Strata reform 2025: Extended liability and contract protections explained
On 1 July 2025, the NSW Government implemented a further stage of significant reforms to legislation for all NSW strata schemes and community land schemes. These changes aim to modernise governance, enhance transparency, and improve protections for owners and residents in strata schemes. While the reforms are broad, we touch on two key changes which are particularly relevant to owners corporations and their insurers.
Extended limitation period for damages claims
Section 106(5) of the Strata Schemes Management Act 2015 (Act) provides that a lot owner may recover from an owners corporation damages for any reasonably foreseeable loss suffered by the owner because of an owners corporation’s breach of its statutory duty, under section 106(1) of the Act, to maintain and repair common property.
Previously, an owner could not bring a damages claim against an owners corporation more than 2 years after the owner first became aware of the loss. This time limitation has now increased to 6 years.
Lot owners should benefit from this reform, with owners corporations encouraged to complete repairs to common property in a timely manner to limit any ongoing damage to lot property. Any failure by an owners corporation to expedite repairs has the potential to result in significantly higher damages claims, for example loss of rent. This reform is also likely to result in more damages claims where lot owners were previously out of time.
New rules on unfair contract terms
Unfair terms as defined in the Australian Consumer Law (ACL) are now banned in standard form contracts with owners corporations for the supply of goods or services, including strata management agreements, building management agreements, and service contracts, with the aim to protect owners corporations from disadvantageous agreements.
The unfair contract term provisions apply to contracts with an owners corporation entered on or after 1 July 2025, and terms of existing contracts renewed or varied on or after 1 July 2025. A term may be unfair if it: causes a significant imbalance in the parties' rights and obligations arising under the contract; and the term is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
It is recommended that owners corporations obtain legal advice on any unfair contract terms in their existing contracts, with a view to varying or entering new contracts as required. Limitation of liability clauses should be carefully considered to protect an owners corporation’s right of recovery in the event of negligence or misconduct by the other party to the contract.
These reforms mark a monumental shift in the strata landscape, with greater accountability for strata and building managers and longer liability windows for owners corporations. Unfortunately, there is no clear guidance on how these reforms will apply to strata disputes already before the courts. Insurers should be alert to the increased potential for larger and more complex claims and consider updating their underwriting and claims strategies accordingly.
This publication constitutes a summary of the information of the subject matter covered. This information is not intended to be nor should it be relied upon as legal or any other type of professional advice. For further information in relation to this subject matter please contact the author.
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