Owners Corporations and Strata Managment in Australia

A brief history: its origins, its successes, its persistent problems, and the reforms
and alternatives now being debated

July 2026

Australia invented modern strata title, and Australia now lives with both its triumphs and its troubles more intensely than almost anywhere else. In just over six decades, a short piece of New South Wales legislation grew into the legal architecture underpinning apartment ownership across the country and, in modified forms, across much of the world. Roughly a quarter of Australians now live in strata, and in the fastest-growing cities strata is no longer the exception but the emerging norm for new housing. This paper traces that arc: where the system came from, what it got right, where it has repeatedly failed the people it was meant to serve, and what better ways of running collectively-owned buildings are now being proposed and, in some jurisdictions, legislated.

The essential idea:  Strata title lets a person own the airspace of their apartment outright — a separate, mortgageable, saleable title — while sharing ownership and responsibility for the common property (roof, walls, pipes, gardens, lifts, driveways) through a body corporate that every owner automatically belongs to. That body corporate is the owners corporation. It is, in effect, a small compulsory government for a building, run by volunteer owners and, usually, a paid professional manager.

1.   Before strata: the problem that needed solving

Apartments existed in Australia from the early twentieth century, but until 1961 there was no clean legal way to own one. The dominant arrangement was company title. A company owned the building, and a buyer purchased shares in that company that carried the right to occupy a particular flat. The buyer never received an independent title to any physical space.

This created two enduring problems. First, financiers were reluctant to lend against shares in a company rather than against real property, so mortgages were difficult to obtain and apartment ownership stayed out of reach for many. Second, insurance, dispute resolution and the allocation of responsibility for shared building elements were awkward, because everything ran through a company board rather than through owners with defined legal interests.

The pressure to fix this was demographic and economic. In the post-war period a great many low-rise flats were built and rented to younger couples saving for a house. As incomes rose through the 1950s, so did the appetite to own an apartment outright. The developer Lend Lease, driven by Dick Dusseldorp, lobbied the New South Wales government for a titling system that would give apartment buyers a genuine, bankable property interest — and would let developers build and sell large residential projects with confidence.

2.   1961: the New South Wales invention

The Conveyancing (Strata Titles) Act 1961 (NSW) commenced on 1 July 1961. It was a slight thing — twenty-nine sections and two short schedules — but it was revolutionary. Its central innovation was that each lot, or apartment, received its own title deed and could be bought, sold, leased or mortgaged in its own right, giving banks the security they had lacked. A few weeks later, on 28 July 1961, the first strata plan in the world was registered: eighteen units in the Sydney suburb of Burwood (the building still stands, in the Ashfield–Burwood area).

The word "strata" refers to the layers or levels of an apartment building. What the Act achieved conceptually was the vertical subdivision of land and the building on it into individually-owned lots plus commonly-owned property, with an automatically-constituted body corporate to administer the shared parts. That template proved so durable that its basic logic is still recognisable in every Australian strata statute today.

The idea spreads across Australia

Other states and territories adopted the New South Wales model in quick succession, each passing its own legislation rather than deferring to a single national law — a federalism that still shapes the sector, because no two jurisdictions' rules are identical.

Jurisdictions, first version, present Act

New South Wales: 1961 (replaced 1973, 1996) Strata Schemes Management Act 2015
Queensland: 1965 (replaced 1980, 1997) Body Corporate and Community Management Act 1997
Western Australia: 1966   - Strata Titles Act 1985 (reformed 2020)
Victoria: 1967  - Owners Corporations Act 2006
South Australia: 1969 - Strata Titles Act 1988 / Community Titles Act 1996
Tasmania, ACT, NT: 1970s  - Various (e.g. ACT Unit Titles legislation)

An Australian export

The 1961 NSW law became a genuine benchmark for apartment-ownership regimes worldwide. Common-law jurisdictions led by New Zealand (1972), and including Singapore, Malaysia, India, South Africa, Canada (British Columbia), Fiji and the Philippines, adopted the strata approach in whole or part. Even civil-law countries — Indonesia, Macau, the United Arab Emirates, Brazil, Saudi Arabia — introduced codified strata-style laws influenced by the Australian design. It remains one of the clearest examples of the export of Australian legislation.

