Unit Entitlements – Staged development ‘off the plan’

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  • 02/05/2016 at 2:40 pm #10429
    deliria1
    Flatchatter

      Hi,

      We bought our apartment ”off the plan” and I was wondering if I am in a position to have the Unit entitlements queried?

      Some background.

      We have 12 identical ground floor apartments with identical outlooks and only a very minor variation in size. see below;

      Unit 1C (lot 67) 85 sqm UE 697 = $883.95 (no parking)

      Unit 2C (lot 68) 105 sqm UE 778 = $986.70

      Unit 3C (lot 1)   99 sqm UE 691 = $876.35

      Unit 4C (lot 2)  101 sqm UE 685= $868.75

      Unit 5C (lot 3)  101 sqm UE 698 = $885.25

      Unit 6C (lot 4)  102 sqm UE 698 = $885.25

      Unit 7C (lot 5)  101 sqm UE 698 = $885.25

      Unit 8C (lot 6)  101 sqm UE 698 = $885.25

      Unit 9C (lot 7)  101 sqm UE 698 = $885.25

      Unit 10C (lot 8) 101 sqm UE 698 = $885.25

      Unit 11C (lot 9) 87sqm  UE 617 =  $782.50 (no parking)

      Unit 12C (lot 10) 101 sqm UE 718 = $910.6

       

      This was a staged development and as such some apartments were purchased for different prices. Obviously, the earlier you purchased the lower the price as the developer was still trying to secure finance.

      However, all apartments had been purchased 15 months prior to the Strata Plan being registered.

      It is my understanding that Unit Entitlements are based on market value at the time the Strata plan is registered and not on purchase price, is this correct?

      As I said all apartments are identical, with the same outlook – 1C and 12C being the end apartments do not have an adjoining apartment on one side, that is the only advantage I can see.

      We think they have possibly allocated the Unit Entitlements on sale price & not market value.  2C was one of the last purchased (at a higher price) and has the highest unit entitlement – also interestingly 11C which has the lowest entitlement by far was purchased by one of the real estate agents selling the development.

      Also is the following correct:

      “IF less than 2 years has elapsed since your Strata Scheme was Registered then a revision of the Schedule of Unit Entitlements for as few as one Lot can be achieved without the need for Orders by the Tribunal, and without the concurrence of all Owners.”

      Many thanks

      Connie

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    • 03/05/2016 at 12:36 pm #24851
      Whale
      Flatchatter

        deliria1 – to be honest I’m not so sure about the entirety of your quote; what is its source?

        What I AM aware of is that if, within two (2) years of the conclusion of a staged strata development, an Owners Corporation considers that all or some of its Scheme’s units of entitlement (UOE) don’t accurately reflect the market value of lot/s, and that’s substantiated by Certificate from a Registered Valuer, then the O/C may resolve by way of a special resolution at a General Meeting to submit a Schedule setting out revised UOEs and the Certificate directly to NSW Land & Property Information (L&PI) who will then make the amendments shown on the Strata Title.

        Perhaps contact L&PI directly on (02) 9228 6666; I’ve always found them to be very helpful and forthcoming with accurate advice.

        25/07/2016 at 1:48 pm #25141
        deliria1
        Flatchatter
        Chat-starter

          Further to this.

          We have now been told by the “valuer” of our complex that an appropriate method is to base Unit Entitlement on “Sales Price.” Which is apparently what he did.

          In all my research I have found nothing that states that UoE is based on the “sale price” of “off the plan” units.

          I am sure everyone on this forum is aware of how selling ‘off the plan’ works.

          Initially the developer may offer apartments at a lower price to attract buyers and therefore secure finance. Once finance is secured and with the advent of time, prices on the remaining apartments rise.

          This is what happened with our complex, those that bought earlier got them for cheaper & those of us who came in later paid more. Not because our apartments were bigger or better or any different – only because time had passed and real estate generally increases with the advent of time.

           

          However, even those that bought later, bought well in advance of building commencing, and at least 15 months before the Strata Plan was registered. By the time the Strata Plan was registered the market value of all apartments would have been the identical (except for those without parking and possibly those with one less common wall). They are all on the ground floor with the same outlook.

           

          How can it possibly be deemed fair to base Unit Entitlements on the sale price? The current market values of these apartments as empty shells would be identical.

           

          Page 7 of the NSW Land & Property Information’s booklet Strata Plan Fast Facts, states the following;

          The unit entitlements should be based upon the market value of the lots at the date of registration of the strata plan. Attention is drawn to section 183 Strata Schemes Management Act 1996

           

          Does anyone have any experience of UoEs being based on sale price rather than market value?

           

          Many thanks

           

           

           

           

          25/07/2016 at 2:31 pm #25144
          Whale
          Flatchatter

            deliria1 – the advice that you’ve been given is from the person who undertook the initial valuation, with which you and presumably some other owners don’t agree, that I’ve given you the means (in post #2) to resolve, and which that valuer obviously doesn’t want to re-assess.

            So is there a problem with you placing an appropriately worded motion on the agenda for the next general meeting, and with lobbying other owners for sufficient support to pass the special resolution that’s necessary to have all or some of the lots’ units of entitlement re-assessed by a different valuer on the basis of market value?

            Your explanation of how selling “off the plan” works is a reasonable but while you’re explaining that and your issues with the initial valuation, they’re not being rectified; which was the whole point unless I’m missing something (?).

            25/07/2016 at 5:38 pm #25146
            Jimmy-T
            Keymaster

              Am I being naive, but if every unit is sold at roughly the same time, isn’t the sales price pretty much the same as the market value?  Or was there some special deal concocted?

              The obvious discrepancy is between 11c and 1c, neither having parking and the former being larger while having a 12 percent lower UE (and price).

              It doesn’t on what basis the UEs were calculated, there seems to be a significant discrepancy (if my fragile arithmetic stands up) and it may be worth challenging, provided the cost of the challenge doesn’t outweigh the benefit accrued.

              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.
              26/07/2016 at 8:22 am #25149
              deliria1
              Flatchatter
              Chat-starter

                The apartments weren’t all roughly sold at the same time, this was a staged development & some units were sold up to two years apart. Those that got in early got the best prices (while developer was still securing finance) – those that came in later paid more as the developer raised the prices.

                However, by the time the Strata Plan was registered all apartments had been sold and it was at that point I believe a valuer should have been brought in to value the apartments – at this time the market value would have been near identical. Instead the developer sent a list of sale prices to the surveyor and the UEs were based on these figures.

                I did raise this apparent discrepancy with my strata manager 6 months after we settled and he just blew it off and said it would cost the OC way too much to change the entitlements & there is no way a majority would agree. At that point I was new to strata and just didn’t want to rock the boat.

                We have since found out (as Whale mentions above), that if we had resolved this before two years we could have just had the valuations done & sent the certificate to NSW Land & Property this would have been a much cheaper prospect. Clearly our Strata Manager should have been aware of this.

                This is being raised at the next EC, and if the valuations were done on sale price then everyone in the complex is affected, either negatively or positively. I guess the vote on this at the AGM will depend on whether there are more of us negatively affected that positively – and also whether, as you say, it is worth the financial outlay.

                I have been told that the UE doesn’t only determine your levies but also impacts your Land/Council/Water rates. 

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