Atkinson Vinden frequently acts for lot owners collectively and developers for the termination of a strata scheme. Are you a party to a strata scheme? If so, the law around how to terminate and amend strata schemes recently changed and this may impact upon you.
A new method of terminating a strata scheme was introduced on 30 November 2016 allowing for a collective sale or redevelopment of an entire strata scheme to a developer if 75% of the lot owners agree. A strata scheme can also be terminated in the following manner:
(a) If there are no other significant competing interests and there is unanimous approval of each owner then an application to the Registrar-General.
(b) If unanimous approval of the owners cannot be achieved then an application will need to be made to the Supreme Court of NSW seeking an order for termination of the strata scheme.
Under the new method of termination some of the benefits include:
(a) A guarantee of a minimum amount of compensation together with terms of settlement for lot owners must be ‘just and equitable in all the circumstances’ – the compensation must be no less than market value and generally at a higher value as the collective sale of the strata scheme will create a higher value as a whole rather than individual lot sales;
(b) Certainty afforded to the majority of lot owners based on the 75% pre-requisite – the Land and Environment Court must grant an order for the strata renewal if all elements of the legislation are satisfied. Upon making of the order, all owners are bound by the strata renewal plan and the lot owners must sell in accordance with its terms.
Each method above is unique and requires a different set of documents, methods of negotiation and advice. The Act and Regulations are a key tool in achieving both certainty for the Lot owners, and in removing opportunistic developers who do not have the financial capacity to complete an acquisition.
Circumnavigating the Act is not the main skill for any successful freehold strata collective sale, or redevelopment. The main skill is managing the expectations of the Owners Corporation, multiple lot owners and the developer whom invariably will not agree on the process, and who collectively require direction through the sale or redevelopment process. For more information please contact Senior Associate of our firm, Janelle Boutros.