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House of Assembly - Fifty-Fifth Parliament, First Session (55-1)
2024-11-27 Daily Xml
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Statutes Amendment (Community and Strata Titles) Bill

Introduction and First Reading

The Hon. A. MICHAELS (Enfield—Minister for Small and Family Business, Minister for Consumer and Business Affairs, Minister for Arts) (17:30): Obtained leave and introduced a bill for an act to amend the Community Titles Act 1996 and the Strata Titles Act 1988. Read a first time.

Second Reading

The Hon. A. MICHAELS (Enfield—Minister for Small and Family Business, Minister for Consumer and Business Affairs, Minister for Arts) (17:30): I move:

That this bill be now read a second time.

Today, I am pleased to introduce the Statutes Amendment (Community and Strata Titles) Bill 2024. The bill will make changes to the Community Titles Act 1996 and Strata Titles Act 1988, which govern the creation and management of community and strata titled properties respectively in South Australia. These changes to the community and strata titles legislation will implement recommendations made in the 81st report of the Environment, Resources and Development Committee of this parliament, entitled Strata Titles, as well as additional changes requested by interested parties in consultation on the bill or subsequently in letters received from members of the public and other interested people and organisations, and changes arising from other recently emerging issues.

I seek leave to have the balance of the second reading explanation and the explanation of clauses inserted in Hansard without my reading them.

Leave granted.

A recent investigation by the ABC Four Corners program into the body corporate management and strata insurance broking industries, identified widespread conflicts of interest. These inclu9ed conflicts due to body corporate managers simultaneously acting as insurance brokers, or through related party transactions, and failing to disclose commissions or other benefits earned through those relationships.

There are amendments in this Bill designed to address these concerns to the extent they arise in this State. It is understood that Commonwealth agencies, including the Australian Competition and Consumer Commission, are looking at further regulation of strata insurance broking.

In the meantime, the Community and Strata Titles Acts currently contain requirements for body corporate managers to disclose any commissions or other benefits expected to be received in connection with arranging insurance or other goods or services on behalf of the community or strata corporations that they manage, before placing corporation business.

However, this Bill will further tighten the disclosure obligations of body corporate managers. The Bill will address the reported practice of body corporate managers 're-invoicing' community and strata corporations—that is, adding fees to service provider invoices for arranging the contracts with the service provider on the community or strata corporation's behalf.

The Bill will also impose additional disclosure obligations in respect of related party transactions, for example, where body corporate managers place business with related insurance, maintenance or debt collection businesses. The Bill will replace the existing requirement to 'disclose the nature of an interest' and replace this with requirements to disclose:

the nature of the interest (for example, common directorships, shareholdings or commission, referral arrangements or other forms of sharing income);

any goods and services that will be provided by a related entity;

the total value, or estimate of the total value of goods and services (expressed in dollars) to be provided to the corporation by the related entity before the anticipated date of the next Annual General Meeting of the strata corporation;

the basis on which it has been determined that the goods and services to be supplied by the related party are in the best interests of the strata corporation; and

the steps the manager has taken to ensure the goods and services will be fit for purpose and of merchantable quality.

These changes also insert a new provision in the Acts requiring a motion at the body corporate AGM for the body corporate manager to declare any commissions, gifts or benefits, including from self-interested transactions and related parties received since the last AGM and the estimated amounts to be received in the next 12 months—including the requirement that the manager disclose as soon as practicable after the AGM if commissions received differ from the commissions or estimates provided at the AGM, and for any undisclosed commissions to be repayable to the community or strata corporation.

Another issue dealt with in the Bill relates to the recent failed Felmeri Homes development at O'Halloran Hill, where the builder went into liquidation before completing an access road and utilities connections, preventing the houses in the development from then being completed under policies of building indemnity insurance.

