What to Expect from 2023 in Strata

The Strata industry is evolving every year, as more and more Australians make the switch to high-density living through choice or necessity.

Whilst 2022 was a big year for the industry, we reckon this year will be even bigger.

The following is a reflection on some trending topics in the strata sector and a short-list of things to look out for in 2023.

Legal Reform

The Queensland Government recently announced a raft of proposed changes to current body corporate laws.

It is important to note that no actual legislation or detail has been drafted yet, and there are many questions that will need to be answered which will be part of the consultation process later this year.

Proposed changes to body corporate legislation:

  • Allowing for the termination of a community titles scheme with the support of 75 per cent of lot owners.
  • Allowing Bodies corporate to prohibit smoking in outdoor and communal areas, to better protect residents from second hand smoke.
  • Preventing Body Corporate from banning pets, except in specific circumstances.

 

The following quotes can be attributed to Attorney-General Shannon Fentiman:

“We are delivering on our commitment to consult on changes to Queensland’s community titles legislation and will continue working with the Community Titles Legislation Working Group to consider further reforms, like management rights, bullying, and harassment.”

“This is the first of two planned packages of reform for body corporate legislation in Queensland. I intend to introduce the second package of reforms before the end of the year.”

Electric Vehicles (and the who pays what and how debate)

Electronic Vehicles (EV’s) are becoming more and more popular and strata communities are looking to future proof their communities and adapt to new sustainable technologies.

EV ownership is expected to surge in the years to come, driven by falling costs, greater model choice and availability, and more charging infrastructure. By 2050, between 92 and 99 per cent of all vehicles are expected to be battery EVs.

As EV’s rise in popularity, it is inevitable there will be an increased demand for charging as more residents in strata buildings own EVs. Subsequently the demand for charging infrastructure and electricity supply also increases.

How strata communities and Bodies Corporates address the need for charging infrastructure, manage the impacts on power consumption as well as introducing equitable payment arrangements will be a key challenge of 2023 and for many years to come.

Flood Mitigation

Severe weather events are happening more frequently and are increasingly more destructive. More strata communities will have to mitigate these risks not just for safety but also to keep insurance premiums down.

Queensland is prone to heavy rainfall and floods, especially during the wet season (November to April), which can cause significant damage to buildings, infrastructure, and personal property. For apartment communities, this can result in costly repairs and disruptions to residents’ lives.

Additionally, many apartment buildings in Queensland are located in low-lying areas or near waterways, which puts them at greater risk of flooding. This means that apartment communities must be well-prepared for potential flooding events in order to protect their residents and minimize damage.

Body Corporates have a responsibility to ensure the safety and wellbeing of their residents, especially in emergency situations like floods. By implementing flood mitigation measures, apartment communities can help to reduce the risk of injury or loss of life, as well as minimize damage to property.

For many apartment communities, flood mitigation will be critical in 2023 and beyond to protect their residents, minimise the impact of future flooding events, as well as keep insurance premium down.

Insurance

Insurance premiums for strata properties have surged over the last couple of years and there is little sign of it slowing down in 2023. Insurers are in the process of restructuring their risk portfolios, examining current schemes, and seeking more information about strata owners’ risk profiles before offering renewal terms.

Strata committees can expect significant premium increases this year for schemes that are claims-free and even greater for schemes with a challenging claims history.

According to insurance experts some key drivers behind increases include:

  • The impact of the previous two years of floods, bushfires, and cyclones and the catastrophic damage they have cause with costs exceeding $8 billion.
  • Fewer specialty strata insurers in the market.
  • Increases to the average cost of claims due to inflation, labour shortages, and delays in the supply of materials.
  • Strata underwriting agencies and their insurers are facing higher costs when purchasing re-insurance (insurance for insurers).

Smoking

Recent cases in NSW and QLD have successfully banned an apartment owner from smoking on their balcony. Contrary to previous unsuccessful attempts, the complaining neighbour argued on the basis that smoke-drift was a health ‘hazard’ rather than a ‘nuisance’, with the adjudicators in both cases agreeing with that assessment.

The QLD government has also said it planned to introduce laws to protect building residents from second-hand smoke.

