NSW: When is a strata management contract term unfair?

Question: A strata managing agent has rejected proposed changes to its contract. When is a contract term considered unfair?

I recently put forward some changes to our contract with our strata managing agent. They rejected the changes and told us they were preparing a new contract.

For strata contracts, what is a “fair term”, and when is a term unfair?

Answer: A contract term is only unfair if it is in a standard form contract. It must also cause a significant imbalance, not be reasonably necessary to protect the advantaged party, and cause detriment.

Since 01 July 2025, the prohibition of unfair contract terms pursuant to the Australian Consumer Law (ACL) was extended to strata and community land contracts. This amendment was introduced in the Strata Schemes Legislation Amendment Act 2025 (NSW) that added section 32 to the Fair Trading Act 1987 (NSW), which states:

(1) The following provisions of the ACL apply to a relevant contract as if it were a consumer contract —

1. Part 2-3,
2. Part 5-2.

Part 2-3 of the ACL defines what unfair contract terms are, and Part 5-2 identifies the remedies in respect of breaches of the ACL. These provisions apply to consumer contracts (section 23(3)) or small business contracts (section 23(4)). Relevant to the enquiry, for the purposes of the ACL, a term is ‘fair’ if it is not ‘unfair’, meaning there is no breach if it does not meet the definition of “unfair contract term“.

This term has two (2) limbs: that it must be ‘unfair’ and that it is a ‘standard form contract’; if both are satisfied, the contract term is void: section 23(1). In general terms, a standard form contract is one where the terms are pre-written and not open for negotiation, c.f. section 27. In respect of ‘unfairness’, the definition is contained in section 24(1), where a contract is unfair if:

1. it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
2. it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
3. it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

The ACL, in section 25, provides some examples of unfair contract terms, though this is not exhaustive:

1. a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;
2. a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract;
3. a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract;
4. a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract;
5. a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract;
6. a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract;
7. a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract;
8. a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning;
9. a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents;
10. a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent;
11. a term that limits, or has the effect of limiting, one party’s right to sue another party;
12. a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract; or
13. a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract.

From the enquiry, it is unclear why the issue of unfair contract terms is raised. The parties are negotiating the contract and proposing and counter-proposing terms with apparent equality. I would encourage the enquirer to seek legal advice.

This post appears in the November 2026 edition of The NSW Strata Magazine.

Matthew Lo
Kerin Strata Lawyers
E: matthew@kerinstratalawyers.com.au