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WA: Q&A What You Should Know Before Buying Strata in WA

The LookUpStrata Team
developer

This WA article is about the things you need to know when buying a strata title property in Perth or throughout WA.

Table of Contents:

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Question: If I purchase one of four detached strata properties with no common property, what by-laws and other requirements would the new owners need to adhere to?

I am considering purchasing a strata property in Kalgoorlie in a four-building strata plan. The four properties are separate buildings with no common walls. Each unit is on its own fenced block. There are no common areas.

The four properties are currently owned by the development group. No strata management company has been set up. When they are sold and owned by different individuals, what by-laws and other requirements would the new owners need to adhere to?

Answer: As the property is strata titled, the Strata Titles Act will apply.

From your description, it sounds like this might be a survey strata scheme. While having no common property is uncommon, it is not unheard of.

Regardless, as the property is strata titled, the Strata Titles Act will apply, and any by-laws (the standard schedule 1 and 2 as per the Act and any registered by-laws) will need to be adhered to.

SVN | Strata SVN Perth E: info@svnstrata.com P: 08 9427 7955

This post appears in Strata News #679.

Question: I purchased an apartment without carrying out any due diligence. There is no transparency or access to information. The developer owns units in the building and strata management company is owned by the developer. What can I do?

I purchased an apartment without carrying out any due diligence and have since found some issues. No strata company has ever been formed. The developer owned 9 of the 10 lots and has since sold a few to other owners.

On settlement, no minutes of meetings and statements of accounts were provided, because none exist. A “proposed” strata levy was mentioned in the sale contract.

After settlement, a strata management company, owned by the developer, has been in contact to collect strata levies from me. If the building had a strata manager, why was this information not provided before settlement?

I’m concerned the collected levies won’t go into the correct fund to maintain the building as there seems to be a conflict of interest and no transparency. I suspect the developer doesn’t contribute to levies.

What can I do? I don’t know the other owners and I’ve contacted the developer about forming a strata company but have never received a response.

Answer: I suggest that you obtain legal advice because something does not sound right.

The non-existence of a strata company

Upon registration of the strata titles scheme, (‘Scheme’) a strata company automatically comes into existence. If you purchased a lot in a scheme and the developer owned 9 out of 10 lots, and someone else owned the other lot, the strata company must have existed for 2 or more years. From the facts you mention, it does not seem that you have purchased a lot off the plan.

Accordingly, the statement by the developer that no strata company existed does not seem correct. It is possible that no annual general meeting (‘AGM’) has been held and no strata council has been appointed.

I suggest that you obtain legal advice because something does not sound right. If a lawyer obtains all the facts from you there may be a logical explanation, or they can advise you on how to protect your rights.

Information that must be provided to a purchaser in a Scheme

Under s. 156 of the Strata Titles Act 1985 (WA) (‘Act’), if you buy into a Scheme, you should receive the following documents and information from the seller, which we assume was the developer, before you signed the contract, namely:

In other words, you should have received minutes of the last AGM and the latest statements of account. The minutes of the last AGM should contain a resolution concerning the levies payable.

Even if there was no strata company, or the developer owned more than 50% of the lots (which was the case), or the first AGM has not been held, the developer as the seller had to give you the following documents (s.157(4)):

From these documents, you should be able to work out the levies payable and what the contract is between the strata manager and the developer.

The availability of minutes of meetings and statements of account

The Scheme developer must, in 3 months after the registration of the scheme, convene an AGM (s.77(1)). If the developer has failed to convene an AGM, you as an owner can convene the AGM (s.77(3)). If this is the case, I suggest you approach the strata manager to assist you to convene an AGM.

Your Scheme seems to have been in existence for a few years, and there should be several AGM minutes. A strata company must keep proper accounting records of its income and expenditure and prepare an account statement for each financial year (s.101). The strata company must keep records of all AGM minutes and statements of account (s. 104).

As a member of the strata company, you can apply to inspect the AGM minutes, and account statements (s.109). The strata company must make them available to you or face a penalty of $3,000. The best way to contact the strata company would be through the strata manager.

Concerning the strata manager owned by the developer

The developer must disclose in writing to the strata company details of any remuneration, benefit or other direct or indirect pecuniary interest that the developer or an associate of the developer has in any strata management contract entered into or arranged by the developer for the strata company (s. 79).

