Proposed changes to the Strata Titles Act – Part Two
By | 29th Feb 16

In the second part of our owners corporation series, Ronald has compiled some steps regarding a collective sale or renewal.

The below is a snap shot of how the proposed changes will benefit strata owners and deliver urban renewal. This will hopefully boost housing supply in the places that people want to live, and if adopted by Victoria, will also provide more flexibility in strata developments and provide for better community environments.

 

UNDERSTANDING THE COLLECTIVE SALE AND RENEWAL PROCESS

There are several stages that strata schemes will need to follow as part of the collective sale and renewal process.

1. Vote to opt into the process

The new process will apply only to existing schemes if the owners corporation agrees to opt in. If the majority of owners (50% or more) don’t support the decision, no further action can be taken.

2. Initiate the collective sale/renewal process

A proposal to sell or redevelop a scheme must first be considered by the owners corporation/strata committee.  A general meeting of all owners is then called to consider the proposal.

3. Form a strata renewal committee

If the majority of the owners (50% or more) agree to pursue a proposal, a committee is elected to investigate and develop the proposal. The committee can appoint professionals such as valuers, lawyers, and tax experts to assist them.

4. Develop a collective sale/renewal plan

The strata renewal committee develops a plan that must set out certain information to help lot owners make informed decisions. The strata renewal committee and the owners corporation will hold meetings to discuss and further develop the plan.

The plan will need to address certain areas such as the amount that each lot owner will receive under a collective sale as well as the costs and liabilities that will be faced by the owners corporation, the proposed settlement date and arrangements for moving out of the building. The plan must also include a full statement by the proposed purchaser or developer of their intended use of the strata parcel. Guidance material will be made available on how to prepare a sale and renewal plan.

5. Consider the plan

Owners will have a minimum of 60 days to consider the plan and seek independent advice. Owners in favour of the plan will sign a support notice, which will be given to the secretary of the owners corporation. The plan lapses if it is not supported by 75% of owners within 12 months. The plan will list the compensation that is to be paid to each lot owner in dollar terms, as a formula (e.g. a percentage of the sale price) or in kind (e.g. a lot in the new building).

6. Approval of the plan

Plans for renewal will be referred to the Land and Environment court for final consideration. The court would consider whether the process has been properly followed and initially seek to resolve disputes through mediation.

The court can reject a renewal plan if it was not developed in ‘good faith’ or followed due processes and will also examine the amount to be received by each owner. For a collective sale or for dissenting owners in a renewal, the amount must be no less than the compensation value of the lot, which is based on the principles used to determine Just Terms Compensation.

Importantly, the terms of settlement provided by the plan must be just and equitable. 

Article by Ronald Perera - email owner@advandtageproperty.com.au