On September 19 2024, the NSW Parliament passed the Strata Managing Agents Legislation Amendment Bill 2024 (“The Bill”) in response to growing concerns about the practices of strata managing agents.
In a recent SCA NSW webinar, industry experts David Bannerman (Principal of Bannermans Lawyers), James Stewart (Managing Director of Altitude Body Corporate & Management) and Tony Irvine (SCA NSW President) came together to explain the new changes and what you need to do next.
Important Dates for New Provisions
The provisions of the new Bill are expected to commence as follows:
Early November 2024 – This marks the start of higher penalties for existing obligations and changes to NSW Fair Trading’s enforcement powers.
Early February 2025 – The remaining provisions will come into effect, including new disclosure obligations and the prohibition on receiving commissions when the owners corporation obtains an insurance quote and arranges for its payment separately from the agent.
Understanding the Key Changes:
Property and Stock Agents Act 2002 (PSAA 2002):
1. Section 55 No Entitlement to Commission
There will no longer be any entitlement to commission or expenses without an agency agreement. The new subsections restrict the inclusion of prohibited provisions defined by Section 55(2) regulations.
2. Section 57 Rebates, Discounts and Commissions
Approval from the owners corporation is now required for any commissions or training services, which must be detailed in the motion. This includes:
- Amount and calculation of any commission.
- The monetary value of any training or an estimate if unknown.
- Nature of the relationship between the strata managing agent and the provider of the commission or training.
- Explanation of why the commission or training serves the best interests of the owners corporation.
- Confirming that accepting the gift or benefit does not breach obligations under the Property and Stock Agents Regulation 2022.
Strata Schemes Management Act 2015 (SSMA 2015)
3. Section 60 Disclosure of Commissions and Training Services
Strata managing agents must update the strata committee as soon as practicable upon becoming aware of discrepancies in commissions or training services provided versus what was disclosed at the annual general meeting. This disclosure must include detailed explanations for any variations.
Additionally, the Tribunal can order a strata managing agent to repay undisclosed commissions or training services. Significant penalties apply for non-compliance, including 500 penalty units for corporations and 100 penalty units for individuals.
4.Section 71 Strata Managing Agents and Building Managers Interests
Strata managing agents or building managers are now required to disclose interests before the appointment, with the maximum penalty for non-compliance being 50 penalty units.
5. Section 166 Insurance Quotations
Strata managing agents must provide at least three insurance quotations detailing new specific information, including base premium amount, commission, stamp duty, broker fees, levy amount, etc. SCA’s Best Practice Insurance Disclosure Guide can help you understand what you need to do in further detail.
Enhanced Penalties
Overall, the scope of NSW Fair Trading’s powers has been expanded, allowing investigations and inspections of records at your office upon receipt of most types of complaints.
What You Need to Do:
1. Develop Comprehensive Disclosures
Starting now, you should revise your Agency Agreements to include expansive disclosures of commissions, training services or other benefits. This will help avoid the need for owners corporation approval at a general meeting once the new requirements are enforced.
2. Create Template Documents
Create template documents that:
- Update motions to appoint strata managing agents to include additional disclosures under the amendments to Section 71 of the SSMA 2015.
- Update your report on commissions and training services to reflect additional disclosure requirements under Section 60 of the PSAA 2002.
- Providing notices to the strata committee regarding variations in disclosure reports to reflect these additional requirements.
3. Update Meeting Agendas
Prepare the following agendas to ensure compliance with the new requirements:
- Include additional disclosure requirements for appointments and reports on disclosures.
- Provide for additional disclosure requirements at the Annual General Meeting and approval of any additional benefits by ordinary resolution.
- Ensure Extraordinary General Meeting agendas reflect the new disclosure requirements for appointments and reports.
- Include the receipt of notices regarding new connections or contracts related to the strata managing agent for committee meetings.
4. Prepare New Disclosure Documents
Draft new disclosure documents, including:
- Notice to Committee regarding connection to supplier or original owner.
- Notice to Committee regarding contract entry