When land is divided by Torrens title, councils become responsible for, and oversee completion of, access roads and other essential infrastructure, including by the imposition of conditions on development approval and/or taking security from developers to ensure compliance with these obligations. However, councils will apparently not impose the same obligations where a subdivision is by community title, including because the community corporation formed of the new owners of the constructed houses will 'own' the road and other infrastructure and be responsible for maintaining it in the future.

There are real concerns about whether the Felmeri Homes development should have been undertaken as a community titled development, given there was no staging of development or creation of shared facilities, beyond access roads and other essential utilities connections which are ordinary features of Torrens titled subdivision. The development would more appropriately have been subdivided by Torrens title, in which case the council would likely not have issued the land division certificates allowing lots to be sold before the essential infrastructure had been constructed to council's standards, or at least not without taking security to ensure completion. Currently, as part of a development assessment under section 102 of the Planning, Development and Infrastructure Act 2016, there is a condition 'that the division of land under the Community Titles Act 1996 or the Strata Titles Act 1988 is appropriate having regard to the nature and extent of the common property that would be established by the relevant scheme'.

Consideration is being given to further guidance to be provided in respect of this condition. In the meantime, to provide greater clarity about this relationship between the Community Titles Act and the Planning, Development and Infrastructure Act, an amendment has been included in the Bill to insert a note into section 7 of the Community Titles Act, dealing with when land may be divided under the Act, to state that regard must be had to section 102 of the Planning, Development and Infrastructure Act.

A recent issue that has arisen since this Bill was consulted on is the need to address situations where a body corporate manager is unable or unwilling to fulfil their duties (as occurred in a recent case).

To address this issue, the Bill removes the present restriction on when the Magistrates Court, as part of its functions of resolving strata disputes, may order the termination of a body corporate management contract. The amendment will allow Court-ordered termination in wider circumstances on application by a community or strata corporation, including where a manager is unable or unwilling to fulfill their duties under the contract. The Court can then use its ancillary orders powers to facilitate urgent access to, and transfer of, corporation trust accounts and records and thereby address practical difficulties that would otherwise arise in attempting a swift transition to a new manager.

Moving onto other measures contained in this Bill, part of the terms of reference for the ERO Committee's inquiry into strata titles regulation was to review the extensive legislative changes that were made to the community and strata titles legislation in 2013. Several of the changes in this Bill will build on those changes, in some cases to tighten provisions to ensure they have the intended effect.

Several other changes in the Bill are designed to achieve greater consistency between the Community Titles Act and Strata Titles Act, noting that the Strata Titles Act generally governs strata titled developments established before 1 June 2009, when the Community Titles Act became the exclusive vehicle for creating new staged and strata developments. The Community Titles Act in turn governs community and strata land divisions, and community corporations, established after that time. This move to consistency wherever possible between the two Acts will make it easier for body corporate managers who assist with the management of both community and strata corporations.

This Bill will make the following other changes to the Community Titles Act and Strata Titles Act, beyond those already discussed:

Insertion of explanatory notes to make it clear on the face of these Acts that they are prescribed as 'related Acts' under the Fair Trading Act 1987 (the effect being that the investigatory powers of authorised officers, as well as the enforceable undertaking provisions under the Fair Trading Act, apply to investigating and enforcing breaches of the Community Titles Act and Strata Titles Act.

Amend the Community Titles Act to create discretionary powers for the Registrar-General to dispense with the requirement for the consents of registered mortgagees or lessees for minor technical amendments of, or to correct patent errors in, the scheme description for a community titled scheme.

Explicitly empower a community corporation to make by-laws to regulate the smoking of tobacco and related products on the shared common property and to prevent smoke drift from private lots onto other lots or common property. A special resolution of the community corporation will be required to alter existing by-laws to this effect—or this by-law could be incorporated into a new development by the developer. The existing provisions of the Strata Titles Act would already allow a strata corporation to adopt the same scope of articles regulating smoke drift, so no equivalent change is needed to that Act.

