strata title reforms proposals for legislative change

1. Strata Title ReformsProposals for legislative change Thanks for invitation Presentation timely � Consultation Paper launched 13 July Presentation will report on progress of review and provide details of legislative proposals that the Tenure Committee has released for industry commentThanks for invitation Presentation timely � Consultation Paper launched 13 July Presentation will report on progress of review and provide details of legislative proposals that the Tenure Committee has released for industry comment

2. raise awareness regarding the legislative change � key part of the consultation process + creating understanding re the key principles key proposals only in the Consultation Paper � this is not everything. seek initial questions & feedback We need your input re consequential & transitional provisions raise awareness regarding the legislative change � key part of the consultation process + creating understanding re the key principles key proposals only in the Consultation Paper � this is not everything. seek initial questions & feedback We need your input re consequential & transitional provisions

3. These are the key reforms we will discuss with you today. These are the key reforms we will discuss with you today.

4. First a reminder of the purpose of the review, and role and composition of the Tenure Committee, which was formed by the Minister in 2006: Tenure Legislation Review offshoot of Community Titles Advisory Committee review of STA CTAC effective in reviewing management provisions of STA Smaller group set up to address issues such as mixed use/ tenure schemes, leasehold strata and termination. Tenure Committee (TC) includes representatives of SSSI, UDIA, Property Council, WALGA, DoP, Landgate & CTAC (chair) In 2008 TC developed broad framework for new tenure/community titles legislation This was included in a consultation paper released in 2009 The 2009 Consultation Paper focused on principles including: One tenure creation act Community schemes extended to different tenures & uses Multiple management bodies Clear staging processes Greater information disclosure Management rules appropriate to scheme New termination requirements One plan form Interests on plan limited Transitioning existing schemes to new legislation The Tenure Committee received 43 written submissions to this paper, which were followed by a review process. Strong general support for proposed reforms But significant issues also For example, (1) not all agencies supported removal of provisions from their acts to form one tenure act; (2) leasehold strata schemes over Crown land were not universally supported; (3) fundamental concerns about freehold tenures and airspace lots in community schemes. Following considerable Tenure Committee deliberation, a Working Group of key interests was formed in March this year to address these concerns head on, and to identify the best path forward in light of the fact that complementary amendments to the STA are already being progressed (re management statements for all strata and community schemes; and regulation modules for schemes of different types). Planning for a number of tenure-related legislative proposals is progressing with respect to the Transfer of Land Act. The 2010 Consultation Paper is a result of that review and the key proposals are supported by the Tenure Committee. First a reminder of the purpose of the review, and role and composition of the Tenure Committee, which was formed by the Minister in 2006: Tenure Legislation Review offshoot of Community Titles Advisory Committee review of STA CTAC effective in reviewing management provisions of STA Smaller group set up to address issues such as mixed use/ tenure schemes, leasehold strata and termination. Tenure Committee (TC) includes representatives of SSSI, UDIA, Property Council, WALGA, DoP, Landgate & CTAC (chair) In 2008 TC developed broad framework for new tenure/community titles legislation This was included in a consultation paper released in 2009 The 2009 Consultation Paper focused on principles including: One tenure creation act Community schemes extended to different tenures & uses Multiple management bodies Clear staging processes Greater information disclosure Management rules appropriate to scheme New termination requirements One plan form Interests on plan limited Transitioning existing schemes to new legislation The Tenure Committee received 43 written submissions to this paper, which were followed by a review process. Strong general support for proposed reforms But significant issues also For example, (1) not all agencies supported removal of provisions from their acts to form one tenure act; (2) leasehold strata schemes over Crown land were not universally supported; (3) fundamental concerns about freehold tenures and airspace lots in community schemes. Following considerable Tenure Committee deliberation, a Working Group of key interests was formed in March this year to address these concerns head on, and to identify the best path forward in light of the fact that complementary amendments to the STA are already being progressed (re management statements for all strata and community schemes; and regulation modules for schemes of different types). Planning for a number of tenure-related legislative proposals is progressing with respect to the Transfer of Land Act. The 2010 Consultation Paper is a result of that review and the key proposals are supported by the Tenure Committee.

