With the aim to improve strata schemes and provide strata owners, developers, investors and managers with sustainable and flexible housing options, Landgate have announced the biggest reform for strata title law in Western Australia in over 20 years.
These community title, leasehold strata and improved strata schemes promise to boost the Western Australian economy by delivering new land development options, backed by a straight forward, modern legislative framework, driving economic growth and, in perfect timing with the state’s new Metronet infrastructure.
The seven areas of reform will address all the existing issues with the current 1985 Act, as well as the introduction of the new Community Titles Act 2018, allowing the subdivision of a single parcel of freehold land into multiple community title schemes. These new and improved schemes will be used to develop rail station precincts, supplying the community with affordable housing options close to public transport.
An important part of the reform is the new requirement whereby any scheme which has more than ten lots (or a high replacement insurance value) must have a cash reserve fund and 10 year maintenance plan in place.
Too often strata companies are left with insufficient funds when maintenance is required on a strata lot, leading to unnecessary financial distress, or, postponing and causing the property to deteriorate further whilst waiting for the funds to be raised. The new reform creates a safety net for both the body corporate and the building itself.
In order to create a financial plan that allows for funds to adequately cover these future costs, a Sinking Funds Forecast or Life Cycle Costing is required, compiled by a qualified Quantity Surveyor.
I chatted to Rawlinsons (W.A.)'s Director, Niall McAree, who explained, "Our reports can detail the expected yearly costs for up to 15 years, however, we recommend the Sinking Fund Forecast be reviewed annually to include any changes arising from extraordinary expenditure, inflation, local market factors and the general building condition."
"In a nutshell, the forecast covers expenditure of a capital or non-recurrent nature including periodic replacement of major capital items and other spending that may reasonably be required for the safe operation and upkeep of the buildings. It does not include expenditure on capital improvements", continued Mr McAree.
This new reserve fund requirement is one of many improved requirements that form the huge reform. With the predicted West Australian population growth to 5 million by 2056, the new legislation promises, alongside Metronet, will provide the Western Australian community affordable housing options and create thousands of new jobs, with a modern, connective transport system tying it all together.
The Strata Reform is awaiting successful passage through the lower and upper houses of Parliament before the drafting of the Regulations and the implementation of the new legislation.
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