The initial period for a strata scheme begins upon registration and continues until one-third of the lots are transferred from the developers to new owners. Under NSW strata legislation, the owners corporation assumes responsibility for maintaining common property from the date of strata plan registration, even during the initial period.
However, the developer retains oversight of the owners corporation’s affairs until the First Annual General Meeting (FAGM), which must be held within two months of the initial period expiring.
Below, we outline key considerations for developers during this critical phase.
Understanding Responsibilities During the Initial Period
When a strata plan is registered, an owners corporation is automatically formed. This entity becomes responsible for managing and maintaining all common property, including cleaning, landscaping, and repairs.
From this point on, responsibility shifts away from the developer. However, during the initial period, the developer still plays a key role in decision-making.
Who Makes Decisions Early On?
During the initial period, the developer is usually the only member of the strata committee. This means they control decisions that affect the building.
These decisions may include:
- Approving owner requests
- Enforcing by-laws
- Managing maintenance and services
All decisions must be recorded properly. Keeping clear records helps ensure a smooth transition at the First Annual General Meeting (FAGM).
Setting Up Initial Contracts
Developers often arrange key service contracts before owners take over. These may include:
- Utilities
- Cleaning
- Strata management
- Building management
However, these contracts cannot extend beyond the FAGM.
Choosing reliable providers early helps:
- Build trust with new owners
- Ensure services run smoothly from the star
Insurance Requirements
After registration, the owners corporation must have the correct insurance in place. This is a legal requirement under the Strata Act.
Construction insurance usually ends once the building is complete. Because of this, new insurance must be arranged immediately.
A replacement cost valuation should also be completed. This ensures the building is covered for the full cost of rebuilding, including rising construction costs.
This requirement aligns with Section 39 of the Strata Schemes Management Regulation 2016 (NSW), which requires an owners corporation to obtain a building valuation to ensure appropriate insurance coverage.Â
Managing Debts and Financial Responsibility
During the initial period, developers must manage spending carefully.
They cannot:
- Take out loans on behalf of the owners corporation
- Commit to costs beyond available funds
If levies have not yet been raised, the developer is responsible for covering expenses. This includes maintenance and repairs.
Even after levies begin, any shortfall remains the developer’s responsibility.
Budgeting and Raising Levies
Within two weeks of registration, a budget must be prepared. This includes planning for both:
- Administrative fund (day-to-day expenses)
- Capital works fund (long-term maintenance)
Although levy payments can be delayed, it is better to raise them early. This ensures all owners contribute fairly to ongoing costs.
Managing Service Providers
Developers are responsible for appointing and directing service providers during the initial period.
These appointments must:
- Follow Strata Act requirements
- Be reviewed at a general meeting
- End at or before the FAGM
Clear direction from the developer ensures services are delivered properly during this early stage.
Avoiding Changes to Common Property
Changes to common property are restricted during the initial period.
Unless already included in a development contract, developers should avoid making changes such as:
- Installing CCTV
- Adding access systems
- Updating signage
It is best to complete all common property works before the strata plan is registered.
Getting By-Laws Right Early
By-laws are difficult to change after registration. During the initial period, changes are limited and require strict conditions.
Because of this, developers should ensure all necessary by-laws are prepared and registered from the start.
Later changes will require approval from at least 75% of owners, which can be challenging to achieve.
The First Annual General Meeting (FAGM)
The FAGM is a key milestone. It must be held once one-third of the lots have been sold by unit entitlement.
At this meeting:
- Control shifts from the developer to the owners
- Key decisions are reviewed and confirmed
- The future direction of the building is set
If the developer still owns more than 50% of the property, their voting power is reduced to one-third of their entitlement.
Preparing Handover Documents
Developers must provide important documents before the FAGM. These should be given at least 14 days in advance.
Key documents include:
- Financial records
- Contracts
- Building manuals
Preparing these early helps avoid delays and ensures a smoother transition.
Building a Strong Community from the Start
The initial period has a lasting impact on the building. Good planning can make a big difference to how residents experience their new home.
Simple steps such as clear move-in processes, easy access to information, and well-managed services can improve satisfaction early on.
When systems, contracts, and communication are set up properly, the transition to owner control becomes much easier.
Setting Up for Long-Term Success
A well-managed initial period creates a strong foundation for the future.
By focusing on:
- Clear processes
- Proper documentation
- Early planning
developers can help ensure a smooth handover and a more stable, well-run strata community.Â
Setting the Right Foundation from Day One
The initial period of a strata scheme plays a critical role in shaping how the building operates in the long term. Decisions made during this stage affect financial planning, maintenance standards, and the overall experience of owners and residents.
By putting the right structures in place early—clear documentation, realistic budgeting, compliant insurance, and well-managed services—developers can support a smoother transition and reduce the risk of future disputes.
A well-managed handover not only builds confidence among owners but also sets the foundation for a stable and well-maintained strata community.
Need Support During the Initial Period?
Managing the early stages of a strata scheme can be complex, especially with evolving legislation and compliance requirements.
If you’re preparing for a handover or want to ensure your development is set up correctly from the start, our team can assist with:
- Initial period planning and compliance
- Budgeting and levy structuring
- Contractor and service setup
- Ongoing strata and building management support
Get in touch with our strata management services in NSW and learn how we can support your project and help you establish a strong foundation for long-term success.
Pre-planning and documenting requirements for the initial period can significantly enhance the purchaser’s experience. Ensuring proper systems, contracts, and structures are in place at the time of registration allows for a smooth transition to the owners corporation.
If you’d like to discuss project completion requirements in more detail, please reach out to our team
ABOUT THE AUTHOR
Stuart Denney is a highly experienced Strata Managing Agent. For more than 15 years he has been working with developers to assist in the successful establishment of strata and community subdivisions ranging from small residential to some of Sydney’s largest and most complex mixed-use developments.
Stuart’s passion lies in creating thriving communities and excels in offering guidance on the essential framework needed to ensure sustainable, efficient, and effective management of every development.