That would mean body corporates could create building by-laws that banned smoking in outdoor and communal areas.

Smoking is a very contentious activity in apartment buildings and the issue can cut to the heart of the challenges of community living, wherein people’s rights must be balanced against others and the community as a whole.

Expect this to remain a hot button issue in 2023 as strata communities and legislators try to find the right balance between protecting residents’ health while safeguarding individuals’ rights to enjoy their property how they see fit.

Pets

The issue of pets in strata buildings and the controls that have and are being imposed on them has become a hot topic in the last few years with major cases, strata law changes, reform proposals and changing societal views.

This has only increased since the beginning of Covid-19 where we have had the tumultuous mix of sky-rocketing levels of pet ownership (AKA pandemic puppies)

There has been a concerted trend of adjudicators generally ruling in favour of having less onerous restrictions on keeping pets in strata properties. In Queensland, the banning of all pets, as well as banning dogs of a certain size or weight by bodies corporate has been ruled invalid.

The QLD government’s proposed reforms for the strata sector would make it plain that bodies corporate cannot ban pets in community titles schemes — except in specific circumstances.

Additionally, as part of new rental laws introduced last year, landlords are no longer be able to impose a blanket “no pets” policy and must give specific reasons for not allowing pets in their property.

All this is inevitably leading to more and more pets living in apartments. However, contrary to how some in the media present it, new laws allowing for more apartment owners to keep pets does not mean every apartment resident can suddenly keep whatever animal they like in their lot.

Apartment communities will need to review, update and strengthen their by-laws when it comes to the regulation of pets in their schemes, so allocations are made for “reasonable” pet ownership balanced with protections against dangerous/nuisance animals and health hazards.

Inflation

Australia is currently experiencing record levels of inflation as a result of knock-on effects from the COVID-19 pandemic, Russia’s invasion of Ukraine and strong consumer demand.

In January, the ABS revealed that Australia’s inflation rate had risen 7.8% for the year to December—the highest level since 1990—while quarterly inflation was up by 1.9%.

High inflation leads to higher prices for goods and services, which can cause a rise in operating costs for the body corporate, such as maintenance expenses and utility bills. This can put pressure on the body corporate’s budget and may require them to increase levies or special assessments on residents.

The massive increase in inflation can be particularly troublesome for body corporates with Caretakers, where the remuneration is usually fixed to national price increases.

Additionally, high inflation can make it more difficult for the body corporate to plan and budget for future expenses and can challenge the financial stability and sustainability of a body corporate if not managed and planned for appropriately.

Strata communities will have to plan ahead to fund this. If your body corporate hasn’t already started to address these issues, you need to.

Short-term Letting (Airbnb)

Short-term letting in strata properties will continue to be a highly contentious topic in 2023 with even more scrutiny and increasing backlash to the industry because of the current housing crisis.

Many local councils are beginning to take action to regulate short-term letting in their areas. Noosa Council, for example, has introduced a raft of regulations for short-term letting activities and Brisbane City Council has increased rates for property owners who short-term let for more than 60 days.

Expect this trend to continue in 2023, with more local councils in Australia introducing greater regulations to the short-term letting sector.

Scheme Termination (Redeveloping Ageing Blocks)

The Queensland Government’s proposed changes to current body corporate laws will make it easier to redevelop ageing apartment blocks.

Many strata properties throughout Queensland have deteriorating buildings and infrastructure that are no longer financially viable.

As well as becoming a financial burden on their owners rather than an asset, these properties take up prime urban land in desirable locations that are ripe for re-development.

Strata law in Queensland currently requires all owners in a community title scheme (strata property) to agree to the property being sold off to be redeveloped.

While seemingly well intentioned to protect property owners from being forced to sell, it can result in a lone objector holding the other owners to ransom and preventing them from exercising their rights to re-develop their property.

Under the proposed new laws, the threshold for sale would be lowered to 75 per cent of owners but only in situations where the body corporate had agreed it was more financially viable for lot owners to end the title than maintain or renovate the property.

In all other situations (for example, selling for pure profit), every owner in the scheme would need to agree to end the community title.

How Can We Help You?

Call us on 07 3435 5300 and one of our friendly consultants will help