Strata Series: Units Plans with 4 or Fewer Units no Longer Exempt from the Unit Titles Management Act

The Strata amendments that came into effect in November 2020 have impacted many legislative instruments that help regulate unit titles in the ACT. (Check out our neat list here).

One interesting change worth noting for small scale developers is the removal of section 18 from the Unit Titles (Management) Act 2011 (UTMA) and the addition to the same act of a “Regulation-making power” in section 147.

Long story short: this change means that units plans with 4 or fewer units are no longer able to exempt themselves wholesale from the UTMA provisions and must instead rely on the Territory Executive to make regulations to exempt units plans from the application of a provision of the UTMA under Section 147.

What did section 18 do?

Section 18 said the following:

Exemptions for units plans with 4 or fewer units

  • An owners corporation for a units plan with 4 or fewer units may, by special resolution, exempt itself from the requirements of this Act as prescribed by regulation.
  • An exemption may be revoked by special resolution.

For example, if a units plan had little or no common property, or only a driveway or meter box to manage, the owner’s corporation could draw up a special resolution that would exempt them from legal obligations to set up bank accounts or complex management structures in order to manage the small or non-existent common property.

The decision to remove this section was made following the observation that the old section 18 was unclear: can the owner’s corporation just make the special resolution to exempt themselves from any provision of the UTMA, or is a regulation required that addresses the provisions they wish to exempt themselves from before the self-exemption power can be relied on? So far, no regulation had been made to guide this power.

Noting that the regulatory frameworks for units plans are extremely important, the new approach aims to make it clear that an exemption from the Act must be permitted by regulation only.

How does it work now?

This amendment means that a small owners corporation can no longer “set and forget” its compliance position under the UTMA. If there are particular obligations that are impractical to comply with, such as running a bank account or collectively insuring a tiny parcel of common property, the owners corporation must do so by passing a resolution which refers to and exempts itself from those particular sections of the Act.

Further, it is no longer accepted that owners corporations can live outside the UTMA entirely, without the endorsement of the Territory Executive under section 147. An owners corporation that has agreed to exempt itself from particular requirements must return to that decision and pass that resolution every year.

What we have observed is that, under the previous section 18, the developers and owners of very small units plans (such as dual occupancies) would exempt themselves from compliance with the UTMA, but that resolution would then be lost or forgotten. Over time and after the properties change hands, important aspects of running the owners corporation such as insurance responsibility and shared costs become unclear and can be a source of concern, cost and conflict between neighbours.

What’s next?

It is important to understand that the UTMA provides procedural and administrative certainty to owners even in very small units plans, which is important both in owning and if your considering selling your property.

If you have any further questions about these requirements, or if you require documents for your small owners corporation, please do not hesitate to contact us now.