owners-corp

The new Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015 are due to commence on 30 November 2016. One of the most debated sections of the Strata Schemes Development Act is the change of procedures in relation to the collective sale of a building. It should be said after reading the 37 provisions of Part 10 of the Act; an Owners’ Corporation who wishes to take on a collective sale will have to have some ticker.

The Government was caught between a rock and hard place. They had to balance up the interests of a person wanting to remain in their home and not being thrown out by the majority, versus the rights of the majority to maximise the income on a sale price of their property. It is a no win for the Government so what they have adopted is a process that protects the minority and provides an opportunity for the courageous majority to ensure the sale.

In short, an Owners’ Corporation who is approached by a developer needs to follow these steps:-

  • Within 30 days of receiving a proposal, a meeting of the strata committee (executive committee) must be convened;
  • The strata committee may determine to refuse or put the collective sale to the Owners’ Corporation;
  • A meeting must then be convened of the Owners’ Corporation to consider whether the collective sale is worth pursuing and establish a strata renewal committee. This strata renewal committee has the obligations of preparing a strata renewal plan for the collective sale of the building.
  • The strata renewal committee has twelve months to develop the strata renewal plan. In short, to develop a plan for the sale of the building.
  • The strata renewal committee will be appointed with a 75% vote of the Owners’ Corporation.
  • After the strata renewal committee has provided its report to the strata committee, a second Owners’ Corporation meeting needs to be convened. This second meeting determines whether the strata renewal plan should be put to the decision of the Owners Corporation.
  • If a motion is passed by 75%, the Executive Committee will send out notices to all lot owners asking them to approve the collective sale.Each lot owner has 90 days to approve to the collective sale. Interestingly enough, the legislation allows a person to withdraw their approval if it is done prior to 60 days. If 70% of lot owners approve it, the returning officer may ask the strata committee to convene a 3rd committee meeting.
  • At a third committee meeting, the Owners Corporation must approve an application to be made to the Land and Environment Court to have the collective sale approved.

Approval by the Land and Environment Court will be given in the process in properly followed and that compensation to each consumer is market value plus any special damages plus solatium. In other words, the property price must be equivalent as if the government would be resuming your property.

The costs are enormous for an Owners’ Corporation;

  • The costs associated with the 1st Owners’ Corporation meeting;
  • The funding of the strata renewal committee;
  • The funding of the report required to support the strata renewal committee;
  • The funding of the second & third Owners Corporation meetings.
  • The funding of the returning officer; and
  • The funding of the application to the land and Environment Court as well as costs for any objector.

The process does provide for integrity and a level of transparency. It will, however, need to be funded by the developer who wants the collective sale if it is to be undertaken. Prior to commencing any collective sale process, Owners’ Corporations should be absolutely certain of the income they are likely to receive before starting this process, otherwise, the whole process will be done with no defined outcome.

If Owners’ Corporations intend to do anything with it, they will need strength, courage and income.