Consequently, if the developer receives any benefit from the agreement with the strata manager, it should be disclosed to the strata company. The disclosure should include information of the value of the remuneration or benefit (s.79(2)(b).

If the developer fails to disclose the benefit or remuneration, it can be ordered by SAT to pay some or all of it to the strata company (s.200(2)(d)).

The strata manager is under statutory duties to act honestly, in good faith and with reasonable care, skill and diligence in performing its functions. The strata manager must further disclose any conflict of interest to the strata company.

Any disclosures made by the developer and the strata manager should be available for inspection from the strata company (s.104(c)(vi)).

In practice, these records are generally kept by the strata manager, and you can request an inspection from the strata manager.

If the strata manager contravenes the Strata Titles Act 1985 (WA) (‘Act’) by not acting honestly, in good faith or with skill, diligence and care, there is a process in s.151 of the Act to terminate the contract with the Strata Manager.

Payment, receipt and administration of levies collected

The strata company must determine the amount the owners should contribute by resolution and levy the contributions according to the owners’ unit entitlements unless the by-laws provide differently (s.100). Generally, levies are determined by a resolution taken at an AGM. Since you became a member of the strata company at settlement, you should have received notice of any AGM held to determine the levies payable.

Ask the strata manager for the AGM resolution determining the amount the owners had to contribute by levies (s.104(1)(d)(iv). Check whether the levy you are paying is proportionate to your unit entitlement unless the by-laws prescribe a different calculation method.

To verify whether the developer or any other owners are paying levies, you can request the current balance of the administrative fund from the strata company (s.104(1)(d)(ii) and other documents in possession or control of the strata company, which may include the developer’s levy account (s109(6)). By considering these documents, you should be able to establish whether the developer is paying levies as it should.

The strata manager must pay all levies it receives into a separate bank account for the strata company (s.148(1)(a), and it must be able to account separately for money it receives or pays on behalf of the strata company (s.148(3)). If the strata manager fails to do this, it is breaching the Act, and the strata company can terminate its contract and recover any damages it suffered from the strata manager.

What can you do if you establish that the developer is not paying levies as it should

Contributions levied become due and payable to the strata company per the resolution taken regarding the levy. If the developer does not pay its levies, the strata company can recover it through court proceedings.

If the strata company, controlled by the developer does not take any steps, the council of the strata company must convene an Extraordinary General Meeting (‘EGM’), if you and other owners entitled to 25% or more of the unit entitlements request an EGM in writing. You can table a motion at the EGM that action be taken against the developer because it does not pay its levies. The developer cannot vote against the resolution because it is not entitled to vote for as long as it owes levies to the strata company.

The council must act honestly, with loyalty and in good faith in their capacity as councillors (s.137). If they breach this duty to favour the developer, you can bring proceedings against them. The same applies to the strata manager. If the strata manager breaches its duties, you can terminate its contract and commence proceedings for any damages suffered by the strata company.

I recommend that you discuss your situation with a lawyer because there are several things that concerns me regarding your matter.

Eduard Ferreira Douglas Cheveralls Lawyers E: eduard@dclawyers.com.au P: 08 9380 9288

This post appears in Strata News #637.

Question: Owners in our 51 lot building were not informed before purchasing that there are a number of NDIS-allocated apartments in the building. There are many people, possibly carers, who come and go throughout the day. Should this have been disclosed before purchase?

I live in a 51-apartment building in Perth with 8 NDIS-allocated apartments. Owners are concerned that they were not informed of this prior to purchasing. Should this have been disclosed?

People who we assume are carers come and go without ID which makes security an issue. They also use the residents’ lounge, office and pool without being accompanied by a resident. Should they be wearing an ID? Should they be using the residents’ common areas? We have spoken to the company responsible for these apartments, but the issues continue.

Answer: It would be up to the developer or selling agents to inform, or advise if asked, of any Specialist Disability Accommodation dwellings within the complex.

Further to speaking with NDIS Property Australia, ‘it would be up to the developer or selling agents to inform, or advise if asked, of any SDA (Specialist Disability Accommodation) dwellings within the complex’.

‘We hope to inspire as many people as possible to work towards the future where all disabled Australians have access to housing that meets their individual needs. Our team work hard, making a difference for disabled Australians allowing them the dignity of having appropriate housing for their needs’.

