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31/08/2021 at 2:09 pm #58014
NSW SSMA
Our SP has just gone twelve months since completion of construction and registration. 43 residential lots and 5 parking lots. As of Feb 2021, Strata Roll recorded 12 lots (28.9% of entitlements) sold by original owner. Not recorded on the Strata Roll was the sale of 6 lots to 3 “separate” companies (27/1/21).Frequent requests from owner occupiers over following months for changes to Strata Roll, were met with, “No changes”. Six months on, Strata Manger calls for General Meeting (no forum, just exclusive email voting on 3 motions) to apply significant changes to voting powers and a reduction of involvement of non-original owners. On declaration of voting results, the Strata Manger reveals the 3 “new” owners. Result favours motions by majority.
Vote count is published, based on all original owner lots having full vote count (not the mandated 1/3). The 6 votes of the “new” company owners are also counted in full.
ASIC company searches reveal the Original Owner has 3 share holders. Further ASIC searches reveal the 3 “new” owners has each of the original owners as individual owners of each company. Three shareholders of the Original Owner. The same three shareholders (entities) individually owns the “new Company” owner in the Strata Plan.
Strata Manager now claims this justifies the end of the Initial Period.Is this a breach of the SSMA ownership laws?
- This topic was modified 3 years, 2 months ago by .
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31/08/2021 at 2:27 pm #58022
I’m not sure exactly what has gone on here – your explanations could do with a bit more detail of how exactly the non-original owners have been impacted – but it does look like a deliberate attempt to circumvent strata laws.
My understanding of what you have written is that the original owner has sold apartments to companies in which they are the major shareholders, to try to dilute their direct ownership of properties in the block so as to avoid their vote being reduced by two-thirds.
With that in mind, you and as many other owners as you can muster should get together and approach an experienced strata lawyer (like our sponsors Sachs Gerace) as soon as possible.
If your fellow owners are worried about the cost, I’d draw your attention to Section 26 (3) of the Act (below): “An owner may recover, as damages for breach of statutory duty, any loss that has been suffered by the owner as a result of a contravention of this section.”
But there’s a bigger issue here. It seems clear to me that the original owners have set out to circumvent the law to their own advantage. What does that tell you about the future of your building?
In your shoes, I would do everything in my power not only to undo the decisions made by this cabal, but to make sure neither they not their representatives can have anything further to do with the running of the building.
Interestingly, I would say that their only defence – that they didn’t know they were breaking the law – is blown away by the lengths they have gone to to circumvent it.
Act now – call a lawyer – don’t wait!
26 Restrictions on powers of owners corporation during initial period(1) An owners corporation for a strata scheme must not, during the initial period, do any of the following things unless the owners corporation is authorised to do so by an order of the Tribunal under this Division—
(a) alter any common property or erect any structure on the common property otherwise than in accordance with a strata development contract,
(b) incur a debt for an amount that exceeds the amount then available for repayment of the debt from its administrative fund or its capital works fund,
(c) appoint a strata managing agent or a building manager or other person to assist it in the management or control of use of the common property, or the maintenance or repair of the common property, for a period extending beyond the holding of the first annual general meeting of the owners corporation,
(d) borrow money or give securities.
(2) An owners corporation may recover from the original owner—
(a) as a debt, any amount for which the owners corporation is liable because of a contravention of subsection (1) (b), together with the expenses of the owners corporation incurred in recovering that amount, and
(b) as damages for breach of statutory duty, any loss suffered by the owners corporation as a result of any other contravention of this section.
(3) An owner may recover, as damages for breach of statutory duty, any loss that has been suffered by the owner as a result of a contravention of this section (other than subsection (1) (b)).
(4) It is a defence to an action under this section in debt or for damages if it is proved that the original owner—
(a) did not know of the contravention on which the action is based, or
(b) was not in a position to influence the conduct of the owners corporation in relation to the contravention, or
(c) used due diligence to prevent the contravention.
(5) A remedy available under this section does not affect any other remedy.
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.
- This reply was modified 3 years, 2 months ago by .
01/09/2021 at 5:33 pm #58080Hopefully, further clarification.
Development consisted of two adjoining buildings, with adjoining underground carparks and shared garbage and fire alarm systems. Our building initially sold off the plan (not very successfully).Our building, strata, 48 lots, 43 residential, 5 carparks; the other building, deposited plan, 30 something residences, built to rent for profit. This division of DP v SP did not become apparent until months after settlement.
During sales process, in early days of construction, the question was asked “can we buy in the 1st block?” It was 2 months ahead in the construction schedule. Answer, “there are none left, they’re all sold.” Inference, better get in quick. No mention of single owner DP.
A hypothetical: developer funds 1st building with committed single sale. That equity is used to obtain funding for 2nd building (us). Developer has declared intentions to further develop adjoining property. Sell our building’s lots to raise equity for next phase! Woops, these are not hotcakes. Seven months after registration, only 12 of 43 residences sold. Financing becomes challenging. Maybe even extremely challenging.
Let’s protect personal investment. Developer, one company = 3 shareholders. Three companies, each with a single shareholder, also the same three joint shareholders of the developer, buy six of the, as yet, unsold residential lots. Legally untouchable by any action against the developer ! End of hypothetical.
Actions and decisions by the imposed Owners Corporation/Committee have resulted in shifting of debt from developer to owner occupiers, including raising a loan to pay for mandatory insurances (Sect 26 (1) (b)&(d)).
Submission for mediation is imminent. Legal advice is pending. Owner occupiers are finally becoming gradually more actively involved.
What a wonderful world.- This reply was modified 3 years, 2 months ago by .