Amend the Community Titles Act and Strata Titles Act to provide that the by-laws or articles (respectively) of a community or strata corporation cannot unreasonably prohibit the installation of sustainability infrastructure (such as solar panels or electric vehicle charging infrastructure) on a community lot or strata unit.

Amend the Community Titles Act to extend the prescribed time for lodgement of amendments to by-laws with the Registrar-General from 14 to 21 days after the passing of a resolution by the corporation to vary the by-laws.

Amend the Community Titles Act and Strata Titles Act to remove the requirement for a strata corporation or community corporation to have and use a common seal to execute documents on behalf of the corporation.

Require a prospective body corporate manager to give a copy of the proposed management contract, and the prescribed pamphlet explaining owners' rights under the contract, to the secretary of the body corporate and for these to be attached to the meeting notice and agenda for any meeting at which it is proposed to consider appointing or reappointing a manager. The manager will also be required to send all owners a copy of the pamphlet and the management contract after the manager is appointed. This amendment relates to Recommendation 19 of the ERO Committee Report.

Amend the Community Titles Act and Strata Titles Act to require corporations to include items on the general meeting agenda (as special business) where these are put forward by an owner.

Amend the Community Titles Act and Strata Titles Act to make it easier to deal with the difficulty in achieving a quorum at corporation meetings. This relates to ERO Committee Report Recommendation 8.

Amend the Community Titles Act and Strata Titles Act to impose further controls on the use of proxy votes and community and strata corporation meetings by expressly providing that, unless a proxy nomination is specific on the vote for the particular resolution, a proxy may not vote on a matter in which they have a direct or indirect pecuniary interest.

Amend the Community Titles Act and Strata Titles Act to increase the prescribed minimum amount of mandatory public liability insurance that community and strata titled groups are required to hold. This is currently $10 million and is to be increased to $20 million in line with other States. This implements Recommendation 13 of the ERO Committee's Report.

Amend the Community Titles Act and Strata Titles Act to remove the five-year maximum on the prescribed duration of the mandatory sinking fund plan (termed 'statement of expenditure' under the Acts). This plan is the forward plan for maintenance costs for a community or strata group and is mandated to help and encourage community and strata groups to plan and budget for future maintenance and capital works for their buildings and common property. It has been submitted that 10 years is a more appropriate duration for these plans, with a requirement to review and update the plan after five years.

Amend the Community Titles Act to increase the threshold for when community titled groups are required to have their accounts audited (although the corporation can nevertheless still resolve to conduct audits). This is separate to a body corporate manager's trust account auditing requirements.

Amend the Community Titles Act and Strata Titles Act to require prospective purchasers to be provided with a copy of the plan of division for a development and the sinking fund budget as part of strata and community property searches prior to sale. These were Recommendations 6 and 10, respectively of the ERO Committee's Report.

Amend the Community Titles Act to make it clear that the caps on fees that apply under the Act for corporations providing information and copy documents under section 139—on application by an owner, prospective owner or mortgagee—apply to a manager providing that information on behalf of the corporation. This was Recommendation 4 of the ERO Committee's Report.

Amend the Community Titles Act and Strata Titles Act to allow the court in a strata dispute to order a body corporate manager to repay undisclosed commissions or benefits. This change is related to other amendments in the Bill tightening managers' disclosure requirements in relation to commissions and other benefits received from third parties.

Amend the Community Titles Act and Strata Titles Act to update the provisions for serving documents and other notices required.

Amend the Strata Titles Act to match the Community Titles Act, so strata corporations have the option to make articles to prohibit short­ term letting in strata groups (as community corporations already can for community titled developments).

Amend the Strata Titles Act to insert a prov1s1on equivalent to Community Titles Act section 84(4) stating that where there is more than one owner of unit, a person (who may, but need not, be one of the owners) may be nominated by all of the owners to vote on their behalf. This is to address a potential loophole in the equivalent Strata Titles Act provisions that may allow joint owners of a unit to nominate different proxies and exercise multiple votes on a motion, contrary to the intention that there be one vote per unit.

