The Managing Buildings Better reforms change the law to improve the management of apartments, townhouses and mixed-use developments and commercial units. Most of the reforms will start when the Unit Titles Legislation Amendment Act takes effect on 1 November 2020, although some will be phased in over a longer period.
We will consider further improvements to unit title management, once the initial package of reforms is in place.
What’s happening from 1 November 2020?
Owners corporations will be able to deal with a broader range of measures as special resolutions, which can be passed without a unanimous vote. Currently, some significant measures can only be passed if unopposed. Special resolutions are fairer because they don’t allow a single vote to veto a measure.
Special resolutions will need 75% of people to vote for them (that is, no more than 25% can vote against). Currently, the threshold is 67% (no more than 33% can vote against) but it will be lifted to align with other states such as NSW.
The number of proxy votes one person can hold will be restricted. Currently, there is no limit on the number someone can hold, which could influence voting outcomes. If there are 20 or fewer units in the unit plan, an owner will be allowed to hold no more than one proxy vote. If there are over 20 units, the number of proxy votes an owner can hold will be capped at 5% of the total number of units.
In most circumstances, only one owner per unit will be eligible to be on the executive committee. If a second owner (a part owner) from the same unit wants to stand for election to the executive committee, a different unit holder will need to nominate them. Currently, two or more part-owners of a unit can be voted onto an executive committee without such checks and balances. This gives them more voting rights on the committee and undermines the principle of one vote per unit.
Developers, builders and other parties involved in a development will no longer be able to vote on matters relating to building defects, including potential litigation, unless they are permitted to do so via a special resolution passed by other owners, or through a declaration obtained from the ACT Civil and Administrative Tribunal. Currently, they can vote on such matters if they own units within the development. This can block owners corporations from taking action to get building defects rectified.
Unless they have changed their rules previously, all owners corporations will inherit new default rules for managing units plans (see Transitional Arrangements). This will mean all owners corporations in the ACT will largely operate on the same rules, ensuring more consistency.
Rules made by owners corporations will need to be compatible with the Human Rights Act 2004 and not be harsh, unconscionable or oppressive.
Owners corporations will need to register the rules they make with the Land Titles Office within 3 months of the passing the rule or they will have no effect.
Owners corporations and executive committees will be able to meet and vote electronically on ordinary or special resolutions. Previously, such decisions could only be made at formally convened meetings, adding time, cost and inconvenience to the process.
Owners corporations’ executive committees will be able to form subcommittees to manage specific issues within unit plans. Subcommittees are useful for progressing tasks and managing workloads, particularly within large, mixed-used developments.
Existing owners corporations will need to prepare a maintenance schedule to identify any regular maintenance or servicing required for common property and buildings, such as lifts, swimming pools, air-conditioning/heating systems, window washing etc. The schedule will ensure these assets stay in good working order for longer and help with planning for the required sinking funds.
Owners corporations will need to annually audit the funds, accounts and financial statement of unit plans of a certain size or nature. This will ensure funds are managed in accordance with the legislation and decisions of the owners corporation.
Owners corporations will be able to determine levy contributions via the new special resolution process. Currently this can only be achieved through an unopposed resolution, which means one vote could prevent change. This is particularly an issue in mixed-use developments.
Owners will be able to separate the budgets for different parts of their units plan to apply contribution levies more fairly. Currently, costs must be consolidated into one budget across an entire units plan. This can mean that owners that use, or don’t use, certain facilities such as lifts may unfairly pay the same amount for them.
Developers will be able to propose different ways of calculating contribution levies from the start, as long as they are fair and equitable, before they register a new units plan. For example, they may choose to adopt a user-pays approach to water charging if the water is mostly consumed by businesses that own units in the complex. Any changes to the method of contributions determined by the developer will be disclosed to buyers in the disclosure statement. Currently, a new units plan defaults to a standard way of determining levies, based on the value of an owner’s unit as a share of the total value of all the units (unit entitlement).