01/09/2021 at 5:36 pm #58090I’m sorry, I’m a bit dim – what is DP v SP?
And a word to the wise, initials and acronyms that may seem obvious to you, may not be so clear to others, especially people who are new to strata
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.
01/09/2021 at 7:34 pm #58117Jordan
thelong narrative you provided does not clarify the issues you want help with.
Can you state clearly what you perceive the problem to be. Maybe reference to the areas of the strata act you think are in play.
It looks to me that your situation covers two properties. One is your strata block and an adjoining block which is not strata titled. They share some common infrastructure. If that’s the case then your strata block is self governing and only owners of thst block can manage it.
The shared infrastructure should be covered by a separate legal instrument that’s called a community title. Does such an instrument exist?
02/09/2021 at 1:28 pm #58153Attempt 3
Problem perception number one: Building one sold to a single owner as a Deposit Plan property. Building two (lagging in construction phase by two months) sold as Strata Plan property, “off the plan”. During sales process, buyers asked, can we get a unit (lot) in building one? Answer, no they are all sold. Inference was that all Strata Plan lots, in first building, had been sold. First deception (some might say lie). An unfortunate history. Move on.Problem perception number two: As outlined in my earlier hypothetical scenario, the developer secures the sale of one building to use as equity for funds to develop a second building, selling the second to fund a third and so on to the fourth. A fairly common and logical industry practice. However, sales of building two turn out to be abysmal. Financing hits a road bump. This could jeopardise the development company’s ongoing development dreams. Maybe even jeopardise the three shareholders’ personal fortunes. What can the development company do?
Well, selling six lots will make sales figures much more impressive for the financier and show that the end of the Interim Period (SSMA Section 4, Definitions, Initial Period (b)) has been reached. Another good sign for financiers. Nobody has been buying them, so how can these six be sold? Let’s have some trusted companies buy them.
The development company has three controlling entities, entity 1, entity 2 and entity 3. Each of those controlling entities has exclusive ownership of each of three separate proprietary limited companies. Entity 1 owns, exclusively, company A. Entity 2 owns, exclusively, company B . Entity 3 owns, exclusively, company C. Let’s have those three companies buy two lots each. That’s two problems solved. Financier gets positive sales data and part of original asset is now separated from developer liability End of hypothetical scenario.Problem perception number three: The twelve owner occupiers are asking difficult questions about finances. Why are those expenses being charged to the Owners Corporation, when the Strata Manager was not advised of the need for the expenses, nor involved non-original owners in any approval process.
Oops, the budget estimates fell short on the amount of levy collections to pay the initial, mandatory insurances. But they have to be paid. OK, let’s just initiate a twelve month loan, in the name of the Owners Corporation, so SSMA Section 160 is not contravened.
In order to remove any owner occupier questions on financial issues, a General Meeting was called, with no other forum than an email vote on three motions. Confirmation of previous general meeting minutes. Reappointment of Strata Manager, up to First Annual General Meeting. That all financial matters be exclusively delegated to the Strata Manager, with zero input from owner occupiers. The motions offered no opportunity to debate, no opportunity to amend, just vote. The voting decision is overwhelming decision in favour of all three motions. Those in favour, 24 original owner votes, 6 lots of three new company owner votes, total 30. Those against, six owner occupiers. Not voted, 5 car park lots (original owner), 1 investor owner and 6 owner occupiers. SSMA, Schedule 1, Section 14 (2) & (3) was not applied.Problem perception number four (the last for now): Life imitates hypotheses. New owners, companies A, B & C, bought the six lots in January 2021. Possibly satisfying conditions for an end to the Initial Period. No notice is issued, under SSMA Section 14 (1), by the original owner, nor their appointed Strata Manager. No additions are made to the Strata Roll.
Following the General Meeting, referred to in problem perception number three, above, when publishing the voting results for that meeting, the Strata manager reveals, for the very first time, that companies A, B & C have joined the Strata Roll and that the conditions for the end of the Initial Period have now been satisfied. Fifteen days notice is now given for the First Annual General Meeting.There are two main concerns of the owner occupiers. First, the legitimacy of the three new owner companies, as separate to the original owners, when they do in fact share the same three entities. Second, does the emergence of these three company owners legitimately satisfy the end of the Initial Period?
Looking forward to your unscrambling of these explanations.02/09/2021 at 1:29 pm #58157Apology. As to the questions in your last two paragraphs. Building 1 and building 2 are managed separately. A deposit plan exists to cover shared facilities with, potentially, participation from both building’s owners in its management. One year down the track. no such forum has yet been convened.
02/09/2021 at 1:30 pm #58160I have never heard of this “Deposit Plan” mechanism before? Can someone enlighten me? Is it common?
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.
02/09/2021 at 1:45 pm #58162DP is not the common vernacular us mortals use. We use strata title, company title and torreNs title.
However every parcel of land is stored in LPI as a deposited plan – DP.
02/09/2021 at 2:30 pm #58166OK to further display my ignorance. My explanation was misleading. My, now enlightened, understanding is the Deposit Plan refers to the parcel of land on which properties are built. There may be a single structure, or, the Deposit Plan may be subdivided into a number of lots, each for a separate structure, or none. In our case there is a single Deposit Plan, let’s say DP12345678, which was divided into lots 1 and 2. Lot 1 has our building, lot 2 has the other. Our deposit plan and its two lots are surrounded on three sides by three separate deposit plans, each with its own unique DP number. Those deposit plans are walkways, or public recreational space, no buildings.
So, my bad. To my knowledge, the shared facilities have only been referred to by the shared deposit plan number. Never a mention of Community Title. -
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