5. Consultation to this point has led to the main drivers for the legislative change as being: Department of Housing considered leasehold strata a potentially valuable tool in tackling housing affordability. More development and lifestyle options would be available to both the development industry and consumers. And developers seem to be keen for more flexibility to establish innovative community schemes. In focusing on the above, the Project Team is not losing sight of what is needed, in terms of tenure legislation being integrated, simple, flexible, easy-to-use. I think you will be able to visualise this better after you see a few examples of the key reforms in motion, and I will hand over to Duncan to walk you through these. Consultation to this point has led to the main drivers for the legislative change as being: Department of Housing considered leasehold strata a potentially valuable tool in tackling housing affordability. More development and lifestyle options would be available to both the development industry and consumers. And developers seem to be keen for more flexibility to establish innovative community schemes. In focusing on the above, the Project Team is not losing sight of what is needed, in terms of tenure legislation being integrated, simple, flexible, easy-to-use. I think you will be able to visualise this better after you see a few examples of the key reforms in motion, and I will hand over to Duncan to walk you through these.

6. Schemes within schemes: meaning Schemes within schemes� refers to the creation of subsidiary schemes within an overarching strata management scheme. This is referred to as a layering arrangement in other jurisdictions. The meaning should be clearer after the next few slides Schemes within schemes: meaning Schemes within schemes� refers to the creation of subsidiary schemes within an overarching strata management scheme. This is referred to as a layering arrangement in other jurisdictions. The meaning should be clearer after the next few slides

7. Created a hypothetical example of a mixed tenure community development to show how this could occur under current laws and how it could be achieved under schemes within schemes. First how it could happen now. Typically a community development would start off with a large block of land. With a development concept in mind, the developer would liaise with the relevant planning authorities including the local government. The zoning might need to be changed and if the development was large or complex a structure plan or similar instrument might be needed.Created a hypothetical example of a mixed tenure community development to show how this could occur under current laws and how it could be achieved under schemes within schemes. First how it could happen now. Typically a community development would start off with a large block of land. With a development concept in mind, the developer would liaise with the relevant planning authorities including the local government. The zoning might need to be changed and if the development was large or complex a structure plan or similar instrument might be needed.

8. In this example the developer applies to subdivide the large block into 4 freehold lots.In this example the developer applies to subdivide the large block into 4 freehold lots.

9. Explanation of diagram The lots are then subdivided into strata & survey-strata lots and common property. Lot 1 is subdivided into built-strata lots & common property (recreational facilities and part of the driveway) Lot 2 is subdivided into single tier strata townhouses and common property (part of the driveway) Lot 3 and lot 4 are subdivided into survey-strata single residential lots with no common property Difficulties with these arrangements: Strata and survey-strata lots could not form part of the same scheme Separate schemes created. Not conducive to consistent & effective management of the development as a whole No legal basis for sharing common property between schemes Some schemes have common property, other don�t Voluntary agreements or other solution needed to share in the use & maintenance of the common property These are not risk free & there could be enforcement difficulties. Other hassles: rights of carriageway to allow access Some schemes could incur an inequitable level of risk [NEXT SLIDE IS EXAMPLE OF HOW SCHEMES WITHIN SCHEMES WOULD WORK]Explanation of diagram The lots are then subdivided into strata & survey-strata lots and common property. Lot 1 is subdivided into built-strata lots & common property (recreational facilities and part of the driveway) Lot 2 is subdivided into single tier strata townhouses and common property (part of the driveway) Lot 3 and lot 4 are subdivided into survey-strata single residential lots with no common property Difficulties with these arrangements: Strata and survey-strata lots could not form part of the same scheme Separate schemes created. Not conducive to consistent & effective management of the development as a whole No legal basis for sharing common property between schemes Some schemes have common property, other don�t Voluntary agreements or other solution needed to share in the use & maintenance of the common property These are not risk free & there could be enforcement difficulties. Other hassles: rights of carriageway to allow access Some schemes could incur an inequitable level of risk [NEXT SLIDE IS EXAMPLE OF HOW SCHEMES WITHIN SCHEMES WOULD WORK]

10. Start again with the original lot. Similar planning approval processes ie rezoning, structure plan etcStart again with the original lot. Similar planning approval processes ie rezoning, structure plan etc