Generations of law

Since 1961 the legislation has been revised continually, and commentators speak of successive "generations" of strata law. New South Wales replaced its 1961 Act in 1973 (a much larger statute of some 200 sections), then in 1996 split the law into two streams — development and management — a structural choice several states echoed. Queensland moved to core Acts plus building-type-specific regulation modules in 1997. Each wave of reform responded to the same recurring pressures: larger and more complex buildings, mixed-use developments, absent or disengaged investor-owners, and disputes that the earlier laws had not anticipated.

3.   The Victorian lineage

Victoria's path is worth setting out in its own right, because it differs from the New South Wales structure and governs the buildings most relevant to Victorian owners today.

• 1967 — Victoria's first strata legislation is enacted, following the NSW lead.
• 1974 — "Cluster titles" legislation extends the concept to estate-style horizontal subdivisions.
• 1988 — The Subdivision Act 1988 (Vic) consolidates subdivision law and, in its Part 5, deals with the creation of bodies corporate and the management of common property. This Act still governs how lots, common property, lot entitlement and lot liability are created on the plan of subdivision.
• 2006 / 2007 — The Owners Corporations Act 2006 (Vic) is assented to on 19 September 2006 and commences on 31 December 2007. It renames the "body corporate" as the "owners corporation", and becomes the primary statute for management, powers, functions, insurance and dispute resolution — with disputes heard at VCAT.
• 2019 — Amendments introduce a framework for short-stay accommodation conduct (complaints, prohibition orders, compensation).
• 2021 — The Owners Corporations and Other Acts Amendment Act 2021 (most provisions commencing 1 December 2021) delivers the most significant modernisation in a generation.

Key features of the 2021 Victorian reforms

A five-tier classification of owners corporations by size (tier one being more than 100 occupiable lots), with obligations scaled to tier — larger schemes face requirements such as audited financial statements and maintenance planning.

A default maximum committee of seven members (extendable to twelve by a 50% vote), and a clearer framework for electronic meetings and voting.

New duties and restrictions on the developer as "initial owner": disclosure of relationships with the OC manager at the inaugural general meeting, a prohibition on unreasonable or unsustainable initial budgets, a bar on mislabelling common property as private lots, and a three-year cap on manager and developer-benefiting contracts.

A "benefit principle" allowing an additional annual fee where one lot's particular use imposes extra costs that lot liability alone would not fairly capture, plus tighter rules on how lot entitlement and lot liability are allocated on the plan.

For an individual scheme this framework is administered day-to-day by three separate bodies: Land Use Victoria / Land Services Victoria registers the plan of subdivision that creates the owners corporation; Consumer Affairs Victoria administers the Act, licenses OC managers and oversees disputes; and the owners corporation itself — the owners collectively — carries the legal duty to manage, repair and insure the common property.

From statute to the committee table: the benefit principle and the Grundl line

The 2021 "benefit principle" did not appear from nowhere. It codified and extended a line of reasoning Victorian tribunals had already developed about how the cost of shared works must be apportioned — and that line is where the broad reform story lands on a single, real committee.

The central authority is Owners Corporation PS407621Y v Grundl (Owners Corporations) [2017] VCAT 1550, now widely called the "Grundl Assessment". It governs how an owners corporation must choose the basis for a special levy for extraordinary expenditure under section 24 of the Act, and it reaches through to how repair costs are recovered as a debt under section 49.

Grundl requires a disciplined two-step reasoning process before any special levy is struck, and — importantly — the protection lies in the process, not the answer. VCAT will uphold a committee's apportionment if the reasoning was genuinely undertaken and minuted, and will set it aside only where the outcome falls outside the "range of reasonableness" or some other legal error occurs.

The recurring failure is a timing trap: committees reconstruct a justification after levying, when the Act requires the basis to be decided before. The December 2021 reforms broadened the benefit principle's reach beyond what applied when Grundl was decided, which makes this discipline more consequential, not less.