According to the National Disability Insurance Scheme (Specialist Disability Accommodation) Rules 2020:

31(1)(c) Density Restrictions

If all of the enrolled dwellings on the parcel of land are enrolled to house no more than 2 residents and the dwellings are not part of an intentional community – the greater of the following:

  1. (i) 15 eligible participants;

  2. (ii) 15% of the total number of residents capable of residing on the parcel of land, assuming one resident per bedroom.

In accordance with Section 105 of the Strata Titles Act 1985, the particulars to entered in the roll to be kept by the strata company include the name and address for service of any lessee or tenant of a lot notified to the strata company.

And, in accordance with Section 107 of the Act, a buyer to has entered into a contract for the sale and purchase of a lot in strata titles scheme, may make an application for inspection of material under Section 109; or a certificate under Section 110.

So if a potential purchaser is inclined to obtain such information, they are freely able to do so.

The Strata Company is unlikely to know how specific lots are intended to be used. Provided that the usage is legal and doesn’t directly impact other owners negatively, then it would be unusual for the Strata Company to get involved in the usage of a lot.

All residents and visitors effectively agree to abide by the bylaws of the scheme.

Firstly, you would need to determine what bylaws may have been made that are specific to your scheme (in particular the use of common areas). Secondly, it is the duty of the Council of the Strata Company to enforce such bylaws.

We all have a right to enjoy living within our strata scheme, just as we have the right to have visitors or carers come to our homes. Regarding visitors or carer’s using common facilities, this would really come down to the bylaws of the Strata Company. Most Strata Companies have bylaws that would guide how owners and their visitors can use the common facilities, and if there are any restrictions. Ultimately, this is something that the Strata Company and its Council would need to regulate and control.

Regarding security, all owners are entitled to have visitors and guests, and their frequency isn’t usually restricted. It would likely be considered unreasonable to suggest (especially in the case of disabled persons) that any owner should be restricted on the number of visitors/carers they have attending the property, purely on the grounds that it may be a security issue.

I suggest discussing the matter directly with your Council, to determine if they are aware of your concerns and what action they may have already taken. What bylaws are currently in place (or being considered)? Have they issued breach of bylaw notices to the lot/s who’s visitors are non-compliant? Have they tried to mediate with the lot owners?

Hopefully this matter can be peaceably resolved, as the ultimate forum would be the State Administrative Tribunal to have the matter heard.

ESM Strata E: mchurstain@esmstrata.com.au P: 08 9362 1166

This post appears in Strata News #607.

Question: I am looking at buying my first strata unit. There seems to be water damage in the ceiling and repainting needing to be done on the exterior of the building. Who pays for these issues to be repaired?

Answer: Every strata complex has different lot boundaries which determine who is responsible for what.

When buying in strata, it’s important that you look at the strata records in order to gain a proper insight into matters such as your queries. Every strata complex has different lot boundaries which determine who is responsible for what maintenance and repairs within a lot and externally. The strata plan and by-laws registered for each strata scheme outline these for the owners. Therefore, depending on the lot boundaries and by-laws registered for the strata complex you are looking to buy into, ceiling and exterior walls repairs/maintenance can be either strata or the lot owner’s responsibility.

Kylie Nelson Eyeon Property Inspections E: kylie.nelson@eyeon.com.au P: 0401 448 308

This post appears in the March 2021 edition of The WA Strata Magazine.

Question: When buying a strata unit, can I request the latest building inspection and any outstanding fees?

Answer: As part of the sales disclosure requirements, the current owner or their agent are required to disclose limited strata information to buyers.

As part of the sales disclosure requirements, the current owner or their agent are required to disclose limited strata information to buyers. Strata levies are one of these items, along with AGM documentation which may show future special levy costs.

A building inspection is not a mandatory document to be provided under the sales disclosure requirements. If a strata scheme is mandated to obtain a 10yr maintenance plan outlining cap ex budgeting and spending, then this may be included in the AGM documentation required to be supplied at the time of disclosure. If it’s not included, however, then the seller is not obligated to supply as a stand alone document. The buyer would have to obtain a copy by making an application to inspect the records.