11. Explanation of diagram The lot is subdivided into 3 development lots and common property by a survey-strata plan Lot 1 is made up of 2 lots in the earlier slides minus the common property. Together the lots & common property form the principal or overarching development scheme for the development (blue line). Through its management statement the scheme can set management and development standards for the whole development. [CLICK] Lot 1 is subdivided into 2 subsidiary development lots that make up a subsidiary development scheme. This may be done to share common property within these lots or ensure consistent standards for the development of these lots through the management statement for the scheme. [CLICK] All of the development lots will eventually be subdivided into either strata or survey-strata lots that will form their own schemes This is the final layer of schemes within schemes. How does this address the earlier problems? Strata & survey-strata lots can be combined in the same scheme Equitable & enforceable basis for sharing common property across the scheme Equitable sharing of costs & risk Consistent management Explanation of diagram The lot is subdivided into 3 development lots and common property by a survey-strata plan Lot 1 is made up of 2 lots in the earlier slides minus the common property. Together the lots & common property form the principal or overarching development scheme for the development (blue line). Through its management statement the scheme can set management and development standards for the whole development. [CLICK] Lot 1 is subdivided into 2 subsidiary development lots that make up a subsidiary development scheme. This may be done to share common property within these lots or ensure consistent standards for the development of these lots through the management statement for the scheme. [CLICK] All of the development lots will eventually be subdivided into either strata or survey-strata lots that will form their own schemes This is the final layer of schemes within schemes. How does this address the earlier problems? Strata & survey-strata lots can be combined in the same scheme Equitable & enforceable basis for sharing common property across the scheme Equitable sharing of costs & risk Consistent management

12. This is another way of looking at it. This diagram is in the consultation paper. Each scheme has its own strata company and management statement Schemes at the lower levels contribute to the schemes above in proportion to their equity in the schemes. This is another way of looking at it. This diagram is in the consultation paper. Each scheme has its own strata company and management statement Schemes at the lower levels contribute to the schemes above in proportion to their equity in the schemes.

13. Other innovative uses for schemes within schemes could include shared: Rainwater harvesting; and Geothermal energy for heating & cooling These resources would be located on the common property for the entire scheme so all lots can share in the benefits and maintenance. Other innovative uses for schemes within schemes could include shared: Rainwater harvesting; and Geothermal energy for heating & cooling These resources would be located on the common property for the entire scheme so all lots can share in the benefits and maintenance.

14. (Schemes within schemes in built-strata [CLICK] Principal scheme [CLICK] Subsidiary schemes Development lots in buildings It is proposed that approval to create development lots would be obtained at development approval stage. Development lots and individual lots could be created in single process after the building is completed.(Schemes within schemes in built-strata [CLICK] Principal scheme [CLICK] Subsidiary schemes Development lots in buildings It is proposed that approval to create development lots would be obtained at development approval stage. Development lots and individual lots could be created in single process after the building is completed.

15. Leasehold strata similar to freehold strata Leasehold strata schemes are the same as freehold strata schemes except that lots are leased to the lessee rather than sold. A strata company is formed by the lessees to manage the strata scheme. Leasehold strata can be used so that the proprietor or developer does not need to manage the common property for the term of the lease; this is the responsibility of the strata company. Leasehold strata similar to freehold strata Leasehold strata schemes are the same as freehold strata schemes except that lots are leased to the lessee rather than sold. A strata company is formed by the lessees to manage the strata scheme. Leasehold strata can be used so that the proprietor or developer does not need to manage the common property for the term of the lease; this is the responsibility of the strata company.