The Grundl two-step (ss 24 & 49)

Step 1 — the threshold question. The owners corporation must consciously ask whether all lots benefit substantially from the works, or whether some (or one) benefit substantially more than others. Failing even to ask this is itself a legal error.

Step 2 — the method follows. If all lots benefit substantially, fees are set on lot liability. If some benefit more, the benefit principle is mandatory — the lot that benefits more pays more, apportioned by degree of benefit.

This is the reform narrative in miniature. A statutory principle designed to make cost-sharing fairer only works if a volunteer committee understands it and applies it correctly at the moment of decision.

That gap — between what the law now requires and what an amateur committee can reliably deliver at the table — is precisely why the newest reforms across the country pair substantive rules with mandatory committee training, standardised documentation and stronger disclosure.

Cost apportionment under ss 24 and 49 is a small but exact illustration of the whole system's central problem, and of where most strata disputes are ultimately won or lost.

4.   The scale of strata today

What began as a niche titling fix is now a mass housing system. The numbers make the point better than any argument.

Strata schemes nationally 270,000+  --- Strata Community Association estimate

Individual lots nationally Over 2 million  - Covering residential, commercial, retail, mixed-use

NSW schemes ~87,000–90,000  --- NSW Fair Trading / PEC, 2024–2026

NSW residents in strata ~2 million (≈¼ of the state)  --- NSW Productivity & Equality Commission, 2024

New Sydney dwellings in strata ~2 in 3 over the last decade --- NSW PEC

Projected NSW strata population ~half the state by 2040  --- Government projection

Because roughly half of all new housing in New South Wales has for years been multi-unit, and other states are following, the quality and governance of strata is not a minor consumer-protection issue. It is central to how a large and growing share of Australians will hold their principal asset and live their daily lives.

5. What the system got right

It is easy, given the litany of problems that follows, to forget that strata title solved a real problem and solved it well. Its successes are structural and lasting.

Bankable, tradeable ownership

The core achievement endures: an apartment owner holds a genuine, separately-titled, mortgageable interest. This unlocked mainstream mortgage finance for apartments, broadened home ownership, and gave developers a viable way to fund and sell density. Without it, the apartment cities of modern Australia could not have been built.

Transparency and a democratic voice

Compared with company title — where a board controlled everything and a shareholder's rights were opaque — strata gives each owner a defined vote, defined rules, and a statutory right to participate in decisions about the building.

A registered plan shows precisely which parts are individually owned and which are common. That transparency, and the equity of one-owner-one-say (weighted by entitlement), is a genuine advance, and the settled view is that strata is more equitable than the arrangements it replaced.

Flexibility and reach

The model proved adaptable well beyond the residential flat: serviced apartments, retirement villages, caravan parks, industrial estates, retail precincts, offices and complex mixed-use towers all now sit within strata or community-title frameworks. A single legal idea scaled from an eighteen-unit walk-up to hundred-storey vertical communities.

A framework for collective maintenance

Strata created a standing legal person with the power to levy funds, insure the building, and maintain shared assets that no single owner could manage alone. When it works, this is quietly essential: roofs get replaced, lifts get serviced, and the building's value is preserved for everyone.

6. The problems — where strata keeps failing owners

The same features that make strata powerful also make it fragile. It concentrates responsibility for large, complex, expensive assets in the hands of volunteer amateurs and paid intermediaries, and it does so at the end of a construction supply chain over which owners have almost no control. The result is a set of problems that recur across every jurisdiction and every reform cycle.

6.1 Building defects

The most damaging problem is that a very large share of new apartment buildings are simply built badly. A 2012 City Futures Research Centre survey of more than 1,000 NSW strata owners found 72% knew of defects in their complex — rising to 85% for buildings completed since 2000. A 2023 NSW government study found more than half of newly registered schemes since 2016 had at least one serious defect, with rectification averaging around $331,829 per building; waterproofing was the most common major failure, followed by fire safety.