Amend the Community Titles Act and Strata Titles Act to introduce expiation fees for a number of offences contained in the Acts to aid in the enforcement of these offences by the Commissioner for Consumer Affairs, and increase several of the maximum penalties for these and other offences in the Act to address inflationary effects and for consistency with recently increased penalties in similar legislation such as the Residential Tenancies Act 1995; and

As a consequence of the Bill including new expiation fees for a number of offences contained in the Acts, amend the Acts to override Criminal Procedure Act 1921 section 52(1 )(a) and provide that the time limit to prosecute those offences remains two years instead of reducing to six months as a result of the introduction of expiation fees.

I commend the Bill to Members and seek leave to have the Explanation of Clauses inserted in Hansard without my reading it.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

Part 2—Amendment of Community Titles Act 1996

3—Amendment of section 5—This Act and the Real Property Act 1886 to be read together

This clause inserts a note pointing out that this Act is also a related Act under the Fair Trading Act 1987 so various enforcement powers and remedies contained in that Act will apply in respect of this Act.

4—Amendment of section 7—What land can be divided

This adds to the explanatory note in section 7 by drawing attention to section 102(1)(d)(iv) of the Planning, Development and Infrastructure Act 2016.

5—Amendment of section 12—By-laws

This clause makes a minor technical amendment.

6—Amendment of section 32—Persons whose consents are required

This clause amends section 32 to give the Registrar-General power to dispense with certain consents required under the section in specified circumstances.

7—Amendment of section 34—By-laws

This clause allows by-laws to regulate or prohibit smoking in the common property or the drifting of smoke or aerosol from e-cigarettes from one lot to another or to the common property.

8—Amendment of section 37—Restrictions on making by-laws

This clause prevents the making of by-laws that unreasonably prohibit the installation of sustainability items (which are defined in the provision) on the exterior of a lot.

9—Amendment of section 39—Variation of by-laws

This clause extends the time within which a copy of varied by-laws must be lodged with the Registrar-General from 14 days to 21 days.

10—Amendment of section 73—The corporation's common seal

This clause removes the requirement for a community corporation to have a common seal and provides for the execution of documents by the corporation without a common seal and the signing of contracts on behalf of the corporation.

11—Amendment of section 78B—Body corporate managers

This clause amends section 78B to require that a pamphlet setting out the role of the body corporate manager and the rights of the community corporation and its members, (including any matters prescribed by regulation), a copy of the contract and other prescribed information be given to the secretary of the corporation before the date of the meeting at which the corporation is to consider whether or not to enter into a contract with the body corporate manager. The secretary is then required to provide a copy of this material with the notice convening the meeting. The body corporate manager must also, within 5 business days after entering into the contract with the community corporation, serve on all members of the corporation a copy of the documents. The clause also includes an interpretative provision specifying that all fees and commissions payable by the corporation are considered part of the body corporate manager's remuneration.

12—Amendment of section 78D—Offences

This clause creates some new disclosure obligations for delegates (including body corporate managers) which are enforceable as offences.

13—Amendment of section 80—Business at first statutory general meeting

This is consequential to clause 10.

14—Amendment of section 81—Convening of general meetings

This clause amends section 81 to require the notice of a general meeting to contain a statement in the prescribed form about the effect of proposed new section 83(6) and also allows the owner of a lot to give written notice to the presiding officer, treasurer or secretary of an item of business that the owner requires to be included on the agenda as an item of special business for a general meeting.

15—Amendment of section 83—Procedure at meetings

This clause amends the general meeting quorum requirement to provide that a quorum is determined by dividing the number of persons who are entitled to attend the meeting and exercise the voting power in respect of a lot by 2, disregarding any fraction and adding 1. The amendments also details what is to happen if a quorum is not present after 30 minutes from the meeting's scheduled starting time.

