Strata Renewal Process
In November 2016 new laws were introduced in NSW which in effect mean that any person can make a written proposal for the collective sale of a strata scheme to an owners corporation and if at least 75% of the owners of the lots agree and it is approved by the court the strata scheme may be sold to that person.
There are many steps and considerations in the process and this article provides a summary of what to consider and do if you are an owner of a lot in a strata scheme and/or part of a strata committee.
Strata renewal process key steps
The strata renewal process involves various key steps as follows:
- Submission of a strata renewal proposal
Any person may give a written proposal for the collective sale of a strata scheme. A strata renewal proposal must include specific information as required by the legislation.
- Initial consideration of a strata renewal proposal by a strata committee
A strata committee must consider a strata renewal proposal within 30 days of receipt at a meeting of the committee and decide whether the strata renewal proposal warrants further consideration by the owners corporation.
- Consideration of a strata renewal proposal by the owners corporation
If a strata committee decides that a strata renewal proposal warrants further consideration by the owners corporation it must within 30 days convene a general meeting of the owners corporation.
If more than 50% of the owners agree that a strata renewal proposal warrants investigation (and if required, the strata scheme has opted in) a strata renewal committee is established.
- Role of the strata renewal committee and strata renewal plan
The strata renewal committee then prepares a strata renewal plan for consideration by the owners corporation. A strata renewal plan must comprise various details including:
- a general overview of the strata renewal proposal
- details of the proposed purchaser and their intended use of the strata parcel
- sale details for each lot including the price, proposed completion date and proposed vacant possession date
- related costs and expenses to be deducted from the sale price
- Consideration of a strata renewal plan by owners corporation
Once a strata renewal plan has been prepared a general meeting of the owners corporation is held and the owners corporation may decide to have the plan amended or resolve to give the plan to the owners to consider.
- Consideration of a strata renewal plan by owners
Owners will then be given the opportunity to consider the strata renewal plan and may provide a support notice to a returning officer that the owner supports the plan. The support notice must be signed by the owner and each registered mortgagee or covenant chargee of an owner’s lot. The notice may be withdrawn under certain conditions.
- Lapsing of strata renewal plan
A strata renewal plan will lapse if the owners corporation decides not to give a plan to the owners or if at least 75% of the owners of the lots support is not obtained within 3 months after a plan is given to the owners for their consideration.
- Decision to apply to the court for an order
If the required level of support for a strata renewal plan is obtained an owners corporation may decide to apply to the court for an order to give effect to a plan.
- Application to the court for an order and objections to an application
An application for an order must be accompanied by various details and documents including a report by an independent valuer. Various persons may file an objection to the application including a dissenting owner.
- Hearing of application and court order
The court must hear and dispose of an application for an order which may include a mediation or a conciliation conference.
If various matters are satisfied the court must make an order giving effect to a strata renewal plan or varying a strata renewal plan and provide reasons. The Registrar-General must record the court order on the folio for the common property and for each lot in the strata scheme.
- Effect of court order
If an order has been made by the court giving effect to a strata renewal proposal the owner of each lot must sell their lot in accordance with the strata renewal plan and court order and in due course the owners corporation is dissolved and the rights and liabilities of the owners corporation vest in the purchaser.
Special considerations for owners in strata renewal process
The strata renewal process is lengthy and complicated and it is very important that the process is carried out correctly and in accordance with the legislation to ensure that a strata renewal plan does not lapse.
There can be many benefits to an individual lot owner of accepting and or negotiating a strata renewal plan which may include:
- a minimum payment for their lot equating to fair market value
- a payment for disturbance which may include the costs of moving including stamp duty and removalist and valuation fees
- the potential to negotiate a higher than market value for their lot
As the strata renewal process is long and complicated, whether you are in favour of or against a strata renewal proposal we recommend that legal advice be sought to ensure that you know what your rights are, what must be done within the relevant time limits and also that you maximise your potential windfall from the process.
How we can help with a strata renewal process
We have already assisted a lot owner and also a strata committee in this relatively new strata renewal process area to achieve the outcome sought. In addition, in a similar matter, we successfully negotiated on behalf of our client with a developer to achieve a significant windfall to our client which was well in excess of what the developer initially offered.
Please contact us if we can assist you make the most out of a strata renewal proposal and/or help you with every step of a strata renewal process.
The information contained in the above article is general and for informational purposes only. It is not legal advice and should not be relied on as such. There may be other factors that are relevant to your circumstances that are not covered in the article.