NSW Strata Reforms: Is Your Scheme Prepared?
NSW Strata Reforms: Is Your Scheme Prepared?
A leaking roof, an underfunded capital works fund or an undisclosed managing agent commission can quickly become more than a building management problem.
Recent changes to NSW strata laws reflect a stronger focus on three practical issues: maintaining common property, planning for future costs and improving transparency in the management of strata schemes.
For lot owners, committee members, developers and strata managers, the question is not simply whether the law has changed. It is whether the scheme is prepared when a major repair, unexpected expense or contentious decision arises.
Maintenance cannot simply be put off
An owners corporation has a statutory duty to properly maintain and keep common property in a state of good and serviceable repair.
That obligation is not new. What has changed is the level of regulatory oversight surrounding it.
Since 27 October 2025, NSW Fair Trading has had increased investigation and enforcement powers to help ensure owners corporations comply with their obligations to repair and maintain common property.
This makes prolonged inaction increasingly difficult to treat as simply an internal strata issue.
Consider a recurring waterproofing problem. A committee may initially be reluctant to proceed because the cause is uncertain or the cost of rectification is significant. But repeatedly postponing investigation can allow relatively contained water ingress to develop into damage to finishes, mould, deterioration of building elements and a much more expensive rectification project.
That does not mean every complaint requires immediate acceptance of liability or that an owners corporation must adopt the most expensive proposed solution.
The appropriate response depends on the evidence. Committees should obtain suitably qualified advice about the cause, extent and urgency of the problem and make properly documented decisions about what needs to be done.
Where defective building work may be involved, another question arises: who should ultimately bear the cost?
The owners corporation may have potential rights against a developer, builder, contractor, insurer or another party. Urgent rectification works may still be necessary, but evidence should be preserved and potential recovery rights considered before decisions are made that could affect a future claim.
Capital works planning needs to reflect the building
Maintenance obligations inevitably lead to another question: how will the scheme pay for the work?
Every strata scheme is required to prepare a 10-year capital works fund plan for anticipated major expenditure.
From 1 April 2026, 10-year capital works fund plans must be prepared using a prescribed standard form.
A capital works plan should not be treated as a document prepared simply to satisfy an administrative requirement and then left in a drawer. It should provide a realistic picture of the building's likely future expenditure.
A scheme facing ageing waterproofing, major façade works or replacement of significant building systems should be planning differently from a building without those anticipated expenses.
Underfunding does not make the future expense disappear. It can simply convert a foreseeable cost into an unexpected special levy.
At the same time, the objective is not to accumulate the largest possible fund. It is to have a rational financial plan, supported by reliable information, which reflects the likely needs of the building.
Greater transparency in strata management
The reforms also place greater emphasis on transparency in the relationship between owners corporations and strata managing agents.
Expanded disclosure requirements applying from February 2025 require strata managers to provide owners with greater information about matters including supplier relationships, commissions and other financial interests or benefits associated with their role.
The significance of these requirements is not that every commission or commercial relationship is necessarily improper.
The important point is that owners should know about those arrangements so they can make informed decisions.
For example, where a strata manager recommends an insurer, contractor or service provider and has a financial or commercial relationship connected with that recommendation, the owners corporation should have sufficient information to understand that relationship.
This makes the strata management agreement particularly important.
Before appointing or renewing an agent, owners corporations should understand the fees being charged, commission arrangements, supplier relationships, delegated authority and termination rights rather than focusing only on the headline management fee.
Good governance depends on good records
Many strata disputes become more difficult because the decision itself is only half the problem.
The other half is demonstrating how and why the decision was made.
A major repair may have been justified, but was the expert report retained? Was the expenditure properly approved? Was a conflict disclosed? Do the minutes accurately record the resolution? Can the relevant contract still be located several years later?
The reforms have strengthened the duties applying to strata committee members, reinforcing expectations that they act honestly and in good faith, exercise due care and diligence and do not improperly use their position.
Good record keeping therefore has practical value beyond administration.
Clear minutes, contracts, reports, financial records and disclosures allow an owners corporation to demonstrate that decisions were informed and properly made. Those records can also become important evidence if a disagreement later develops.
New strata schemes: getting the foundations right
The reforms also introduce greater structure around the information and financial planning provided when a new strata scheme is established.
From 1 April 2026, initial maintenance schedules must be prepared using a prescribed standard form. For multi-storey schemes, the initial maintenance schedule and initial strata levy estimates are also subject to independent review and certification requirements.
These changes address an important practical issue.
If initial levies are unrealistically low or maintenance information is incomplete, owners may purchase into a new development without an accurate picture of the building's likely future costs. The consequences may only emerge later through substantial levy increases or unexpected expenditure.
A proper handover gives the new owners corporation the information it needs to understand the building, budget realistically and respond appropriately when maintenance or defect issues arise.
What should owners corporations review now?
For most established schemes, preparing for the reforms does not require an elaborate compliance exercise.
A useful starting point is to consider:
- whether the 10-year capital works fund plan is current and reflects known or foreseeable major expenditure;
- whether significant common property repairs are being properly investigated and progressed rather than repeatedly deferred;
- whether the owners corporation understands the fees, commissions and supplier relationships associated with its strata managing agent;
- whether important decisions and conflicts are properly recorded; and
- whether contracts, reports and other important records can be readily located when required.
For schemes dealing with substantial building works or defects, these questions become particularly important. Decisions about repairs, funding and contracts can affect not only the immediate project but also the owners corporation's ability to recover losses from responsible parties.
Preparing before a dispute arises
The practical direction of the NSW strata reforms is clear: owners corporations are expected to understand their buildings, plan realistically for future expenditure, maintain common property and make decisions transparently.
For a well-managed scheme, this should not mean paperwork for its own sake. It should mean fewer surprises and better decisions.
The best time to discover that a capital works plan is inadequate, a management agreement is unclear or important maintenance has been deferred is not after the roof has failed, the contract has been signed or a substantial special levy has become unavoidable.
Addressing those issues early gives owners corporations better information, more options and a stronger position when difficult decisions need to be made.
*Disclaimer: This article provides general information only and does not constitute legal advice. The law and its application may vary depending on the particular circumstances. You should obtain legal advice specific to your circumstances before acting or relying on the information contained in this article.
