Owners Corporations in NSW

Owners corporations, strata laws and management committees… if you’re new to strata schemes and trying to work out what is what, it can quickly become confusing and tricky to understand.

So to help you out, we’ve summarised the important bits about what’s what in a NSW strata title scheme.

What is an owners corporation?

In a strata scheme, the owners corporation is the legal body that owns all the common property as well as the building and infrastructure. It may also employ staff such as cleaners etc. Owners of the individual residences are the voting members of the corporation and can make decisions about how the entire property is run and maintained. In some states, the owners corporation is also called strata management or body corporate. 

The operation and responsibilities of owners corporations are typically governed by specific state or territory legislation. In New South Wales (NSW), for example, the relevant legislation is the Strata Schemes Management Act 2015, in Victoria it is the Owners Corporations Act 2006. Both acts outlines the legal framework for establishing and managing owners corporations, including:

• Requirements for formation and registration of owners corporations.
• Powers and duties of owners corporations.
• Holding meetings and voting procedures.
• Management of finances and levies.
• Dispute resolution mechanisms.

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What are the differences between an owners corporation and a strata committee?

The owners corporation is simply the company that owns the building, land and common areas of the property. It is a legal entity like any other company, and, like any company it needs a board of directors. In the case of owners corporations, that board is the strata committee. It looks after the administration and management of the property. Some decisions it can make on its own, while others must be put to a vote of all members of the corporation. Committees can also outsource the day-to-day or technical responsibilities to a specialist strata management firm .

What are the responsibilities of the owners corporation?

Like any company that owns property, the owners corporation has various responsibilities to the owners, tenants, the public and the law. In New South Wales, the Strata Schemes Management Act 2015 regulates how strata committees and owners corporations act and operate.

In short, the owners corporation is responsible for maintenance, repair and overall management of the common property, including:

• Holding appropriate strata insurance - including compulsory cover for building damage and public liability, and voluntary workers - with an insurer such as Flex Insurance
• Proper, responsible and transparent financial management, including charging fees for capital and maintenance funds, and using those funds
• Maintaining and keeping detailed records including a Strata Roll of lots, owners, tenants and insurance; financial statements; and the minutes of all meetings
• Arranging timely repairs and maintenance of common property
• Issuing, publishing and enforcing by-laws
• Notifying owners and residents of any upcoming works, such as maintenance or pesticide use
• Getting legal advice and taking or defending a legal action
• Scheduling safety inspections including fire safety, lift and swimming pool inspections
• Employing staff such as building managers, and contractors such as strata managers (if decided)
• Knowing, understanding and adhering to all applicable laws, such as planning, building, safety, insurance, employment, fire safety, inspections and occupational health and safety.

The Structure of the Owners Corporation

All owners within the scheme are automatically members of the owners corporation and have a say in its operation. Here's a glimpse into the typical structure:

• Committee: An elected committee of owners takes the lead in managing the day-to-middels affairs. This committee is responsible for tasks like overseeing maintenance, managing finances, enforcing by-laws, and representing the corporation in legal matters.
• Meetings: Regular meetings are held where all owners can discuss important issues, vote on decisions, and hold the committee accountable. Voting rights are typically determined by the unit entitlement of each owner.
• By-Laws: A set of pre-defined rules, called by-laws, govern the use of common areas, resident conduct, and other aspects of living within the scheme. Owners are expected to adhere to these by-laws.
• Financial Management: The owners corporation collects levies from residents to cover operational costs, maintenance, and future projects. Maintaining financial transparency and proper record-keeping is crucial.

The Role of Insurance in Strata Schemes

In New South Wales, certain insurance is compulsory, while other cover is highly recommended. Compulsory insurance in NSW includes items such as:

• Damage or repairs to buildings and common facilities (including infrastructure and first fix plumbing and electrics)
• Public liability for injury or damage to other people's property, and
• Cover if a volunteer is injured while working at the property.

All the above items are automatically covered by Flex Residential Strata Plan Insurance.

While compulsory insurance covers a number of important issues, an owners corporation and the strata committee could still be at risk of other potential costs and liabilities. Fortunately, optional insurance cover can safeguard against these,  

• Committee member liability/ Fidelity guarantee - covers your owners corporation for any loss due to theft, dishonesty or fraudulent misappropriation of Your Funds.
• Office bearer legal liability – can help cover the cost of legal fees if there is a claim against your strata committee members, and any damages or costs you’re ordered by a Court to pay.
• Machinery breakdown -  comes in very useful if you have lifts, water pumps, shared washing machines or common air conditioners. They can easily breakdown and cost to repair can be substantial.
• Catastrophe cover - when widespread declared disaster strikes – like bushfire or cyclone – the costs of repairs sky-rockets because of demand for tradespeople or material. This cover allows for those increased expenses.
• Government Audit and Legal expenses -  provides cover in the event of a government audit, protection if the Owners Corporation needs to appeal an unreasonable Order imposed by a statutory body and provides cover for legal defence costs
• Lot owners fixtures and improvements - often overlooked, but improvements and renovations to a unit which an Owners Corporation is unaware of can take the actual cost of building repairs well above the declared value of the building. This option covers that shortfall in event the building value is exhausted.
• Exploratory costs - Costs associated with searching for the source of a water leak.
• Loss of Rent - Increased limits for Temp Accommodation/Loss of Rent should a claimable event leave your property inhabitable.
• Fusion - Protection of electrical motors attached to the building for Fusion damage.
• Floating floors - Protection for floorboards that are not fixed to the slab but are held in place by clips or skirting boards.
• Special benefits - Covers for or extending limits for the following: Fallen Trees, Landscaping, Removal and Storage Costs of Personal Contents, Failure of Supply Services, Cost of Reletting, Keys and Lock Replacements, Car Park Liability, Hiring of Sporting/Recreational Facilities, Garden Equipment and Court Appearances.

Flex Residential Strata Plan Insurance gives you the flexibility to tailor your strata title insurance to suit your needs. You can choose which of the above items you'd like included in your strata cover. 

As an owner and/or strata committee member, it is your right to request that your owners corporation is adequately covered, not just for the compulsory insurance, but also for extras that may otherwise see you or the corporation paying large additional costs. 

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Are you covered as a member of the owners corp committee in NSW?

As a member of your strata committee, if you, or the committee, make a decision that ends up in legal action, you could be covered by your strata insurance for the legal expenses or financial liability arising out of your action, omission, neglect,etc. In NSW Office Bearer's Legal Liability cover is not compulsory, however cover may be available for you.