Owners corporations will be able to change the way they calculate contribution levies for their general and sinking funds. The new method of contributions will need to be adopted as an owners corporation rule and registered on the units plan. The ACT Civil and Administrative Tribunal will be able to review any disputes that may occur as a result of a change in contribution methods.
Owners corporations in mixed-used developments will be encouraged to represent all types of owners on their executive committees. Currently, there is no requirement for executive committees to include both commercial and residential unit owners.
Owners in complexes with different leases and uses will be given a new option for managing their building. Existing multi-lease buildings will be able to adopt a Building Management Statement (BMS) and form a building management committee, made up of the owners of all the different leases, to jointly deal with issues such as shared facilities and easements. The BMS will be a binding agreement that requires all lease owners to comply with the terms of the statement to help manage and maintain the building into the future. That will allow, for example, unit owners who occupy the upper floors of a building to work with ground floor businesses to manage areas of common property as well as the building as a whole.
From 1 November 2020, existing multi-lease buildings will be able to opt into adopting a BMS if all lease owners agree, whether or not there is a units plan in the building. New multi-lease buildings with at least one units plan will be required to have a BMS from 1 July 2021 (see Transitional Arrangements).
Developers will be able to tailor rules for running a new units plan in a way that makes sense for the development. For example, they may propose particular rules for use of a shared entrance foyer. Currently, the same, one-size-fits-all set of rules applies to all new unit plans, leaving little room for flexibility or innovation in how they are managed.
If unforeseen circumstances arise, developers and owners corporations will be able to change the rules for running a units plan during the “developer control period” – that is, the period when a developer owns two-thirds or more of units in a units plan. The rule change will need to be authorised by the ACT Civil and Administrative Tribunal, which must be satisfied it is fair and necessary.
Owners corporations will be permitted to grant special privileges to unit owners or someone with an interest in a unit to use areas of common property.
Owners will be able to apply to the ACT Civil and Administrative Tribunal to resolve a broader range of disputes between parties, such as when there is a dispute with an owners corporation’s executive committee member or current manager.
Developers will be required to give owners buying off the plan a disclosure statement as a part of the contract. This document will provide greater information at the point of sale about proposed levies, maintenance and mixed uses throughout the building as well as information regarding the development and its progress. Developers will also need to provide update statements to notify buyers of any significant changes to the development, including registration of the unit plan and any material changes made since the contract was signed. These extra steps provide buyers with the information they need to rescind a contract if the unit or unit plan is not as described. Currently, there are no requirements for a developer to disclose any changes that occur during construction, and buyers may not become aware of these changes, which can sometime be substantial, until just prior to settlement. These new requirements give buyers clearer rights to terminate a contract of sale where the end result (i.e. what is actually built) is significantly different to the plan they bought off.
Owners buying within an existing unit plan will be given more information about their unit and unit plans in general through improvements to the unit title certificate. The certificate will include more details about all funds held by the owners corporation, any sustainability infrastructure built on the units plan, and current insurances, warranties and contracts the owners corporation has entered into. Just before settlement, buyers will be able to request an updated unit title certificate to make sure they are informed of any changes that may have occurred since contracts were exchanged.
To help owners corporations understand and manage the building and its facilities, developers will need to present an initial maintenance plan for a new complex at the owners corporation’s first annual general meeting. The plan will need to detail the expected maintenance tasks and costs and include an asset register, warranties, manuals and contact details for manufacturers and installers. Currently, no such requirement exists, leaving owners and buyers in the dark about ongoing maintenance for these items and their estimated running costs.
Pet ownership in units plans will be made easier by encouraging owners corporations to pass pet-friendly rules and letting would-be buyers or renters know what the rules on pets are before they commit to a unit. The new default pet rule will permit an animal to be kept in a unit, as long as an owners corporation is given notice of its arrival. An owners corporation can adopt the new default pet rule or create their own rule in accordance with the requirements of the legislation. They can also opt to keep a consent process if unit owners prefer. Currently, a unit buyer or tenant must wait until they move in before they can ask for permission to keep their pet and are left in limbo until consent is granted.