16. Application to Crown land as well as freehold land Tenure Committee (TC) aware of benefits and opportunities particularly in relation to housing affordability & remote communities. However, there are unresolved concerns about application of strata schemes to Crown land. TC has therefore proposed that leasehold strata only be applied to specific areas of Crown land that are agreed by the Minister for Lands and prescribed in regulations. The TC has also proposed that modules to regulate the management of leasehold schemes on Crown land should be developed on the advice of the DRDL. <click> Lot Creation Same approvals required Leasehold strata lots on freehold land would require the same approvals as freehold strata lots. But additional approvals would be needed for development on Crown land The leases attached to these lots would not require WAPC approval. Leases to be lodged before plan registered Leases (including a lease of the common property to the strata company) must be lodged at Landgate before the plan of subdivision is registered. A notification is entered on the title of the freehold lot referring to the strata plan and associated leases. CT issued in name of lessee & leases registered against titles A certificate of title (CT) in the name of the lessee is created for the leasehold estate of each lot in the plan. Each lease is registered against the title for the lot. The lessor can be the lessee on a registered lease. <click> Leases Same expiry date & terms of renewal The terms of the leases commence upon registration of the plan and expire at the same time. If there is an option to renew it must be consistent for all leases. Lessee can sub-lease Lessees have the right to sub-lease but need to ensure that sub-lessees are properly informed (see INFORMATION DISCLOSURE). Lessor to renew if enough ask The lessor is obliged to comply if a sufficient percentage of lessees give notice of their desire to renew their leases. Lessor may refuse new lease The lessor may refuse a new lease if the lessee has failed to comply with the lease after being given notice. The paper does not address the issue of terminating a lease before the initial term expires. One approach is to allow mortgagees and other interest holders to apply to SAT if a lessor intends to bring a lease to an end prematurely. TC would welcome views. <click> Management of leasehold schemes Lessees form strata company when plan is registered. Regulations will define the rights of the lessor and owner (if not the lessor) in the management of a leasehold scheme. <click> Termination of schemes Terminated if leases not renewed At the expiration of the leases (and if not renewed) the strata scheme is terminated the strata plan will be terminated the strata company is dissolved all rights and liabilities in regard to the owners corporation are now vested in the former lessees all relevant tiles will be cancelled and record an appropriate notification on the freehold title. Application to terminate At any other time, an application may be made for termination by the proprietor, any mortgagee or covenant chargee or the strata company. The application for termination must be signed by: each proprietor of a lot within the scheme; each registered lessee of a lot within the scheme; and each registered mortgagee, chargee or covenant chargee of a lot or of a registered lease of a lot within the scheme. <click> Conversion from leasehold to freehold strata Lessor may offer right to acquire to lessees Process in NSW (still to be considered here) After the lessor�s reversion the lessor confers the right to acquire the lessor�s reversion to the lessee. The body corporate meets before the termination of the scheme to ascertain whether those rights are to be exercised. Who may acquire The lessee may acquire their lot After 6 weeks the body corporate may acquire any lots that haven�t been acquired After 3 months the lessor may acquire any lots that haven�t been acquired After 6 months if not all lots have been acquired, an application is made to the Registrar General identifying the lots that have not been acquired. Application to Crown land as well as freehold land Tenure Committee (TC) aware of benefits and opportunities particularly in relation to housing affordability & remote communities. However, there are unresolved concerns about application of strata schemes to Crown land. TC has therefore proposed that leasehold strata only be applied to specific areas of Crown land that are agreed by the Minister for Lands and prescribed in regulations. The TC has also proposed that modules to regulate the management of leasehold schemes on Crown land should be developed on the advice of the DRDL. <click> Lot Creation Same approvals required Leasehold strata lots on freehold land would require the same approvals as freehold strata lots. But additional approvals would be needed for development on Crown land The leases attached to these lots would not require WAPC approval. Leases to be lodged before plan registered Leases (including a lease of the common property to the strata company) must be lodged at Landgate before the plan of subdivision is registered. A notification is entered on the title of the freehold lot referring to the strata plan and associated leases. CT issued in name of lessee & leases registered against titles A certificate of title (CT) in the name of the lessee is created for the leasehold estate of each lot in the plan. Each lease is registered against the title for the lot. The lessor can be the lessee on a registered lease. <click> Leases Same expiry date & terms of renewal The terms of the leases commence upon registration of the plan and expire at the same time. If there is an option to renew it must be consistent for all leases. Lessee can sub-lease Lessees have the right to sub-lease but need to ensure that sub-lessees are properly informed (see INFORMATION DISCLOSURE). Lessor to renew if enough ask The lessor is obliged to comply if a sufficient percentage of lessees give notice of their desire to renew their leases. Lessor may refuse new lease The lessor may refuse a new lease if the lessee has failed to comply with the lease after being given notice. The paper does not address the issue of terminating a lease before the initial term expires. One approach is to allow mortgagees and other interest holders to apply to SAT if a lessor intends to bring a lease to an end prematurely. TC would welcome views. <click> Management of leasehold schemes Lessees form strata company when plan is registered. Regulations will define the rights of the lessor and owner (if not the lessor) in the management of a leasehold scheme. <click> Termination of schemes Terminated if leases not renewed At the expiration of the leases (and if not renewed) the strata scheme is terminated the strata plan will be terminated the strata company is dissolved all rights and liabilities in regard to the owners corporation are now vested in the former lessees all relevant tiles will be cancelled and record an appropriate notification on the freehold title. Application to terminate At any other time, an application may be made for termination by the proprietor, any mortgagee or covenant chargee or the strata company. The application for termination must be signed by: each proprietor of a lot within the scheme; each registered lessee of a lot within the scheme; and each registered mortgagee, chargee or covenant chargee of a lot or of a registered lease of a lot within the scheme. <click> Conversion from leasehold to freehold strata Lessor may offer right to acquire to lessees Process in NSW (still to be considered here) After the lessor�s reversion the lessor confers the right to acquire the lessor�s reversion to the lessee. The body corporate meets before the termination of the scheme to ascertain whether those rights are to be exercised. Who may acquire The lessee may acquire their lot After 6 weeks the body corporate may acquire any lots that haven�t been acquired After 3 months the lessor may acquire any lots that haven�t been acquired After 6 months if not all lots have been acquired, an application is made to the Registrar General identifying the lots that have not been acquired.