Kylie Nelson Eyeon Property Inspections E: kylie.nelson@eyeon.com.au P: 0401 448 308

This post appears in the March 2021 edition of The WA Strata Magazine.

Question: I have never owned a strata before and am unsure of what I need to do before buying into a complex to ensure I don’t get surprised with hefty costs.

Answer: It is important to undertake due diligence to do proper checks for any matters that are not formally disclosed to you.

This is a problem that all buyers encounter when purchasing into strata. It is important to undertake due diligence to do proper checks for any matters that are not formally disclosed to you. Especially with the number of defects that are arising in buildings across Perth affecting owners costs without a lot of notice.

As a buyer, you can request to inspect the strata records to identify any issues you may need to be aware of before making your decision to buy. Searching records for a person without strong strata experience can be daunting, as records are often voluminous, and hidden issues are not always easy to see. Sometimes the seller themselves aren’t fully aware of all issues within their complex as a lot of the work happens behind the scenes between the strata manager and the Council of Owners.

The best way to get all important information is to engage a professional strata records inspection company to search the records for you and prepare a formal strata report. The report shows buyers a full run down and health check of the strata scheme, noting any issues that may be of concern or warrant further clarification. Any building reports on record would certainly be provided as a copy to you along with all relevant other documentation for your peace of mind. This will not only reduce your risk of overlooking important information but will also give you access to the inspector who will be able to assist you with understanding these issues better. Head over to the EYEON Property website if you would like to see a sample of a strata report.

While strata reports are not free, they are still the cheapest and the most important element of the buying process, especially given that most people are putting their life savings on the cards.

You could also try tabling your questions in writing for the sellers/agent for their response and they may be able to get you the information you require. Often, there will be fees associated with this (from obtaining copies from the strata company) that the seller may request you cover. They also may not be able to obtain the required information or respond with what you need in its entirety.

Kylie Nelson Eyeon Property Inspections E: kylie.nelson@eyeon.com.au P: 0401 448 308

This post appears in the March 2021 edition of The WA Strata Magazine.

Does WA want to keep apartment buyers in the dark?

Recent WA Strata reform has delivered a raft of changes in the law. Many of these changes are positive and will help apartment owners over time. For example, the introduction of a 10-year maintenance plan and reserve fund will help many strata schemes keep their properties in better condition.

Another feature of the reforms requires property sellers to provide some information about the strata scheme to property buyers. However, in my view, this information is very basic and will usually leave most questions that are important to buyers unanswered. For example, is the scheme’s financial position improving or deteriorating? What are the ongoing issues in the building? Do they have sufficient funds for future maintenance? Have they needed to raise additional funds in recent years?

Serious buyers need to know the answers to these and other questions. The only way to do that is to get access to more strata information by searching the strata records. But it looks to me like the WA government doesn’t really want buyers to search these records.

For some unexplained reason, the WA Parliament has decided it will cost $150 ($165 incl. GST) just to get a look at the records!! That’s $100 to get access to the records and $50 for the first five pages of printing. That’s 480% more than it costs in NSW ($34.10 incl GST).

Just as high taxes on cigarettes have reduced the number of smokers, high fees to search strata records are likely to mean buyers could be forced to make big decisions without proper information.

Does it seem reasonable to charge $10 per page to print the first five pages of information and then $1 per page after that? What if there are 500 pages to print? Sure, most documents are kept electronically these days and don’t usually need to be printed, but there’s also a $50 fee for an email or flash drive. Sounds like a great business for strata managers and an unreasonable cost for everyone else.

In reality, it just creates a barrier for property buyers to get the information they need.

We’ve been inspecting strata records in NSW for over 10 years. We know for sure that property buyers cannot rely solely on the few documents WA sellers are required to provide by law. A buyer needs to know what has been happening in the building in recent years and what the future forecast looks like, not just half the story of what is happening now. And even more importantly, many buyers don’t really understand strata information in the first place. So, what do they do with the information they get from the seller? Ask their lawyer? They often don’t know much about day to day strata issues either.

Buyers need support. They need someone who can explain the information. And they need that support quite quickly.

I’m annoyed that our WA services will have to be more expensive than they need to be, simply because the WA Parliament is treating apartment buyers like smokers.

Michael Ferrier Eyeon Property Inspections E: michael.ferrier@eyeon.com.au P: 02 9260 5510

This post appears in Strata News #428.

