From 1 July 2010 the NSW Self Insurance Corporation takes over as the single insurer for the provision of home warranty insurance cover under the Home Building Act 1989. The NSW Self Insurance Corporation will trade as the NSW Home Warranty Insurance Fund. Premiums for home warranty insurance will be paid into the fund. The government will outsource the management of home warranty insurance to the existing insurers QBE, Caledon and Vero. Vero will cease to be part of the arrangement on 30 September 2010. The insurers will write the insurance policies and administer claims.

The new arrangements make no fundamental alteration to the terms of the insurance which will remain last resort, two years non-structural, six years structural and exemption for over 3 storeys. However, given that the insurance company processing the claim no longer has a direct financial interest in the payout, it may be that we will see a more efficient and quicker claims process in the future .............. or are we just being cynical?

GOVERNMENT ACTS TO REINSTATE HOME OWNER WARRANTY INSURANCE

After the decision in Ace Woollahra Pty Ltd v The Owners – Strata Plan 61424 the government has enacted the Home Building Amendment (Warranties and Insurance) Act 2010 so that owners can again be sure of their ability to enforce statutory warranties against builders.

In the case of Ace Woollahra Pty Ltd v The Owners – Strata Plan 61424 [2010] NSWCA 101 the Court of Appeal held that where there was no contractual relationship between the builder and the developer successors in title to the developer could not enforce the statutory warranties against the builder and had no basis to claim on home warranty insurance. This case meant that before an owners corporation would know whether it was entitled to the benefits of the statutory warranties and the home warranty insurance it would need to know whether there was a contract between the builder and the original owner.

Apart from the difficulty in obtaining evidence about that contract it was the case that for many years lawyers advised builders that they could avoid the warranty obligations under the Home Building Act 1989 by entering into contracts with parties other than the owners of the land on which the development was built. While not all builders engaged in this practice there were a substantial number who did.

The government has acted to amend the Home Building Act by passing the Home Building Amendment (Warranties and Insurance) Act 2010 to restore the rights of all successors in title to claim on the warranties and the home warranty insurance. The Act now makes provision for a non-contracting owner which is an owner of land who is not a party to a building contract. Successors in title to non-contracting owners will still enjoy the benefits of the statutory warranties (s.18D) and home warranty insurance (s.92C). The legislation commenced on 28 June 2010 and is retrospective except for cases finalised between 17 May 2010 and 28 June 2010.

REVIEW ANY CASE LOST OR CLAIM REJECTED UNDER ACE WOOLLAHRA NOW

Any home owner warranty case or insurance claim which was finally determined by a court, tribunal or insurer between 17 May 2010 and 28 June 2010 can be re-determined by lodging an appeal within the relevant statutory time limit.

The transition provisions of the Home Building Amendment (Warranties and Insurance) Act 2010 do not permit the review of any final determination of a court or tribunal or a decision of an insurer or the Building Insurer’s Guarantee Corporation made between 17 May 2010 and 28 June 2010 and lost or refused on the basis of the decision in Ace Woollahra. However, final determination does not occur until the expiry of any appeal period in the relevant court or tribunal or the expiry of the appeal period on any insurance decision which is forty-five (45) days after notification of the assessment. If you have such a decision you should consult a lawyer immediately.

NEW STRATA REGULATIONS

The Minister for Fair Trading, in consultation with the Office of Fair Trading, has released proposed strata regulations for public comment (“new regulations”). The new regulations are intended to replace the Strata Schemes Management Regulation 2005.

The new regulations, if made, will introduce a number of important laws for owners corporations, strata managers and other stakeholders in the strata industry. This article will examine the most important changes to the law that are contained in the new regulations.

Changes to the Treasurer’s Obligations

The treasurer of an owners corporation must issue a receipt for each payment received. The receipt must include various details. The new regulations will no longer require the treasurer to include in a receipt the address of the person on whose behalf the payment is made.

The treasurer must keep a cash record which must be balanced every 6 months unless a shorter period is determined at the annual general meeting. The new regulations will extend the time for the treasurer to balance the cash record to 12 months unless a shorter period is determined at the annual general meeting.

New Document to be Delivered by Developer

The developer must deliver to an owners corporation a range of documents at the first annual general meeting. The new regulations will require the developer to deliver any building valuation which could be used by the owners corporation for insurance purposes.

Increased Expenditure Thresholds

At the moment, large strata schemes must obtain at least two quotations for proposed expenditure greater than $25,000.00. The new regulations will increase this amount to $30,000.00.

The new regulations will also increase the threshold for authorising legal services or legal action at a general meeting. The threshold will be raised to $1,000.00 per lot (excluding utility lots) or $12,500.00, whichever is less.

New Exemption for Levy Recovery

Importantly, legal action to recover overdue levies will no longer need to be approved by an owners corporation at a general meeting no matter the cost involved. This recognises that legal action to collect unpaid levies is the most frequent type of legal action taken by an owners corporation and that the need to call a general meeting to approve that action can be overly burdensome.

Increased Priority Vote Threshold

The threshold amount for priority votes has been increased from $200.00 per lot to $1,000.00 per lot to make it clear that priority votes are only able to be used for major matters.

Mediation Costs

The new regulations will now make it clear that each party involved in a strata mediation will need to pay their own costs.

Fee Increases

The fees payable for lodging applications for mediation, adjudicator’s orders and for other matters have increased as have the costs for making the books and records of an owners corporation available for inspection or issuing section 109 certificates.

The cost for making records available for inspection will be $30.00 plus an additional $15.00 for each half hour or part thereafter after the first hour of inspection. The cost for issuing section 109 certificates will be $104.00 plus $52.00 for a lot comprising a garage, parking space or storeroom.

New Model By-Laws

The hanging of washing model by-law will be amended to allow washing to be hung in lots provided it will not be visible from street level outside the building. This is designed to encourage residents to reduce use of electric clothes dryers and make greater use of natural clothes drying methods.

A new by-law will be introduced permitting the electronic service of documents on lot owners by email where owners have given the owners corporation an email address for the service of notices. This is designed to encourage greater use of electronic communications in the management of strata schemes.

New Forms

The section 109 certificate will be redesigned to make it more user friendly. The proxy appointment form will change so the proxy will not be required to sign the form. So the owners giving the proxy will be the only persons required to sign the proxy appointment form.

Conclusion

The new regulations contain some important and timely changes to the strata laws.

The new regulations are open to public comment. Any submissions need to reach the Office of Fair Trading by 4 August 2010.

The new regulations are expected to become law on about 1 September 2010.

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