At present, owners corporations are not allowed to unreasonably withhold consent for a pet, and any refusal is subject to review by the ACT Civil and Administrative Tribunal. That will remain the case. However, owners corporations will have 21 days to consider any request made by an owner or occupier to keep an animal, and will also be required to respond to the request in writing. Consent may be granted with or without conditions. If consent is refused, the owners corporation will need to explain why in writing. Currently, they are not obliged to document their reasons. If the owners corporation does not respond to the request within 21 days, it is taken that consent is granted.
People living with a disability or illness will not need permission to keep guide dogs or other assistance animals in a units plan, although they may be asked for proof of their assistance animal’s accreditation. Currently, the law does not differentiate assistance animals from other animals, so this will provide more clarity.
Unit owners will have more rights to install solar panels, clothes lines, rainwater tanks or other systems in or on their unit or the common property to make their homes more sustainable. If a unit owner applies to the owners corporation for approval to install a system to save energy or water, the owners corporation cannot unreasonably withhold consent under the reforms. For example, an owners corporation cannot withhold consent due to aesthetic reasons, but can withhold if there are safety or structural issues.
Any rule made by an owners corporation which restricts or prohibits the installation, operation or maintenance of sustainability infrastructure in a unit or on the common property will be invalid.
These changes encourage and support owners corporations and unit owners who want to live more sustainably and reduce their environmental impacts.
What’s happening at a later date?
Some of the reforms will start later than 1 November 2020 to allow time for transition.
Transitional arrangements: Introducing the changes
Building Management Statements (BMS)
From 1 July 2021, a BMS will be required for all new multi-lease buildings that have at least one units plan in the development. Applications to register a units plan received after this date cannot be assessed unless the application includes the BMS, or proposed BMS, for the building.
From 1 July 2021, sellers must provide a disclosure statement for all new contracts for sale for units sold off the plan. Sellers may elect to include the disclosure statement in the contract for sale for any new units plan from 1 November 2020. Disclosure statements will not apply to developments where at least one contract for sale has already exchanged prior to 1 July 2021, unless the seller decides to issue the disclosure statement. In this case, if a buyer has already exchanged contracts and is given a disclosure statement by the seller, the buyer may rescind the contact without penalty if they do not agree to the disclosure statement (subject to time limitations).
Owners corporations must review any existing special privileges and transition to the new special privilege rules by 1 July 2021.
Maintenance Schedules and Plans
Developers will be required to provide the maintenance schedule for new units plans from 1 July 2021. Owners corporations of existing units plans (any registered prior to 1 July 2021) will have longer to prepare their maintenance plans - until their second annual general meeting after 1 November 2020.
From 1 November 2020, the default rules under the Unit Titles (Management) Regulation 2011 will apply to all owners corporations, except for the pet rule and any other rules they have previously amended and that are still in force at the time. This will allow time for owners corporation to decide what their pet policy will be as well as whether they need to change any other rules before the end of the transition period, which occurs after the second annual general meeting after 1 November 2020.
Previously amended rules must be consistent with the Act and any other territory law to remain in effect. However, amended rules cannot be challenged in the ACT Civil and Administrative Tribunal until after the second annual general meeting after 1 November 2020.
Owners corporations will have until their second annual general meeting after 1 November 2020 to decide whether to adopt the new pet rule, determine their own pet rule, or retain the consent process prescribed under the Act for the keeping of animals. If the owners corporation does not make a determination before this time (or wish to transition naturally to the new default pet rule), the default pet rule as prescribed under the Unit Titles (Management) Regulation 2011 will automatically apply from the day after the second annual general meeting post 1 November 2020.
Audit of Owners Corporations Accounts
The new audit requirements for owners corporations will not apply until after their first annual general meeting post 1 November 2020.