Own­ers Cor­po­ra­tions / Asso­ci­a­tions now sub­ject to Unfair Con­tract Terms 

Under the new stra­ta law reforms com­menc­ing 1 July 2025 (the Stra­ta Schemes Leg­is­la­tion Amend­ment Act 2025 (No. 14) NSW) a key change that will impact own­ers cor­po­ra­tions and asso­ci­a­tions[1] are the unfair con­tract terms (UCT) pro­vi­sions.

In line with Aus­tralian Con­sumer Law, UCT will now be banned and will apply to:

• con­tracts for a sup­ply of goods or ser­vices to an own­ers cor­po­ra­tion or asso­ci­a­tion; and
• con­tracts for a sale or grant of an inter­est in land to an own­ers cor­po­ra­tion or association.

The UCT changes do not apply to exist­ing con­tracts and will only apply to:

• con­tracts entered into after the new pro­vi­sions come into effect;
• renewed con­tracts but only in rela­tion to con­duct occur­ring after the renew­al; and
• new or var­ied terms insert­ed into exist­ing con­tracts but only in rela­tion to con­duct occur­ring after the vari­a­tion or insertion.

Read more on this at the Guide to 2025 stra­ta law changes | NSW Gov­ern­ment and Unfair con­tract terms in out­dat­ed stan­dard form con­tracts could cost you a pos­si­ble fine of $50 mil­lion (Com­pa­nies) or $2.5 mil­lion (Indi­vid­u­als). 

Under sec­tion 24 of the Aus­tralian Con­sumer Law, UCT means terms that:

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

In order to deter­mine whether a term is unfair, the Court must take into account the following:

• the extent to which the term is trans­par­ent i.e. expressed in rea­son­ably plain lan­guage, leg­i­ble, pre­sent­ed clear­ly and read­i­ly avail­able to any par­ty affect­ed by the term;
• the con­tract as a whole.

Some exam­ples of unfair con­tract terms:

• a term that per­mits one par­ty but not the oth­er par­ty to avoid or lim­it performance;
• a term that per­mits one par­ty but not the oth­er par­ty to ter­mi­nate the contract;
• a term that penalis­es one par­ty but not the oth­er par­ty for a breach or ter­mi­na­tion of the contract;
• a term that per­mits one par­ty but not the oth­er par­ty to vary the terms of the contract.

Typ­i­cal exam­ples of the types of agree­ments entered by own­ers cor­po­ra­tions or asso­ci­a­tions which will be impact­ed by UCT from 1 July 2025 include:

• Build­ing Management/​Facilities Ser­vices Agreements
• Concierge/​Cleaning Agreements
• Ser­vices Agreements
• Stra­ta Man­age­ment Agency Agreements
• Build­ing Contract/​Consultancy Agreements
• Con­tracts for sale or grant of an inter­est in land

Swaab has an expe­ri­enced team of lawyers spe­cialised in stra­ta law to assist with updat­ing agree­ments and con­tracts for the sup­ply of goods and ser­vices and/​or con­tracts for sale of or grant­i­ng of an inter­est in land to be entered after 1 July 2025. 

[1] asso­ci­a­tion means a com­mu­ni­ty asso­ci­a­tion, precinct asso­ci­a­tion or neigh­bour­hood asso­ci­a­tion under the Com­mu­ni­ty Land Man­age­ment Act 2021 (NSW)