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This column first appeared in the Sydney Morning Herald’s Domain section. You can find a comprehensive explanation of the process involved in strata renewal here in Forced Sales Process Explained and you can read the original post here.
The laws enabling the renewal or forced sales of strata units are still nine months away – if they even get through parliament – but the misinformation, BS and outright cons have already started.
Flatchatter Obmik wrote to ask about a buy-out offer made to owners in his strata factory complex. The proposed developer of a block of units has offered 35 percent over market value but even that isn’t worth the disruption and dislocation that selling up would cause Obmik’s business.
Now the developer has told owners that if they wait until the new laws come in, only the people who accept the offer now will get the current price. The others will have to take the true value of the units as decided by a valuer.
What a load of tosh! Under the proposed laws, a strata renewal deal can either be ‘collective sale’ or ‘redevelopment’.
Collective sale is where all the units are sold as one entity and the building or buildings will probably be demolished and replaced with something bigger and shinier.
In this option, the compensation package is negotiated by a committee of owners formed to work out the best renewal plan for all concerned. Once agreed on by a majority of the owners, the proceeds are distributed according to unit entitlements (the figure on which your levies are calculated).
Redevelopment is where the building is changed so substantially that a new strata plan is required, but current owners can negotiate their return to a unit in the building. In this scenario, compensation is based on the market value of the units.
This factory buy-out is clearly not a redevelopment so Obmik will get his fair share of the collective price of the units as negotiated by his committee, at a price possibly higher than what’s on offer.
There are checks in place to prevent developers buying a majority of units then selling the block to themselves at knock-down prices.
It’s sad that there are developers out there already using lies and scare tactics to jump the gun on the new laws, but that’s just one reason Obmik’s neighbours should tell these conmen to take a hike.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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I’m currently facing this issue and would like some feedback.
I live in a 27 unit building and the surrounding properties have been bought by a local RSL which they are planning on expanding. They currently owe 5 properties in the building. Back in 2003 they offered to buy us out by offering a unit in the new development. The thing is this is my home I’ve lived here for 14 years and I’ve recently lost my job so obtaining a new loan would be difficult.
What should we do. Do I contact other owners and see what they think? In addition to this to buy a similar property in my area would be extremely expensive and where do I get money for stamp duty? And I need to be close to family as my mother is very ill. This is so stressful.
Cheers, SSkye – what you’re talking about is a redevelopment of your Strata Plan where right now every owner in the building would need to vote in favour before such a move could even be considered, and from 1 July 2016 the procedure becomes even more detailed so as to ensure that owners like you are not financially disadvantaged or in any way forced to agree to something that you really don’t want to.
As I said the process will be detailed, and in summary involves:
1) A General Meeting of the Owners Corporation (i.e. all owners) where a majority (51%) would need to vote in favour of just further examining the details of a proposal such as the one by your local RSL Club
2) Then only if that majority votes in favour, they’d need to elect a Committee to undertake that detailed examination of the RSL’s proposal, including precisely how owners who want to stay can be allocated another unit in the new building and who it is will pay for the associated costs such as legal costs stamp duty, who is is will pay for their alternate accommodation in the interim, and how those who want to sell and move elsewhere will be compensated and how that amount will be calculated.
3) Then the Committee has to report back to all owners at yet another General Meeting where for anything to proceed further at least 75% of owners would have to be in agreement with everything in #2 (above)
4) Then there’s another General Meeting where for the RSL’s proposal to be formally accepted at least 75% of owners have to again agree, this time based on the units of entitlement of their units – so the higher your levies the more your vote counts.
5) Then your Owners Corporation needs to inform the Registrar General of NSW Land & Property Information (the old Lands Department) of what has been decided.
6) THEN FINALLY if any owners such as you remain opposed to what’s proposed, you can have your say at the NSW Land & Environment Court, where a Commissioner will make sure that all owners have been treated fairly and that items 1- 5 (above) have been properly followed.
So rest easy Skye, as the procedures that I’ve summarised have been deliberately designed to ensure that people such as you are not stressed by any proposal such as the one from your local RSL to redevelop your building, that all your concerns are properly listened to, and that you’re not pushed into making decisions that you’re not at ease with.
‘@Skye, I’m really sorry to hear how stressful this situation must be for you and I agree that you don’t really want to be worrying about moving out or putting your things into storage when you’re perfectly happy where you are. It would be a good idea to get consensus from your other neighbours and see if anyone else is indicating that they want to move. Then you can get a better gauge on what might happen after?
That is really sad to know that people are being conned to do something against their will. Perhaps you could talk to your neighbours about this issue and let them know your opinion about what you think is really happening. Before that, get some cold hard facts in hand in black and white to support your findings to further convince them. It would be such a pity to have them all move out.
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