April 2010
The first quarter of 2010 has seen some interesting developments in the legislation regarding community style living with significant changes to both the Retirement Villages Act and the Strata Schemes Management Act that will affect owner/developers and purchasers alike.
A summary of those changes is included in this Update for your information, together with another reminder to clients in the commercial leasing arena to formalise their leasing arrangements before it is too late.
Residents of Retirement Villages given greater protection
On 1 March 2010, significant changes to the Retirement Villages Act 1999 came into force that will see residents afforded greater protection in terms of their financial obligations, physical safety, and involvement in decision making.
The changes have been implemented as a result of the commencement of the Retirement Villages Amendment Act 2008 No 121 and the Retirement Villages Regulation 2009 No. 596, and they cover a variety of issues including the composition of resident committees and voting procedures, through to recurrent charges for residents and the budget for repairs.
The main features of the amendments are summarised below:
· Annual management meetings are to be conducted by the village operators with residents.
· Written safety and emergency procedures are to be prepared by all village operators and the residents and staff are to be appropriately informed/encouraged to be familiar with such procedures.
· In the event new residents wish to terminate their contracts by permanently vacating their premises within 90 days of first moving into the village unit, they are only obliged to pay fair market rent for that period of their occupancy together with any reasonable administration fees (to a maximum of $200.00) to the Operator.
· The requirement to obtain resident consent for increases to recurrent charges has been removed however operators are encouraged to keep increases at or below the rate of inflation. The notification period for any changes to recurrent charges has also been reduced from 60 days to 14 days. For transitional purposes, this change will not be effective until the second budget cycle following the commencement of the changes, that is, resident consent is required regardless of whether the increase is more than CPI and the usual budget process will apply for the 2010-11 budget.
· The provisions for capital repairs and maintenance have been retained but refined through the Regulations which now prevent recurrent charges from being used to pay for improvements to capital items or to repeatedly repair an item that would be more cost effective if replaced.
· In any scheme other than strata, community or company title schemes, the village operators are prohibited from selling capital items to residents or attempting to pass on responsibility to individual residents for the maintenance and replacement of capital items in their premises.
· Village operators are required to make good any budget deficit at the end of each financial year unless a prescribed exceptional circumstance occurs. Increases in certain costs specified in the Regulation may result in the operator requiring residents to contribute towards a deficit (for example, utilities (except telephones), rates and taxes, award wages and salaries, urgent maintenance and insurance.
· If urgent repairs are required to be carried out, and the operator fails to have those repairs done, residents may have them carried out and request reimbursement from the operator. The Act defines what may constitute ‘urgent repairs’ and includes any damage that causes an urgent safety or security risk.
· If agreed to by the residents, the requirement for annual accounts of operators to be audited or provide quarterly accounts to residents, has been lifted if the annual income is $50,000.00 or less. Further, residents of small villages may elect not to have a budget at the start of each year in an attempt to reduce the administrative costs of small villages/volunteer run villages.
· A person may not hold any more than two proxies for voting at a residents committee. Residents are now however permitted to vote at meetings by written ballot and able to submit postal votes on special resolutions.
· No resident will be able to retain the same office bearer position for a period of more than three consecutive years.
· The village operator cannot unreasonably refuse consent for residents to add or remove fixtures or make alterations to their premises.
· In the event the village needs to be sold due to the insolvency of the operator, and where a resident does not hold a registered interest in the village land, the residents’ refund entitlements are protected and given priority over certain other creditors.
· Village operators are required to record (by registration of a form of Request) the use of the land as a retirement village on the Land and Property Management Authority register no later than 1 June 2010. This will assist with establishing a publicly accessible list of all retirement villages in NSW.
· The Director-General is granted the power to issue a public warning notice involving a particular operator as part of the revised investigation, compliance and enforcement powers.
· The types of orders that the Consumer, Trader and Tenancy Tribunal, in the event of a dispute between the operator and a resident(s), have been upgraded to include (but are not limited to) village contracts, rules, capital management and replacement, recurrent charges, annual budgets and accounts, payment of money and compensation, termination and vacant possession, security and safety, and sale or letting of premises.
Generally, the above changes have been formulated to provide a wider protection to residents in Retirement Villages. Disclosure requirements by operators have not been altered.
The Property team at Coleman Greig has significant experience in dealing with matters concerning retirement villages and is available to answer any questions you may have as a resident or owner, or provide advice and representation as required.
For further information contact:
Leonie Blazey, Licensed Conveyancer
Licence No. 1059041
Phone: 9895 9244
The importance of entering into formal leases
Over the years, the property and leasing team at Coleman Greig has been constantly surprised by the amount of clients who have considered taking or allowing occupation of commercial premises without reducing the terms of the occupancy to a formal agreement.