Two Sydney towers became national symbols of the crisis. Opal Tower (36 storeys, Sydney Olympic Park) was evacuated on Christmas Eve 2018 after alarming cracking, less than six months after completion. Mascot Towers was evacuated in June 2019; at eleven years old it fell outside warranty, leaving owners facing enormous, open-ended repair bills. The underlying causes are structural: developers owe buyers few obligations once apartments are sold, boom-time pressure to build fast and cheap, and gaps in construction oversight mean errors go unnoticed until owners inherit them.

6.2 The cladding crisis

Victoria's defining defect episode was combustible cladding. On 24 November 2014 a discarded cigarette on a balcony of the Lacrosse tower in Docklands ignited a fire that raced up the external aluminium composite panels, reaching the roof above level 21 within minutes; some 400 residents were evacuated. The 2017 Grenfell Tower fire in London made the danger unmistakable.

In the litigation that followed (Owners Corporation No.1 of PS613436T v LU Simon Builders), VCAT found the builder primarily liable for breach of statutory warranties but apportioned 97% of the roughly $12 million in damages to the project consultants — fire engineer, building surveyor and architect. The decision, upheld on appeal in 2021, sent a shock through the industry and helped drive a ban on the relevant panels. A Victorian audit of 2,227 buildings found 1,069 with combustible cladding, 72 posing an extreme risk, and the state established Cladding Safety Victoria and a rectification scheme. Crucially, owners corporations themselves can face liability for failing to act on a known fire risk — the burden lands on the building's own residents.

6.3 Conflicted strata managers

Most schemes rely on a professional strata (or owners corporation) manager. In law the manager is an agent and fiduciary of the owners corporation, and cannot profit from dealings beyond disclosed fees. In practice, a funding model built on commissions has produced pervasive conflicts of interest.

A 2024 ABC Four Corners investigation into the manager Netstrata exposed what was described as a long history of self-dealing — hidden insurance and contractor commissions, undisclosed ownership of the companies a manager transacted with, and indifference to owners' interests. When the ABC invited reports, it received more than 1,000 in a fortnight. Ten consumer groups, including Choice and the Owners Corporation Network, wrote to the federal treasurer demanding an inquiry. The problem is a textbook "market for lemons": owners cannot easily tell good service from bad, or a fair price from an inflated one riddled with kickbacks.

6.4 Owner apathy and volunteer overload

Strata assumes engaged owners. Reality often disappoints. Investor-owners may never set foot in the building; owner-occupiers may have neither the time nor the expertise to govern a multi-million-dollar asset. Committees can struggle to reach a quorum, and the work — legal duties, contracts, budgets, disputes, compliance — falls on a small number of volunteers who are exposed to real liability and, sometimes, to abuse. This concentration of responsibility on unpaid amateurs is a structural weakness the law has never fully resolved.

6.5 Under-funded maintenance

Because levies are unpopular, many schemes chronically under-provision their capital works (sinking) funds, deferring major maintenance until it becomes an emergency and hitting owners with special levies or "bill shock". Developers have historically set artificially low initial budgets to make off-the-plan sales attractive, storing up trouble for the owners who inherit the building.

Reforms in several states now push toward mandatory, standardised ten-year capital works plans precisely to counter this.

6.6 Disputes, insurance and embedded networks

• Disputes — noise, pets, parking, renovations, by-law enforcement and, above all, who must repair what — are endemic, and the tribunals (VCAT in Victoria, NCAT in NSW) carry a heavy strata caseload.
• Insurance — strata insurance is compulsory but costly, opaque, and a focal point for commission abuse; in defect-affected or cladding-affected buildings insurers have withdrawn or repriced sharply, leaving owners exposed.
• Embedded networks — buildings locked into long, uncompetitive electricity or utility supply arrangements have prompted new disclosure-on-sale and contract-limiting rules, because owners were being tied into arrangements that benefited developers or intermediaries rather than residents.

7. The reform response

Governments have not been idle, and the last few years have seen the most intensive strata reform activity in the system's history — concentrated in New South Wales but watched closely everywhere.

