RTA in focus: Disclosure obligations for strata properties

RTA in Focus: Disclosure obligations for strata properties

20 March 2020

This article is part of the RTA in Focus series. With a raft of reforms to the residential tenancies framework set to start on 23 March 2020, we’re giving you the information you need to ensure you understand your obligations.

You can access all the articles in the RTA in Focus series here.

New disclosures must be made to tenants, prior to entering into a residential tenancy agreement, where the property they are renting is in a strata scheme.

Property managers already need to tick certain boxes before entering into any new residential tenancy agreement on behalf of the landlord to ensure relevant information is disclosed to the tenant.

Are there any material facts that need to be disclosed? Is the landlord planning to sell the property in the near future? Has a copy of the Tenant Information Statement (which replaces the New Tenant Checklist) been provided?

Now, where the premises is in a strata scheme, there will be additional disclosure requirements.

“These amendments add yet another layer of compliance complexity for property managers,” Sandra McGee, Property Management Manager at Starr Partners Merrylands and member of the REINSW Property Management Chapter Committee, said.

“In essence, we’ll need to go on a fact-finding mission prior to signing every residential tenancy agreement.”

Property managers need to be aware of these new disclosure obligations and put processes in place to ensure compliance for all residential tenancy agreements signed on and from 23 March 2020.

What’s changing on 23 March 2020?

A new section 26(2A) will be inserted into the Residential Tenancies Act 2010 (NSW), setting out that certain information must be disclosed to tenants where the property is in a strata scheme.

On and from 23 March 2020, a landlord or property manager must give the tenant a copy of the current by-laws (see new section 26(2A)(a)). Further, where there is a strata renewal committee and the property manager is aware of this fact, it must be disclosed to the tenant (see new section 26(2A)(b)).

Both of these disclosures must occur before the tenant enters into the residential tenancy agreement.

The amendments in practice

Sandra said that the implementation of these new disclosure requirements has the potential to be quite onerous in practice.

“Property managers will need to plan ahead so that, prior to the tenant signing a residential tenancy agreement, they have a copy of the latest by-laws and knowledge of whether a strata renewal committee has been established,” she said.

Sandra explained that property managers will need to allow sufficient time, so they can be proactive in seeking and obtaining this information from strata managers to ensure compliance with the new section 26(2A).

“For example, you’ll need to specifically ask strata managers ahead of time whether a strata renewal process is underway,” she said. “You’ll also need to keep track of annual general meetings and follow-up on their outcomes to ensure you have sufficient time to obtain updated by-laws if any amendments have been made.

“All of this takes additional time, so appropriate processes need to be put in place to ensure the leasing process isn’t slowed down.”

Sandra mentioned that some strata management agencies may charge a fee for supplying by-laws to property managers.

“Always check with the landlord before proceeding and incurring this additional charge,” she advised. “In some cases, the landlord may have access to an online portal where they can access and download the by-laws for free.”

Also to note when it comes to strata properties are changes to clause 8 of the Residential Tenancies Regulation 2019 (NSW) regarding material facts.

“On and from 23 March 2020, the landlord or their agent must disclose information about rectification work or major works that are to be carried out to common property during the fixed term of the residential tenancy agreement,” Sandra said. “This information is now a material fact.”

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