16—Amendment of section 85—Duty to disclose interest

This clause varies the provisions on voting by persons who hold a pecuniary or other interest. Under the new provisions a person must not vote as a nominee of another person on a resolution relating to the provision of goods, amenity or service to the community corporation if the nominee has a direct or indirect pecuniary or other interest in the provision of the goods, amenity or service. Contravention of the provision is an offence punishable by a maximum fine of $20,000 or an expiation fee of $500. The offence will however not apply if certain specified requirements are satisfied.

17—Amendment of section 104—Other insurance by community corporation

This clause increases the minimum amount of mandatory public liability insurance from $10,000,000 to $20,000,000.

18—Amendment of section 113—Statement of expenditure etc

The statement of expenditure presented at the annual general meeting must set out proposed expenditure (other than recurrent expenditure) for the period prescribed by the regulations, which currently cannot exceed 5 years. This clause deletes that 5 year limitation.

19—Amendment of section 138—Audit

This clause reduces the number of community corporations that will be required to have their annual statement of accounts audited.

20—Amendment of section 139—Information to be provided by corporation

This clause adds to the list of material that is available on application by or on behalf of an owner or prospective owner or a registered mortgagee or prospective mortgagee. The section will now also allow for provision of a copy of the plan of community division and a copy of the most recent statement under section 113 (the statement of expenditure). The clause also amends the offence provision in subsection (3) to ensure it can also be committed by a person who is acting on behalf of a community corporation.

21—Amendment of section 142—Resolution of disputes etc

This clause allows the Court to order a body corporate manager to pay to the community corporation the whole or part of the amount or value of the commissions, gifts or other benefits where there has been a failure by the body corporate manager to disclose the whole or part of the amount or value of any commissions, gifts or other benefits provided to or paid for the body corporate manager in accordance with section 78D. The clause also removes the current restriction in subsection (9a).

22—Insertion of section 152A

This clause allows proceedings for a summary offence against the Act to be commenced within 2 years of the date on which the offence is alleged to have been committed even where the offence is expiable.

23—Amendment of section 155—Service

This clause makes a minor amendment to the service provision that is consequential to clause 11.

Part 3—Amendment of Strata Titles Act 1988

24—Amendment of section 4—This Act and the Real Property Act 1886 to be read together as a single Act

This clause inserts a note pointing out that this Act is also a related Act under the Fair Trading Act 1987 so various enforcement powers and remedies contained in that Act will apply in respect of this Act.

25—Amendment of section 16—Amalgamation of adjacent sites

This is consequential to clause 29.

26—Amendment of section 17—Cancellation

This is consequential to clause 29.

27—Amendment of section 18—Name of strata corporation

This is consequential to clause 29.

28—Amendment of section 19—Articles of strata corporation

This clause prevents the making of by-laws that unreasonably prohibit the installation of sustainability items (which are defined in the provision) on the exterior of a unit and also allows the articles of a strata corporation to prohibit or restrict a unit holder from leasing or granting rights of occupation in respect of the unit for valuable consideration for a period of less than 2 months.

29—Substitution of section 24

This clause provides that a strata corporation may (but is not required to) have a common seal and provides for the execution of documents by the corporation without a common seal and the signing of contracts on behalf of the corporation.

30—Amendment of section 27B—Body corporate managers

This clause amends section 27B to require that a pamphlet setting out the role of the body corporate manager and the rights of the strata corporation and its unit holders (including any matters prescribed by regulation), a copy of the contract and other prescribed information be given to the secretary of the strata corporation before the date of the meeting at which the corporation is to consider whether or not to enter into a contract with the body corporate manager. The secretary is then required to provide a copy of this material with the notice convening the meeting. The body corporate manager must also, within 5 business days after entering into the contract with the strata corporation, serve on all unit holders a copy of the documents. The clause also includes an interpretative provision specifying that all fees and commissions payable by the strata corporation are considered part of the body corporate manager's remuneration.

