In large or complex buildings, especially those with a mix of residential, commercial, or retail spaces, managing shared facilities can get complicated. That’s where a Strata Management Statement (SMS) comes in.
A Strata Management Statement is a legal document that outlines how shared areas between two or more strata schemes (or strata and non-strata lots) are to be managed. It defines who is responsible for what, how costs are shared, and how decisions are made across separate parts of a development.
Whether you’re a property owner, investor, or strata committee member, understanding the purpose and function of a strata management statement is key to managing your property effectively, especially in mixed-use or multi-title developments.
In this article, we’ll explain what an SMS is, when it’s needed, what it typically includes, and why it’s important to get it right.
When Is a Strata Management Statement Required?
A Strata Management Statement is typically required when two or more strata schemes, or a strata and a non-strata lot, exist within the same building or development and share common infrastructure or services.
This commonly applies to:
- Mixed-use buildings with both residential and commercial areas (e.g. apartments above shops or offices)
- Multi-building developments that share facilities such as driveways, security gates, gyms, or car parks
- Strata and non-strata lots co-existing on the same parcel of land (e.g. a strata-titled apartment block alongside a freehold office or retail unit)
In these cases, the Strata Schemes Development Act 2015 (NSW) requires a strata management statement to ensure that shared responsibilities and costs are clearly defined between the different ownership groups.
Without an SMS, disputes can arise over who is responsible for maintaining shared spaces, how costs should be split, and how access or usage should be managed.
What Does a Strata Management Statement Include?
A Strata Management Statement outlines how shared property, infrastructure, and services are to be used, maintained, and funded between multiple parties. While each SMS is tailored to the specific development, most include the following key details:
1. Shared Facilities and Services
- List of all areas jointly used (e.g. foyers, lifts, driveways, security systems, loading docks)
- Rules around access, hours of use, and restrictions for residents, commercial tenants, and visitors
2. Cost Allocation
- How maintenance and service costs are split between different strata schemes or owners
- Formula or method used to determine each party’s share of expenses
- Examples: electricity for shared lighting, gardening, cleaning, insurance premiums
3. Management and Decision-Making
- Who is responsible for managing the shared areas
- Procedures for making joint decisions
- Voting rights and how disputes between parties are resolved
4. Insurance
- How building insurance and liability coverage is arranged for shared property
- Responsibility for policy renewals and claims
5. Dispute Resolution
- Steps to take when parties disagree on cost sharing or maintenance
- Internal process before escalating to legal or tribunal action
6. Signage, Renovations, and Access
- Guidelines on installing signage or making changes to shared property
- Conditions for granting access to service areas or shared plant rooms
By clearly outlining these details, an SMS reduces the chance of confusion or conflict between different strata schemes or owners who share a building or land.
How Is a Strata Management Statement Different from By-Laws?
At first glance, a strata management statement might seem similar to strata by-laws, but the two serve different purposes and apply in different situations.
1. Scope of Application
- By-laws apply within a single strata scheme and govern the behaviour of lot owners and residents (e.g. noise restrictions, pet rules, use of balconies).
- A Strata Management Statement applies across multiple schemes or between strata and non-strata lots. It governs the use and management of shared property between different legal entities.
2. Legal Status
- Both are legally binding and registered, but the SMS is specifically required under the Strata Schemes Development Act 2015 for mixed-use or multi-title developments.
- An SMS is recorded on the titles of all affected lots and overrides by-laws where they conflict on shared matters.
3. Purpose
- By-laws are focused on internal community living rules.
- An SMS focuses on shared infrastructure, cost sharing, and operational coordination between distinct property owners or schemes.
Understanding this distinction is crucial, especially in larger or mixed-use developments where multiple parties must work together to manage common assets and responsibilities.
Who Prepares and Registers the SMS?
A Strata Management Statement is usually prepared during the development stage of a project, particularly when multiple strata schemes or a combination of strata and non-strata lots are planned within the same site.
1. Who Prepares It
- Typically prepared by the developer with assistance from legal professionals and surveyors
- Must reflect how the shared areas will operate and how costs will be shared
- Often includes input from planners or local council if specific requirements apply
2. Legal Requirements
- The SMS must comply with the Strata Schemes Development Act 2015 (NSW)
- It needs to clearly define shared property, responsibilities, and dispute resolution methods
3. Registration Process
- The finalised statement is lodged with NSW Land Registry Services at the time of registering the strata plan
- Once registered, the SMS is legally binding and recorded on the titles of all affected lots
- It stays in place until it is formally amended and re-registered
Registering the SMS ensures that all current and future owners are aware of their obligations and the shared responsibilities tied to their property.
Can a Strata Management Statement Be Changed?
Yes, a Strata Management Statement (SMS) can be changed, but the process is more complex than updating by-laws and requires agreement from all parties involved.
1. When Changes Are Needed
Amendments to the SMS may be required when:
- Shared facilities are added, removed, or reconfigured
- Cost-sharing arrangements need updating
- New technologies or services are introduced
- Dispute resolution procedures need refinement
2. Who Can Request Changes
- Any owner or scheme affected by the SMS can propose a change
- In most cases, all parties named in the original SMS must agree to the amendment
3. Approval and Registration
- Changes must be prepared in writing and follow the requirements set out in the Strata Schemes Development Act 2015
- The amended statement must be lodged with NSW Land Registry Services to take legal effect
- Some changes may also require consent from mortgagees or other stakeholders
Amending an SMS typically requires legal advice and formal resolution, especially in developments where commercial and residential interests need to be balanced.
Why Is It Important for Owners and Committees?
A Strata Management Statement plays a vital role in the smooth running of large or mixed-use developments. For both owners and strata committees, understanding the SMS helps avoid confusion, disputes, and unexpected costs.
1. Clarity of Responsibility
- Clearly outlines who is responsible for maintaining shared areas
- Prevents disputes over who should pay for repairs or services like cleaning or security
- Ensures all parties know their obligations from the start
2. Financial Transparency
- Defines how costs are shared between schemes or lots
- Helps owners understand why certain levies or charges apply
- Supports more accurate budgeting and financial planning
3. Legal Protection
- The SMS is a registered legal document, giving it enforceable authority
- Provides a structured process for resolving disagreements between schemes
- Helps protect owners’ rights and sets boundaries for all involved parties
4. Important for Buyers and Committees
- New buyers should review the SMS to fully understand their responsibilities
- Committees must refer to it when managing shared services or resolving cross-scheme issues
- Essential when engaging contractors or discussing access to shared infrastructure
An up-to-date and well-drafted SMS makes life easier for owners, tenants, and committees by setting clear rules for cooperation and shared use.
Conclusion
A Strata Management Statement is a key document in multi-title and mixed-use developments. It outlines how shared areas and responsibilities are managed, who pays for what, and how decisions are made between different owners or schemes. Registered on the property title, it’s a legally binding agreement that helps avoid disputes and ensures everyone is on the same page.
Whether you’re buying into a development, managing a strata committee, or dealing with shared facilities, understanding your SMS is essential. It protects your rights, clarifies your obligations, and supports the smooth operation of your building.
If you’re unsure about your current Strata Management Statement or need help preparing or updating one, feel free to get in touch. Clear, well-structured agreements make all the difference in successful strata living.