New South Wales: staged reform, 2023–2026

Following a 2021 statutory review that made 139 recommendations, NSW has rolled out reforms in waves:

• Feb 2025 — expanded up-front and ongoing disclosure by managers; more transparent insurance quotes; easier removal of committee office-bearers.
• Jul 2025 — codified duties for committee members (honesty, fairness, due care); deemed approval of minor renovations if not refused in time; protection for sustainability infrastructure.
• Oct 2025 — a formal enforcement model — Fair Trading gains investigative powers over failures to maintain common property; mandatory financial-hardship information on levy notices; building managers brought within a best-interests duty.
• Apr 2026 — standardised ten-year capital works plans; certified initial maintenance schedules and realistic initial levies for new schemes; clearer strata information certificates.
• Late 2025 (proposed) — mandatory training for committee members; reduced regulatory burden for two-lot schemes; a second-quote rule for works over $30,000; EV-charging approval rights.

The commissions review  A landmark finding

In February 2026 the NSW Productivity and Equality Commission reported on prohibiting conflicted payments to strata managers. It found that moving from a commission-based model to a fee-for-service model would simplify remuneration, improve competition and service quality, increase trust, and lower costs — potentially delivering more than $300 million in net benefit to NSW over fifteen years. It set out four options, from phasing out insurance commissions to banning percentage commissions in favour of a regulated flat fee. Penalties for non-disclosure of up to $110,000 now apply.

Victoria and the industry

Victoria's 2021 reforms (Section 3 above) pursued the same themes — developer accountability, manager disclosure, better governance for large schemes. The industry body, Strata Community Association, adopted a Professional Standards Scheme and, in 2024–2025, announced a six-point plan including mandatory disclosure of insurer, broker and software relationships and an independent complaints chair. NSW SCA moved to phase out strata insurance commissions. 

8. Alternatives and better ways to run a building

Beyond patching the existing statutes, a genuine debate has emerged about whether the self-managed, commission-funded, defect-exposed model can be improved structurally. The main proposals fall into several families.

Fee-for-service instead of commissions

The clearest structural alternative, now backed by government analysis, is to pay strata managers a transparent flat fee for defined services and prohibit conflicted commissions altogether. This aligns the manager's incentives with owners, makes costs legible, and removes the hidden-kickback problem at its root. It is the reform most likely to reshape the sector nationally.

Professionalisation and mandatory competence

A second family raises the floor of competence on both sides: licensing and conduct standards for managers, and — newly in NSW — mandatory training for committee members, with loss of membership for those who do not complete it. The logic is that if amateurs must govern complex assets, they should at least be equipped and the professionals advising them should be genuinely accountable fiduciaries, not mere contractors.

Proactive quality regulation of construction

Because the defect crisis originates before an owners corporation even exists, many experts argue the real fix is upstream: government driving quality throughout design and construction rather than only certifying a finished building. Tools include building commissioners with audit and stop-work powers, a statutory duty of care owed by builders and consultants to eventual owners, developer defect bonds (e.g. NSW's 2% building bond), decennial (ten-year) insurance, and certified handover documentation. The premise, well supported by the evidence, is that building quality in is far cheaper than rectifying defects out.

Tiered and right-sized regulation

Not every scheme is a hundred-lot tower. A duplex or two-lot scheme carries a governance burden wholly disproportionate to its risk. The emerging answer is proportionality: exempt very small schemes from meetings, committees and annual reporting, while imposing audits, reserve planning and stronger oversight on the largest. Victoria's five-tier model and NSW's two-lot exemptions both move in this direction.

Rethinking self-management itself

For small, engaged buildings, full self-management (no external manager at all) can work well and cut costs, and many owners choose it. For large or disengaged schemes, the opposite argument applies: some jurisdictions and commentators favour compulsory professional management, or tribunal-appointed managers where governance has failed. The honest conclusion is that there is no single best model — the right structure depends on scheme size, owner engagement and building complexity, which is exactly why tiered, flexible regulation is gaining favour over one-size-fits-all rules.

