Understanding Responsibilities During the Initial Period
When a strata plan is registered, an owners corporation is automatically formed, becoming the legal owner of the common property. From this point, the owners corporation—not the developer—is responsible for maintaining common areas, including cleaning, landscaping, and repairs.
However, during the initial period, the developer typically is the only member of the strata committee and, therefore, manages decisions impacting the owners corporation. Decisions made during this time—such as owner applications, by-law compliance, maintenance, or service requests—must be documented and kept in the owners corporation’s records, which will ensure a smooth transition at the FAGM.
Setting Up Initial Contracts
Developers may arrange essential service contracts—such as utilities, strata management, building management or cleaning—but these cannot extend beyond the FAGM. Choosing reliable and cost-effective service providers builds trust with new owners and facilitates an efficient handover.
Placing Insurances
After registration, the owners corporation is legally required to hold insurance in compliance with the Strata Act and regulations. Developers must ensure appropriate insurance coverage is in place, as construction policies typically lapse once an occupation certificate or practical completion is issued.
A replacement cost valuation should be obtained to ensure adequate coverage, factoring in cost escalations and requirements under Section 39 of the Regulations.
Managing Debts and Liabilities
Developers cannot incur debts on behalf of the owners corporation beyond what can be paid from its administrative and capital works funds. If levies have not been raised, the developer is fully liable for costs, including repairs and maintenance.
Loans cannot be entered into, and even after levies are raised, liabilities beyond available funds remain the developer’s responsibility.
Raising a Budget and Levies
Within two weeks of registration, the owners corporation, under the direction of the developer, must prepare budget estimates and consider levies required for the administrative and capital works funds. While the initial levy due date can be deferred, raising them early, ensures all lot owners take responsibility for contributing to the owners corporation costs like utilities, management and maintenance.
Initiating and Directing Service Providers
Developers are responsible for appointing service providers during the initial period. These appointments should comply with the Strata Act and be confirmed at a general meeting. Contracts must not extend beyond the FAGM.
Developers will also need to provide day-to-day direction to service providers as the sole member of the strata committee during this time.
Avoiding Changes to Common Property
Common property cannot be altered during the initial period unless specified in a strata development contract. Developers should finalize all common property works before registering the strata plan, including installing CCTV, access systems, signage or notice boards.
Getting By-Laws Right from the Start
By-laws cannot be amended during the initial period except under strict conditions. Developers should ensure all necessary by-laws are drafted and registered with the strata plan to avoid challenges later, as amendments require 75% approval from lot owners.
Convening the First Annual General Meeting and Voting Rights
The FAGM must occur once one-third of lots are sold by unit entitlement. This meeting transfers decision-making control to new owners and sets the foundation for the owners corporation’s future operations. Developers should work closely with strata managers to ensure the meeting fosters trust and confidence among new owners.
It is worth noting that for any general meeting where the developer retains greater than 50% of ownership their vote at a general meeting is reduced to 1/3 of their voting entitlement.
Preparing Handover Documents
Developers must provide key documents to the owners corporation at least 14 days before the FAGM. These documents include financial records, contracts, and building manuals, which are essential for ongoing management. Aligning this process with the occupation certificate application can streamline the effort and avoid replicating tasks to compile the required documentation.
Establishing Community
The initial period significantly impacts the development’s long-term success. Developers should work with service providers to create clear processes for move-ins, utility connections, and common queries. Thoughtful pre-planning ensures a positive experience for new owners and lays the foundation for a harmonious community.