17. Information disclosure important Pictures show the importance of information disclosure <click> ! Information disclosure important Pictures show the importance of information disclosure <click> !

18. Need for disclosure Community schemes can be complicated especially schemes within schemes. Would be buyers are entitled to good information in order to make informed decisions. This would be provided through current disclosure requirements plus: Information Sheets Management statements Information sheets This would be a new requirement here but information sheets are provided in Qld, SA and Vic . Sheets would be simple documents that guide would-be buyers on matters they should consider before buying into community schemes. The sheets would be attached to but not form part of the purchase contract. The form and content of the sheets would be prescribed in regulations. Appendix 2 of the consultation paper looks at options for information sheets. Please take time to consider. Management statements Amendments are being drafted that will require all schemes to have management statements. It is proposed to amend the information disclosure requirements of the STA so that would-be buyers are provided with the management statement for their scheme and if their scheme is a scheme within a scheme, the management statements for the schemes that the would-be buyers would contribute to. It is also proposed to include a new requirement in management statements to disclose the amenities to be provided in a scheme. It is not intended that the precise location of the amenities be disclosed if not determined or approved. Need for disclosure Community schemes can be complicated especially schemes within schemes. Would be buyers are entitled to good information in order to make informed decisions. This would be provided through current disclosure requirements plus: Information Sheets Management statements Information sheets This would be a new requirement here but information sheets are provided in Qld, SA and Vic . Sheets would be simple documents that guide would-be buyers on matters they should consider before buying into community schemes. The sheets would be attached to but not form part of the purchase contract. The form and content of the sheets would be prescribed in regulations. Appendix 2 of the consultation paper looks at options for information sheets. Please take time to consider. Management statements Amendments are being drafted that will require all schemes to have management statements. It is proposed to amend the information disclosure requirements of the STA so that would-be buyers are provided with the management statement for their scheme and if their scheme is a scheme within a scheme, the management statements for the schemes that the would-be buyers would contribute to. It is also proposed to include a new requirement in management statements to disclose the amenities to be provided in a scheme. It is not intended that the precise location of the amenities be disclosed if not determined or approved.

20. New management statement if changed New statement is needed if the content of the statement is changed. Strata company must approve new management statement The strata company must approve the new statement. Current voting requirements to amend a statement would apply. Strata company cannot refuse new management statement in some circumstances If change reflects development plans in previous statement If SAT or courts order If changes to development plans are minor Regulations would prescribe what is minor. New management statement if changed New statement is needed if the content of the statement is changed. Strata company must approve new management statement The strata company must approve the new statement. Current voting requirements to amend a statement would apply. Strata company cannot refuse new management statement in some circumstances If change reflects development plans in previous statement If SAT or courts order If changes to development plans are minor Regulations would prescribe what is minor.

21. Key proposals only � as mentioned before, this is not everything. We need your input re consequentials & transitionals Submission details are within the Consultation Paper, which is available from the Landgate website (look under News) Key proposals only � as mentioned before, this is not everything. We need your input re consequentials & transitionals Submission details are within the Consultation Paper, which is available from the Landgate website (look under News)

22. Thanks again for opportunity � and thank members for being so attentive. Members of the TLR project team will be available now to talk further � or you can contact Duncan later.Thanks again for opportunity � and thank members for being so attentive. Members of the TLR project team will be available now to talk further � or you can contact Duncan later.