International comparison

Australia exported strata, but it can also import ideas. Civil-law condominium regimes, decennial-liability insurance in parts of Europe, and stronger developer-warranty regimes elsewhere all offer templates for the accountability gaps Australia still struggles with — particularly the problem of owners left with no one solvent to sue once a developer or builder has moved on.

9. What else needs highlighting

The structural paradox at the core

Every recurring problem traces back to one design tension: strata fuses private individual ownership with compulsory collective governance, and then hands that governance to people who did not seek it and are rarely equipped for it. An owners corporation is a corporation of the reluctant. Reform can mitigate this — better information, better-aligned professionals, proactive quality control — but it cannot abolish the underlying fact that a building is a shared, deteriorating, expensive machine that a group of strangers must jointly keep alive.

The ageing-stock time bomb

Much attention focuses on new buildings, but the harder long-term problem is ageing stock. The first strata buildings are now over sixty years old. Waterproofing, concrete cancer, services and — in a large tranche of 2000s-era towers — cladding all reach end-of-life together, often in schemes that never funded their reserves adequately. The coming decades will test whether owners corporations can finance major renewal, or whether large numbers of buildings drift toward collective sale, redevelopment, or decline.

Information asymmetry at purchase

Buyers still enter strata with far too little insight into a scheme's financial and physical health. Reforms tightening disclosure — standardised capital works plans, information certificates, defect and embedded-network disclosure on sale — matter enormously, because a well-informed market is the cheapest form of discipline on developers and managers alike.

Federalism as friction

Finally, the state-by-state structure that let strata spread so fast now imposes a cost: eight different regimes, no national standard, and reforms that leapfrog one another jurisdiction by jurisdiction. Owners, managers and developers operating across borders face needless complexity, and good reforms in one state take years to reach another.

Conclusion

Strata title is one of Australia's most consequential and successful legal inventions. In sixty years it democratised apartment ownership, financed the vertical growth of the cities, and was copied around the world. Its core promise — a real, bankable stake in your own home plus a fair say in the shared parts — has been kept for millions of people.

But the system has never resolved the tension between individual ownership and collective, amateur governance, and that tension has been exploited at both ends: by a construction industry that too often builds badly and walks away, and by intermediaries whose pay was structured to reward conflict rather than service.

The intensive reforms now underway — fee-for-service remuneration, mandatory competence, proactive construction quality control, tiered regulation and stronger disclosure — are the most serious attempt yet to close those gaps. Whether they succeed will determine not just the value of a growing share of household wealth, but the quality of daily life for the roughly half of urban Australians who will soon call strata home.

Principal sources

• Gary Bugden OAM, "Strata Titles — Australia's Least Known Export Product"; Bugden Allen Group Legal.

• Netstrata / Stratacare / Jamesons / Paddocks — histories of the Conveyancing (Strata Titles) Act 1961 (NSW).

• Owners Corporations Act 2006 (Vic); Subdivision Act 1988 (Vic); legislation.vic.gov.au; Consumer Affairs Victoria.

• Owners Corporations and Other Acts Amendment Act 2021 (Vic); Clayton Utz; Septimus Jones & Lee.

• Crommelin, Randolph, Easthope et al., City Futures Research Centre (UNSW) — building-defects research; The Conversation.

• NSW government studies and media on Opal Tower and Mascot Towers; MacroBusiness (2023 defect data).

• Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286; Tanah Merah v Owners' Corporation [2021] VSCA 72 (Lacrosse).

• ABC Four Corners (2024) and UNSW commentary on strata-manager conflicts (Netstrata).

• NSW Productivity and Equality Commission, Strata Commissions Review (Feb 2026); NSW Fair Trading reform guides.

• Strata Schemes Legislation Amendment Act 2025 (NSW) and staged reforms 2023–2026; Grace Lawyers; JS Mueller & Co; Project Lawyers.

This paper is a general overview compiled from public sources for discussion purposes. It is not legal advice. Specific questions about an owners corporation's rights or obligations should be checked against the current legislation and, where needed, with a qualified strata lawyer.

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