strata stakeholders whose submissions on the draft bill have helped to improve its provisions. They include the Strata Community Association NSW, the Owners Corporation Network, the Real Estate Institute of NSW, the Law Society of NSW, the Tenants' Union of NSW, the Australian College of Strata Lawyers, the Association of Consulting Surveyors NSW, the Australian Property Institute, the Property Council of Australia, NSW Land Registry Services, People with Disability Australia, Animal Care Australia, the Cat Protection Society, Domestic Violence NSW, and the Women's Legal Service NSW.

This bill shows that the Government is not wasting any time and is quick to take action on issues facing strata and community lands schemes in New South Wales. These sensible and proportionate reforms are being implemented in a way that limits any further regulatory burden on residents and industry. The bill is just the first step in reforming the sector. The Government plans to bring further reforms to Parliament to implement the remaining recommendations of the review. Unlike the previous Government, it will do so in a timely manner. This Government is determined to deliver reform that improves the lives of the people in our great State, including those living in strata and community land schemes. I commend the bill to the House.

Debate adjourned.