Collective Strata Sales: Fact v Fiction

The new NSW strata legislation commenced late in 2016 with the showstopper reform that owners in a strata scheme can now take part in a collective sale of the whole scheme on a 75% and above vote.

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Collective Strata Sales: Fact v Fiction

Collective Strata Sales: Fact v Fiction

The new NSW strata legislation commenced late in 2016 with the showstopper reform that owners in a strata scheme can now take part in a collective sale of the whole scheme on a 75% and above vote.

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March 22, 2017

The new NSW strata legislation commenced late in 2016 with the showstopper reform that owners in a strata scheme can now take part in a collective sale of the whole scheme on a 75% and above vote.

The ability for a group of owners to force the sale of a neighbour’s property against their will is one of the most dramatic changes in Australian law.

On one view, the legislation gives private citizens a power previously only the Government could exercise (compulsory acquisition).

On another view, the legislation provides owners the protection that when their strata building comes to the end of its useful life and is onerous to continue to maintain, they will not be prevented from reaching a sensible decision to sell or redevelop by a single owner or small group of owners.

Whether this is just in the circumstance will not always be easy to determine. An apartment will be someone’s home – much more than an investment vehicle. Also true is that there are many cases where the last owner to sell in a block has managed to extract significantly more than any other owner in the building for their property – just by being the last holdout.

Regardless of the view one has on these issues, the legislation has commenced and before too long there will be a test case before the Land & Environment Court.

With this in mind, we thought we would provide you with our view on some of the conduct, statements and opinions we are seeing in the marketplace.

Fact	Fiction
Collective sales are achievable A collective sale is likely to be approved by the Court where: 1. The owners follow the process to the letter (ie get good advice); 2. The owners act in good faith, openness and transparency, in particular in all dealings with any dissenting owners; 3. There is no question that the compensation available to the owners is significantly above market value; 4. on a common sense and objective review, the proposal is ‘just and equitable in all the circumstances’. For many groups of owners, achieving the above is not likely to be too difficult. More schemes will be redeveloped as a result of plans for collective sale than plans for redevelopment. The legislation allows either for collective sales – the sale of the whole strata scheme, or redevelopment, where there is greater flexibility and owners can for example stay on and have a share of the possible development profit. In the foreseeable future we predict most strata renewal will be achieved by way of collective sale as the process is simpler and the compensation payable to a dissenting owner is far easier to determine.	As long as you have 75% of owners on board you will be able to achieve a collective sale. There is a lot more to getting a proposal approved by the Court than a simple vote! The conduct of the owners and the adherence to the process will be major factors. Only older blocks where there is a need for redevelopment can be sold under the Act There is no express requirement that a scheme be derelict for the legislation to apply. It may however be a strong factor in the Court determining that the proposal is ‘just and equitable’.

Fact

Fiction

Collective sales are achievable

A collective sale is likely to be approved by the Court where:

1. The owners follow the process to the letter (ie get good advice);
2. The owners act in good faith, openness and transparency, in particular in all dealings with any dissenting owners;
3. There is no question that the compensation available to the owners is significantly above market value;
4. on a common sense and objective review, the proposal is ‘just and equitable in all the circumstances’.
For many groups of owners, achieving the above is not likely to be too difficult.

More schemes will be redeveloped as a result of plans for collective sale than plans for redevelopment.

The legislation allows either for collective sales – the sale of the whole strata scheme, or redevelopment, where there is greater flexibility and owners can for example stay on and have a share of the possible development profit.

In the foreseeable future we predict most strata renewal will be achieved by way of collective sale as the process is simpler and the compensation payable to a dissenting owner is far easier to determine.

As long as you have 75% of owners on board you will be able to achieve a collective sale.

There is a lot more to getting a proposal approved by the Court than a simple vote!

The conduct of the owners and the adherence to the process will be major factors.

Only older blocks where there is a need for redevelopment can be sold under the Act

There is no express requirement that a scheme be derelict for the legislation to apply. It may however be a strong factor in the Court determining that the proposal is ‘just and equitable’.

The Real Estate Team at Dentons in Sydney are currently assisting several groups of owners and developers in facilitating collective strata sales. If you would like to know more, please contact Sally or Chris.