As a prospective tenant or landlord, if you decide to adopt this approach, you do so at your peril!
Take the following scenario as an example, which came before the NSW Court of Appeal recently:
· Party A tries to obtain an order from the court to enforce an agreement to occupy premises against Party B, the owner of the premises.
· Party A had taken possession of the premises.
· Party A had spent large sums of money on the premises fitting it out.
· There has been lengthy correspondence between Party A and Party B.
· The parties had reached consensus on most of the terms and conditions of the lease, but there were still some points of difference at the time Party A took occupation and had completed fit out works.
In the above scenario, the Court held that even though the majority of terms and conditions of the lease had been agreed to and evidenced by correspondence, there was no binding agreement between the parties because a formal lease had not been executed.
There are some exceptions to this rule – for example in the case of retail leases when certain tests have been satisfied – however for the most part, rules will apply.
Andrew Grima, head of our Property and Finance team is happy to explore the above scenario, and any exceptions to the rules, in more detail with you and how the relevant legislation may be applied in your case.
It is vitally important to make sure that both landlord and tenant engage lawyers to negotiate and prepare the appropriate formal documentation for their transaction to ensure the agreement to occupy is enforceable.
If you are an owner of premises and need to prepare a lease, or you need advice before signing a lease as a tenant, please contact:
Andrew Grima, Principal
Phone: 9895 9271
Changes to the Strata Schemes Management Act 1996
With the growth of high density housing and community living in today’s society, one of the fastest growing and rapidly changing areas of law relates to strata living. In New South Wales, the Strata laws were recently changed to protect purchasers and avoid the potential for disputes between members of the scheme and the property developers.
The major changes included amendments to the legislation concerning:
1. By-laws about parking vehicles on common property
The potential for disputes when buyers move into a new strata scheme (either purchased off the plan or a newly registered scheme) has been reduced following a limitation on the owners corporation authorising exclusive use rights and/or special privileges over the common property during the initial period.
This means that new by-laws cannot be introduced, or changes be made to by-laws, during the initial period from registration of the scheme up to the time when over one third of the unit entitlements within the scheme have been sold and Contracts completed.
As a result of this limitation, other owners, besides the developer/original registered proprietor, are able to vote for any change to or introduction of new by-laws after the initial period has expired.
2. Proxies and power of attorney
The enforceability of special conditions within a Contract for Sale of Land (or any related contract or arrangement) that require Purchasers to give proxy voting rights or power of attorney to the developer of the strata scheme have been quashed by legislative changes which eliminate the fear of legal action or penalties for breaching any such special conditions.
However, if the owner/purchaser desires, the changes do not prevent them from granting proxy voting rights to anyone they choose, including the developer or caretaker. An owner may also elect to revoke or replace any proxy appointment at any time or may override any proxy they have issued by attending a meeting and voting in person.
3. Executive committee members – disclosure requirements
As a result of numerous complaints regarding executive committees being formed that consist of friends or associates of the developer, legislative changes have been introduced that require any executive committee member of an owners corporation to disclose any personal, business or financial connection they have with the developer or caretaker.
The disclosure by the committee member is required prior to the election and the disclosure must be recorded in the meeting minutes. Further, once elected, if a member subsequently forms a connection with the developer, they must disclose this to the secretary of the executive committee and have it placed on the agenda for the next general meeting. If the person forming the connection is the secretary of the executive committee, the disclosure should be made to the chairperson of the committee.
Any disclosure of a connection with the developer or caretaker does not necessarily prevent an executive committee member from continuing to hold their position on the committee. The purpose of the disclosure is simply to provide transparency to the owners when voting in connection with the election or removal of committee members.
4. Caretakers and building managers
The Strata Schemes Management Act, now makes it clear that all on-site caretakers are regulated under the Act, even if they use a different job title such as ‘building manager’.
The Act previously provided for the protection of strata owners in relation to “caretaker” contracts however, the amendment will further protect owners form caretakers avoiding the requirements of the Act by using a different job title.
Caretakers generally do not have the same delegated functions as a licensed strata manager, however they may be employed to assist the owners corporation to carry out its functions, such as:
· managing the common property
· controlling the use of common property by tradespersons and other non-residents
· maintenance and repair of common property.
However, caretakers are not empowered to enforce by-laws or carry out other similar functions of the owners corporation. If a person is a member of the executive committee and voluntarily or casually exercises the functions of a caretaker, the provisions of the Act do not apply.
Strata living is an increasingly complex area of law. At Coleman Greig, we have specialist property lawyers who have gained significant experience in, and a sound understanding of, the laws in this field. We can provide advice and representation regarding all facets of strata schemes for owners, property developers, and executive committees.
For further information contact:
John Cotter, Consultant
Accredited Specialist - Property Law
Phone: 9895 9234