Changes to the Strata Scheme Management Act: Important changes to strata management laws commenced on 7 February 2005

Important changes to strata schemes management laws both for residential and commercial properties commenced on 7 February 2005 with the commencement of the Strata Schemes Management Amendment Act 2004. The changes were introduced largely to reflect the growing complexity involved in administering strata buildings in recent years as medium and high density living becomes such a predominant part of urban life. The changes will have implications for strata managers, developers and those who either live or work in properties that are governed by a strata scheme. The following is a 'snapshot' of some of the more significant changes which have been made.

Large Strata Schemes

One of the most significant changes to the legislation is the introduction of special rules for the operation of Large Strata Schemes ? defined as those with 100 lots or more. It became apparent that there was a need for a mechanism to be put in place where larger schemes which may have annual budgets of several million dollars, should be treated differently from smaller schemes. The changes include:

• Mandatory annual auditing of accounts and financial statements. These audits must be conducted by a member of CPA Australia, or a member of the Institute of Chartered Accountants in Australia.
• At least 2 quotes to be obtained in relation to proposed expenditure in respect of any one item or matter that exceeds an amount prescribed by the regulations (currently $25,000), unless expenditure is undertaken for emergency purposes.
• Limit on spending by executive committees of larger schemes to no more than 10% above the budget on specific items, unless expenditure is undertaken for emergency purposes.
• Personal notice at least 72 hours before a meeting is to be given to all owners about upcoming executive committee meetings. Within 7 days after a meeting of a large strata scheme the decisions from those meetings must also be given to each owner.
• Proxies to be lodged at least 24 hours before any meetings.

Sinking funds

All schemes established from 7 February 2005 are required to prepare a 10 year sinking fund plan. These changes require owner's corporations to have a structured approach to sinking fund reserves so that they consider the capital expenditure that will arise over the following 10 years and plan the sinking fund budget accordingly.

\"The changes will have implications for strata managers, developers and those who either live or work in properties that are governed by a strata scheme\".

The owners corporation may engage expert assistance in preparing the sinking fund plan, however, the initial plan has to be finalised by the end of the 2^nd annual general meeting. The requirement for the 10 year sinking fund plan is for the life of the scheme.

In addition:

• The Plan has to be reviewed regularly (at least every 5 years); and
• Mandatory item on agenda of first annual general meeting is to discuss the preparation of the sinking fund plan.

Alteration of Common Property & Licences to use Common Property

The Act now clarifies that an owners corporation has the necessary power to add to, alter or erect new structures on common property or allow others to do so.

Records of Owners Corporations

All records of the Owners Corporation must be kept for 5 years.

Commencement of Legal Action

The changes now provide that legal action is to be approved by a general meeting and all lot owners are to be given the estimated costs and be given the opportunity to vote on the matter.