With the recent sale of three strata apartment buildings in Macquarie Park (link to article here) for $55 million, it seems that redeveloping strata buildings is only just getting started in Sydney.
A major change to the Strata Schemes Development Act 2015, introduced on 30 November 2016, was the level of decision required to terminate a strata scheme, from a unanimous resolution to a special resolution.
This change which will unlock value to owners within some Strata schemes, has been challenged by both developers and the broader strata community for some time.
Some key notes about the changes are:
- This collective sale mechanism doesn't only apply to 'old' strata schemes, but is available for all Strata Schemes in NSW. An Owners Corporation is able to opt into the process via a General Meeting resolution.
- Owners have a say through their vote regarding collective sale. However, the ability for one or two owners to 'hold out' if more than 75% of owners support a collective sale has been reduced in most cases.
- Owners Corporations are required to apply to the Land and Environmental Court to ensure that the legislated procedure for a collective sale was correctly followed.
- Overall, it is a far simpler process to purchase the entire strata scheme via unanimous resolution (with 100% owner support) however the new measures provide greater options for both Owners Corporations and developers where one or two owners are resisting the majority.
There are many considerations for Owners Corporations and individual owners which should be taken into account before going down this path of collective sale:
- Every owners corporation should seek legal advice first to understand the process and risks involved with a collective sale.
- The amount of work involved, including forming a Strata Renewal Committee and conducting multiple General Meetings.
- Seeking independent advice on what the maximum future value of the property is to ensure the best outcomes for all owners.
- The tax treatment for settlement from a developer and how this will impact owners.
- Legal considerations including timing on strata owners corporation approvals. This includes timing on notices, notifications and conducting meetings. Owners Corporations will require the support and advice of an expert Strata Manager and Strata Lawyer to ensure the process is managed well.
- Decisions on who will be appointed to the Strata Renewal Committee. In most cases it will include subject matter experts to ensure suitable guidance is provided to Owners Corporations.
Contact The Strata Collective if you would like to know more about collective sales.
* The Strata Collective communications including this article are intended to provide commentary and general information. They should not be relied upon as legal or specific strata advice.