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Sustainability amendments to the Strata Schemes Management Act: A pathway for greener NSW apartments

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On 16 February 2021, New South Wales passed the Strata Schemes Management Amendment (Sustainability Infrastructure) Bill 2020 (“Sustainability Infrastructure Bill“). The Bill amended the Strata Schemes Management Act 2015 (NSW) (“SSMA“) by reducing the voting threshold required by owners corporations to approve the financing and installation of sustainability infrastructure within their scheme. These amendments provide owners corporations with the tools to more easily implement greener initiatives within their strata schemes.

 

Background to sustainability infrastructure

Approximately 18 per cent of homes in New South Wales have solar units installed. While solar has been readily embraced in free standing residences, the same growth has not been seen in strata schemes. The NSW Government estimate that less than 0.5% of residential strata schemes across Australia have installed solar panels.

It is not only in solar that strata schemes lag behind in the sustainability space. Spontaneous sustainability initiatives are less readily implemented as they will often affect the common property of a strata scheme and as a result, require the requisite owners corporation approval and registration with LRS before any works can commence.

In response, the measures introduced by the Sustainability Infrastructure Bill seek to fill a legislative gap and streamline the approvals process for the installation of ‘greener’ infrastructure and sustainability initiatives within strata schemes.

The newly introduced section 132B of the SSMA defines “sustainability infrastructure” as a change to a scheme’s common property to achieve any of the following purposes:

(a) to reduce the consumption of energy or water, or increase their efficient use;

(b) to reduce or prevent pollution;

(c) to reduce the amount of waste sent to landfill;

(d) to increase the recovery or recycling of materials;

(e) to reduce greenhouse gas emissions;

(f) to facilitate the use of sustainable forms of transport; or

(g) any other purpose specified by the Strata Schemes Management Regulation 2016.

This broad definition includes significant infrastructure such as electric vehicle charging stations, solar panels and recycling/ composting facilities, but may also include light touch measures such as bike racks, LED light conversions, or even the establishment of green spaces and tree planting.

Section 132B has been drafted to allow owners corporations to decide for themselves how to pursue sustainability within their scheme and for that reason the provisions are deliberately broad. So long as the purpose of the resolution is improving sustainability, be that financing, additions and alterations, or general changes to the schemes by-laws, it has the potential to be considered by an owners corporation as a “sustainability infrastructure resolution” under section 132B.

The revised approvals process

Before approving a sustainability infrastructure resolution, an owners corporation must consider: the cost of the infrastructure, including running costs; who will own, install and maintain the sustainability infrastructure; and the availability of the infrastructure to all residents. It is important that an owners corporation make these considerations early in the approvals process to ensure that any by-laws made under section 132B are within power and obligations are clearly established. This is to minimise the risk that the Tribunal will make an order invalidating the resolution under section 24 of the SSMA. Clarity of obligation and consistency of interpretation are especially important where repair and maintenance obligations are transferred for works which impact upon the common property.

Ordinarily, changes to the common property of a strata scheme require a motion be passed by a special resolution (where not more than 25% of the votes cast are against that resolution) and registration of a by-law. However, the new provisions introduced by the Sustainability Infrastructure Bill reduce that threshold for sustainability infrastructure resolutions. They may be passed by special resolution so long as less than 50% of the votes cast are against that resolution.

What does this mean for residents?

These amendments provide owners of strata units with greater flexibility and the potential for a smoother approvals process to institute green initiatives or carry out works affecting the common property if the works are considered “sustainability infrastructure”. For instance, if an owner can satisfy their owners corporation that the installation of rooftop insulation within their lot is for the purpose of reducing heating and cooling costs, then a resolution that would otherwise need to be passed by 75% majority, can be passed by a simple majority of 50%.

It may be a while before we see section 132B tested as a very specific set of circumstances would need to present themselves before the Tribunal or a Court. An owners corporation would need to deny that the purpose of a resolution is improved sustainability, and then see it fail as a special resolution where more than 50% of voting entitlements are in favour. A claim for unreasonable refusal might then be made under section 149 and further clarification of this legislation be observed.

There are currently no incentives or any urgency for owners corporations to embrace these measures, nor is it clear how these amendments will be interpreted by owners and strata managers. It is therefore likely that section 132B will see limited use at first, as sustainability infrastructure resolutions will be introduced by environmentally conscious owners. However, there is potential within the scope of these amendments for owners who wish to see the value of their homes increase – by way of installing solar, insulation or even double-glazed windows to progress through the approvals process with greater ease. This appears to be the target audience of these amendments, and there is hope that as these changes are communicated to owners, they will consider proposing a sustainability infrastructure motion at their next general meeting.

Strata Schemes Management Act 2015 No 50 – NSW Legislation

Contributors

Jacqueline White
Law Graduate
William Wade
Law Graduate

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