Question: If you’ve purchased into an over 55s unit, should there be a statement somewhere in the purchase documents or strata agreement, stating that the developer is going to keep some of the units to rent out or would that need to be something you would have to specifically ask about?

Answer: Keeping in mind that it is an over 55’s scheme, only those people who are over 55 would be eligible to rent a unit in the strata scheme.

Keeping in mind that it is an over 55’s scheme, only those people who are over 55 would be eligible to rent a unit in the strata scheme.

The developer is not required to automatically disclose those details but if you want to ask, that is up to you.

Shane White Strata Title Consult E: shane.white@stratatitleconsult.com.au

This post appears in Strata News #392.

Question: When buying a strata industrial unit, what am I buying? Do I only own the inside of the unit? What will be my responsibility to repair or replace?

When buying a strata industrial unit, what am I buying? Do I only own the inside of the unit? What will be my responsibility to repair or replace? Would the metal roof be my responsibility if it leaks, or a strata expense?

Answer: Not all strata plans are the same and only a careful read of the strata plan will ascertain the maintenance responsibilities.

Irrespective of whether it is an Industrial unit or not, the responsibility for maintenance will be determined by the boundary description on the Floor Plan of the Strata Plan.

Not all strata plans are the same and only a careful read of the strata plan will ascertain the maintenance responsibilities.

In some cases, the registration of subsequent by-laws may also have some impact on maintenance requirements.

Shane White Strata Title Consult E: shane.white@stratatitleconsult.com.au

Disclaimer: this article should not be relied on as legal advice.

This post appears in Strata News #379.

When you’re buying a strata title property in WA, know what you are buying into

Please note: this video was recorded prior to the proclamation of the new strata title amendments.

Daniel: If you’re looking to buy a property in the next few weeks or months, there is a good chance you will be buying into a strata title property. If you are buying into strata, it is important you understand the difference between strata and freehold.

To answer this important question, I’ve invited Shane White to talk to us about strata. Shane is Director of Strata Title Consult and describes himself as a solution finder and problem solver with over 30 – 40 years experience in the industry including working for Landgate for about 30 years.

I’m asking Shane questions about strata because it is important that you understand what it is you are buying into.

So Shane, if I am a first-time buyer and I see the property I really like is a strata title property, what do I need to understand and what is different?

Shane: A strata title property is very different from owning a freehold property in that you are governed by a particular act called the Strata Titles Act which has bylaws and a Strata Plan that defines what it is that you own. If you are not familiar with looking at a Strata Plan then get someone who is to explain it to you.

The bylaws determine how meetings are conducted, the election of Council Members, but also the other half of the bylaws are more concerned about the behaviour or conduct of the owners within the strata scheme. You can’t just do anything you feel like doing like changing the appearance of your lot, changing the colour or adding alterations to the building.

Daniel: Can I have a pet if I want to?

Shane: It is very important that you find out if there is a No Pets Bylaw. Unless you come under one of the exemptions for guide dogs or assistance animals, you would not be permitted to have a pet so it’s best to find that out first.

Daniel: So if I’m looking at buying into a strata property, I need to be aware of what the bylaws are. And basically, bylaws are a set of rules. In strata, there are restrictions because one of the biggest difference with a strata title property is that you live among other people in close proximity. This means you need to be mindful and respectful of other people. These rules are put into writing, and these are called the bylaws.

Now, if I’m buying into a strata title property are there any documents that I should be provided if I’m looking to make an offer?

Shane: It’s most important that you receive a copy of the strata plan because that will determine what the boundaries are for the buildings on the strata scheme. Those buildings may be the responsibility of the Strata Company to repair or otherwise, they may be your responsibility to repair. Now, if the obligation to repair is within the strata company’s responsibility, they will incorporate that repair cost into the levies for the strata scheme.

Daniel: So levies are obviously something else I need to be aware of. So what is a levy?

Shane: A levy is an amount of money that is raised at an annual general meeting through a budget that allocates money for certain expenses that are the day to day expenses during the year for the administration fund and there may be an allocation of additional money to a reserve fund for future contingency expenses.

Daniel: So that is something I, as an owner, need to pay? Is that usually on a quarterly basis? Known as strata fees or levies?

Shane: The Act refers to these as a strata levy.

