- This topic has 6 replies, 4 voices, and was last updated 7 years, 9 months ago by .
-
Topic
-
We are one of 9 owners in a strata townhousese complex.
There are a number of developments around us already had construction works began.
Recently, after those works strated, we had real estates agents approched us proposing selling the complex as a whole.After some discussion, all 9 owners are willing to sell, but at what price and what’s the share for each owner:
– The price would only be known if the complex is put onto the market.
– The share would only be ascertained if all owners agree on the split-method.
And that’s the problem – “how to spilt the proceed, if the complex is to be sold as one”.The most logically one is to use the Unit Entitlement as the split-method – as the Unit Entitlment should be a reflection of the value and size of each unit comparing with other.
If all units had the same or similar value and size, then using Unit Entitlement would seem to be fair and fine.
However, the 2 largest units have 36% of the area but only 24% of the Unit Entitlement.
So, using the Unit Entitlement, on paper, would seem to, unfairly, benefit the other 7 with smaller areas.Since there is no agreement of the split-method, so the group of 7 owners (G7 – with smaller areas) decided to go to the market on their own – excluding the other 2 who have the larger unit area.
Interesting questions then arised:
Considered the future strata law (if it passes and in its current proposed form), only 75% of owners are needed to dissolve the strata scheme.
And that, once acquired these 7 properties, the developer (or buyer) would have:
– 78% of the votes (based on one-unit-one-vote)
– 76% of the votes (based on Unit Entitlement)1. Would they (G7 owners) find developers (or buyers) NOW willing to buy just 7 out of 9 properties – for FUTURE development?
2. If these 75%-owners become 75%-developer (once propreties acquired by the developer), would the develper be allowed to force the 25%-owners to sell – in the same way as the 75%-owners?
3. If the G7 owners sold at a developement premium, would the ‘market prices’ then be the prices-with-the-developement-premium or just the market-going-prices at the current market? (with the new proposed law, the 25% owners could be forced to sell their properties at the ‘market prices’ plus moving costs)
-
Replies
-
My first thought is that the people with the disproportionately lower unit entitlements have been getting a free ride for a long time by having UEs that had been set at artificially low levels (a common practice to attract buyers to larger units). They’ve had their cake and now they want to eat it.
If I were you, I would be suggesting that you look at what the UEs should have been (you can get a surveyor or just agree on a figure). Then take an arbitrary date – let’s say when the the person who has owned there for the longest bought in – and recalculate what the levies should have been. The difference is what the S2 owners owe the G7. Then recalculate the proportion of the purchase amounts, give the G7 what they are owed and all is fair(-ish). Otherwise, tell them that the G7 plan to sell and they can deal with the new owner.
And to answer your questions (bearing in mind that the law hasn’t been passed yet):
1. Would they (G7 owners) find developers (or buyers) NOW willing to buy just 7 out of 9 properties – for FUTURE development?
Absolutely – it’s already happening. If developers think they can get council approval to eventually build something that will make a profit, they’ll be all over it.
2. If these 75%-owners become 75%-developer (once propreties acquired by the developer), would the develper be allowed to force the 25%-owners to sell – in the same way as the 75%-owners?
Yes, especially on the numbers you have provided. The one fly in the ointment may be at all “collective sale” agreements will have to be approved by the Land and Environment Court and that’s where the other owners might be able to force an adjustment to the sale price – but they will have to hire some heavy hitting lawyers to do so.
3. If the G7 owners sold at a developement premium, would the ‘market prices’ then be the prices-with-the-developement-premium or just the market-going-prices at the current market? (with the new proposed law, the 25% owners could be forced to sell their properties at the ‘market prices’ plus moving costs)
Market prices only come into play in a redevelopment scheme (the block will be renovated substantially, with the possible addition of new apartments, but the original owners have the option to move back in). When the block is going to be bulldozed and replaced, it’s done on UEs as a share of the overall sale price negotiated with the developer. Obviously, the developer is going to try to push the price down so, once again the S2 will be looking at hiring lawyers to plead their case at the L&E Court. There are enough protections there to stop the minority being screwed financially but those same protections will prevent them from exploiting the situation.
Again, if all you are quibbling over is who gets how much of what, talk to a mediator about reaching a consensus. By all means get a couple of offers from developers and then you will at least be dealing with real figures rather than pie in the sky.
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.
I’m worried about the new strata laws and the risk of unscrupulous developers swooping in to take control of the strata committee.
I’m an owner in a block of 12 units. There’s an AGM coming up and I want to raise this topic on the agenda, at least for discussion & awareness.
1. Are there any suggestions for some simple effective clauses that my strata exec committee could move to insert into our building’s bylaws that could mitigate the above risk?
2. Is this an issue I should be raising with the strata management company? (Admittedly, I don’t place a lot of faith in them to advise appropriately).
Much appreciated!
You can’t pass by-laws to prevent “dealing” with a lot. Than means if developers get control of 10 of your 12 units, then they can force you to sell or rebuild. However, they would ultimately have to get their proposals past the Land and Environment Court and that’s where you can make sure you are not being cheated. Making it clear that you will fight this all the way may be enough to deter all but the most determined developers.
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.
“My first thought is that the people with the disproportionately lower unit entitlements have been getting a free ride for a long time by having UEs that had been set at artificially low levels (a common practice to attract buyers to larger units). They’ve had their cake and now they want to eat it.”
This assertion is ludicrous. My wife and I are in a very similar situation to the poster, except that our townhouse (in a block of 11 units) is over TWICE as large as the smaller units, and is over 70% larger than 8 of the 11 units – and yet our lot entitlements are equal.
As newer owners who have bought into a 17 year old block, we have no say over lot entitlement nor any way to change it. Furthermore, if the monetary difference of actual strata fees vs “fairer” ones (based on comparative market value) is taken into account, that only adds up to low thousands of dollars – and yet the difference in sale price (entitlement-based vs comparative market value) is in the 100’s of thousands.
To say that because we should have paid a few thousand more in strata fees means we should lose out on hundreds of thousands of dollars in an unfair collective sale is just not right.
- You must be logged in to reply to this topic.