4 ctober 2019

Utility freedom: Strata changes worth celebrating

As of Tuesday the 1st of October, schedule 4.5 of the Fair Trading Legislation Amendment (Reform) Act 2018, came into effect. This amended the Strata Schemes Management Act 2015 (NSW) by introducing a new section 132A and clause 6(e) in Schedule 1.

This change limits the term of agreement for the supply of electricity, gas, or any other utility with an owner’s corporation.

So why does this matter?

Being able to shop around in the ultra-competitive utility market, is something many homeowners can do freely, but for those living in the nearly 80,000 strata lots in New South Wales, it’s a different story.

Tenants and homeowners living in strata schemes are bound to their utility agreement and provider, so it’s important they’re getting a good deal.

These changes were initially brought about by the Government after a light was shone on lengthy up-front agreements struck by developers, which were handed on to the strata scheme.

This left everybody within the scheme forking out for a pricey and uncompetitive contract.

Under these changes, there will be no automatic contract roll-ons and locked in long-term contracts are a thing of the past.

These reforms ensure any utility agreement made on and from Tuesday the 1st of October, will have a maximum length of three years.

It will also protect strata buildings from inheriting an uncompetitive deal. Now, any utility agreement made after 1 October 2019 and before the first annual general meeting of the owners corporation, will automatically expire at the conclusion of that meeting (unless the term ends or is ended earlier).

There is also a clause that makes it mandatory for utility agreements to be on the agenda at every annual general meeting of the owners corporation.

What does this mean for pre-existing arrangements?

Any agreement made before the 1st of October, 2019 will expire 10 years after the date on which that agreement commenced – unless the agreement is due to expire in less than 10 years or a party chooses to terminate the contract.

The fine print

What the owners corporation needs to know:

  • Unless a utility agreement has a shorter term or is ended earlier (for instance, by way of termination), a utility agreement made by the owners corporation on or after October 1, 2019:
    (a) will expire at the conclusion of the first annual general meeting of the owners corporation if the agreement was entered into before that meeting; or
    (b) in any other case, will expire three years after the date it commenced.
  • A utility agreement which is already in place before October 1, 2019, will expire 10 years after it commenced unless the agreement has a shorter term or is ended earlier, for instance, by way of termination.
  • The owners corporation may renew a utility agreement by resolution at a general meeting on or after its expiry date.
  • Utility agreements must be considered at each annual general meeting as an agenda item.

What’s left out

These reforms will not impact any agreement to supply electricity to residents in a strata scheme through an embedded network.

Embedded networks are arrangements found in ‘closed’ communities such as strata schemes but can also be found in retirement villages, residential parks and shopping centres.

It’s where the owners corporation or operator of the community contracts with an energy retailer for supply of electricity to the ‘front gate’ or a parent meter. They then on-sell this electricity to each individual resident or commercial tenant.

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