Daniel: I deal with lots of first home buyers and I see them going through home opens and the question is always “what are the strata fees?” Is there a risk in associating lower strata fees with a better buy?

Shane: If you were comparing different strata schemes and worked out how the fees compare, you can get an idea of how much per quarter it costs to run strata schemes of the same size and quality. If a scheme has abnormally low levies, it may be an indication they are not accumulating enough funds for future repairs to the strata scheme or they haven’t allocated any money for repairs that are required through that year.

Daniel: So what happens if they don’t have enough money to pay for the repairs we are talking about?

Shane: It means, as a purchaser, you are walking into a possible increase in levies through special levies.

Daniel: So it means, I will need to more? My share of whatever it costs to do that?

Shane: The share will be determined by the unit entitlement values and if you’ve got a bigger unit, you might pay a lot more than someone with a smaller unit.

Daniel: So you really need to go into a strata title property with both your eyes open. You need to understand the difference. There are great opportunities, but you need to be aware.

OK, so the agent should provide copies of the bylaws, the strata plan and what else?

Shane: The minutes from the last Annual General Meeting, or any other Extraordinary General Meetings that have transpired since the last AGM because that will give you an indication of the topics that have been discussed during the general meeting and if those items of business have been addressed and if they have raised funds to fund any items of a repair or maintenance nature.

There may be ongoing problems in the building that they are trying to resolve but they haven’t got sufficient funds to fix them. There may be an indication that a special levy may be invoked at a later time during the year, and you need to be aware of this.

You are buying into any existing problems which are in the strata scheme that you may have to fund the repairs to.

Daniel: So when you buy a property and you engage a Settlement Agent, their job is to transfer the title from the seller to the buyer, but it is also to look at any other fees that the seller has occurred that go past the settlement time. Is an extra levy something that the new buyer would be liable for?

Shane: Generally, whatever the levies are due to say a quarterly levy was payable then if the current owner has paid it up front they would be entitled to be reimbursed the unused portion and they would be refunded that amount in settlement. If a special levy was due and payable during the period of that quarter than the existing owner may be responsible to pay prior, although it would come out of the settlement fee. Any ongoing continual payments would be payable by the new owner when they become due.

Daniel: Now, few buyers would-be lawyers and most people fall asleep after the first sentence of a legal document but if I realise I need to be aware of what I am buying into and what my responsibilities are, what my level of ownership and my regulations are, where do I get help?

Shane: You can contact any number of strata consultants that are around. I’m available to provide information on interpreting the strata plan and your responsibilities under the bylaws. It’s important that you understand what you are buying into and those bylaws will determine how you act and conduct yourself whilst you are an owner in a strata scheme.

Daniel: Would a settlement agent be able to help with that as well?

Shane: A settlement agent can provide you with a copy of the bylaws. Whether they have a good understanding of interpreting a strata plan? Some do and some don’t.

If levies are low, that is a good indication that either the building is not being maintained properly there is no allocation of funds for future repairs. If you do a comparison of that scheme to another of equivalent size and their levies are $500 more per quarter, it may be that they are working to save money for future repairs and are actively involved in maintaining the strata scheme as a whole. That would include the painting of the scheme, the roofs, the driveways, the gardens, and any other works they may need particular to that strata scheme. It is an indication that they are putting money away.

Your copy of the General Meeting minutes will indicate that a certain amount of money is being put away for a reserve fund and that’s why the levies are higher.

Daniel: As a buyer, I can ask those questions: Why is it high? Why is it low? I just need to know which questions to ask.

When the agent provides you with the documents we’ve discussed, make sure you have a look at them and make sure you ask the questions.

We are looking to provide you with information about what’s involved in buying a strata property. The likelihood of you buying strata is increasing. Local Government has big plans for strata title property and it is pretty much the way of the future. You need to know what you are buying into.

Shane: Definitely! Your financial obligations and your behavioural obligations.

This post appears in Strata News #248.

Have a question about the things you need to know when buying a strata title property in WA or something to add to the article? Leave a comment below.

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Daniel Eigenmann Capita Finance E: deigenmann@capitafinance.com.au

Shane White Strata Title Consult E: shane.white@stratatitleconsult.com.au

Please note this advice was provided prior to the proclamation of the new strata title amendments and will be updated in due course.

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