31—Amendment of section 27D—Offences

This clause creates some new disclosure obligations for delegates (including body corporate managers) which are enforceable as offences.

32—Amendment of section 31—Other insurance by strata corporation

This clause increases the minimum amount of mandatory public liability insurance from $5,000,000 to $20,000,000.

33—Amendment of section 33—Holding of general meetings

This clause:

allows the presiding officer or treasurer to convene a general meeting (in addition to the existing categories of people who can do so); and

allows a unit holder to give written notice to the presiding officer, treasurer or secretary of an item of business that the unit holder requires to be included on the agenda as an item of special business for a general meeting; and

amends the general meeting quorum requirement to match the new provision in section 83 of the Community Titles Act 1996 (and also adds the same requirement for the notice of the meeting to contain information about the new quorum provision).

34—Amendment of section 33A—Statement of expenditure etc

The statement of expenditure presented at the annual general meeting must set out proposed expenditure (other than recurrent expenditure) for the period prescribed by the regulations, which currently cannot exceed 5 years. This clause deletes that 5-year limitation.

35—Amendment of section 34—Voting at general meetings

This clause amends section 34(3)(b) to provide that, where there are 2 or more unit holders in respect of the same unit, a person (who may, but need not, be one of those unit holders) may be nominated by all of those unit holders to vote on their behalf or if there is no such nomination:

if only 1 of the owners attends a meeting, the vote is exercisable by that person; or

if 2 or more of the owners attend a meeting, the vote is exercisable by 1 of them in accordance with an agreement between all the owners attending the meeting but, if there is no such agreement, none of them is entitled to vote.

The clause also amends section 34(7) to make it consistent with section 84(14) of the Community Titles Act 1996 by ensuring that an owner who is in arrears cannot exercise voting rights.

36—Amendment of section 34A—Duty to disclose interest

This clause varies the provisions on voting by persons who hold a pecuniary or other interest. Under the new provisions a person must not vote as a nominee of another person on a resolution relating to the provision of goods, amenity or service to the strata corporation if the nominee has a direct or indirect pecuniary or other interest in the provision of the goods, amenity or service. Contravention of the provision is an offence punishable by a maximum fine of $20,000 or an expiation fee of $500. The offence will however not apply if certain specified requirements are satisfied.

37—Amendment of section 41—Information to be furnished

This clause adds to the list of material that is available on application by or on behalf of an owner or prospective owner or a registered mortgagee or prospective mortgagee. The section will now also allow for provision of a copy of the strata plan and a copy of the most recent statement under section 33A (the statement of expenditure). The clause also amends the offence provision in subsection (2a) to ensure it can also be committed by a person who is acting on behalf of a strata corporation.

38—Amendment of section 41A—Resolution of disputes etc

This clause allows the Court to order a body corporate manager to pay to the strata corporation the whole or part of the amount or value of the commissions, gifts or other benefits where there has been a failure by the body corporate manager to disclose the whole or part of the amount or value of any commissions, gifts or other benefits provided to or paid for the body corporate manager in accordance with section 27D. The clause also removes the current restriction in subsection (10a).

39—Amendment of section 49—Service

This clause amends the service provision to make it consistent with the provision under section 155 of the Community Titles Act 1996 (consequentially to the amendment in clause 30).

40—Amendment of section 50—Proceedings for offences

This clause allows proceedings for a summary offence against the Act to be commenced within 2 years of the date on which the offence is alleged to have been committed even where the offence is expiable.

Schedule 1—Further amendment of Community Titles Act 1996

This clause updates penalties and Act references in the Community Titles Act 1996.

Schedule 2—Further amendment of Strata Titles Act 1988

This clause updates penalties and Act references in the Strata Titles Act 1988.

Debate adjourned on motion of Mr Teague.

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