Strata Law Reform to change development landscape

Much has been said of the reforms to the strata laws in New South Wales which are to commence on 30 November 2016.

The most significant change relates to the approval process to be followed in order for the owners of lots in a strata scheme to agree to a redevelopment of their building. Under existing law approval of 100% of the owners of such lots is required in respect of development proposals however, under the new regime, this is reduced to 75% provided that the process set out in the legislation (the Strata Scheme Development Act 2015 (NSW)) is followed. 

This has the potential to significantly increase the properties available to developers to create additional housing stock (particularly in older established suburbs which have a significant number of older style strata titled buildings) subject to relevant planning laws and restrictions.

Although it will still be necessary for a developer to demonstrate to the owners of the lots the benefits of the proposal, the reduced majority required for approval should improve the success rate of developers in proceeding with such developments.

Such developments are not necessarily limited to an acquisition of all of the lots which constitute the relevant strata scheme and could extend to such things as the addition of new apartments to the block. The benefits provided to existing owners of lots could include not only payment of market value for their lots but also :

• the construction of an elevator for the residents in older properties where no elevators were initially installed, the construction of balconies for apartments which do not have balconies and/or the refurbishment of the existing apartments,
• amounts paid by the developer to the existing lot owners being used by the lot owners to attend to urgent repairs needed for the existing building or for such repairs to form part of the works to be undertaken by the developer.

With many strata schemes having inadequate funds available to carry out major repair work to older strata buildings, the new regime can significantly assist the existing owners overcome this shortfall (and the potentially large special levies they may need to pay to fund such work) and result in the work being funded and undertaken as part of the development.

On the face of it, the new reforms will provide benefits not only to developers but also to residents of existing strata buildings. We should watch with interest the extent to which both domestic and foreign developers take advantage of these reforms as well as whether such reforms will be adopted in any of the other States of Australia.

I would welcome your thoughts on the above.

Peter Faludi

E: [email protected]