Owners corporations may receive strata renewal proposals under Part 10 of the Strata Schemes Development Act 2015.
What do they need to do?
The key steps are as follows:
- If the scheme was an existing scheme when the new legislation commenced on 30 November 2016, it needs to convene a general meeting to pass a resolution opting into Part 10. Otherwise, Part 10 will have no application to the scheme.
- If the scheme receives a strata renewal proposal, it needs to convene a strata committee meeting to consider whether the proposal warrants further consideration. It must convene a meeting as soon as practicable, but not more than 30 days after receiving the proposal.
- If the strata committee decides that the proposal warrants further consideration, it must convene a general meeting to consider whether the proposal warrants further consideration. It must convene a meeting as soon as practical, but not more than 30 days after the strata committee meeting.
- If the owners corporation decides that the proposal warrants further consideration, it must convene a strata renewal committee and elect its members. That can be done at the same meeting, but this would often be done at a separate meeting. This is very complicated process with many significant steps and tasks which are not listed above this should not be embarked upon without specialist legal representation from the outset.
Some of the pitfalls include, the failure to have meeting(s) at the appropriate time can cause the strata renew proposal to lapse. If it lapses, a person cannot give the proposal, or another strata renewal proposal that is substantially similar to that proposal, to an owners corporation within 12 months after the day the proposal or plan lapses
Steps for collective sale and or renewal
A collective sale or redevelopment process has specific stages.
1. Vote to opt into the process
The owners corporation must first opt in. This applies to strata schemes registered before 30 November 2016. If most owners (more than 50%) do not support opting in, the process stops.
2. Initiate the collective sale/renewal process
The strata committee must consider a proposal to sell or redevelop a scheme. The secretary then calls a meeting of the owners corporation to consider it.
3. Form a strata renewal committee
Most owners (more than 50%) must agree to go ahead with a proposal. Next, a strata renewal committee is elected to investigate and develop it. The committee can appoint valuers, lawyers, tax experts and other professionals to help.
4. Develop a strata renewal plan
The strata renewal committee develops a strata renewal plan. This will inform the lot owners’ decisions about the sale or redevelopment. The strata renewal committee and the owners corporation can meet to discuss and further develop the plan.
The plan must include:
- a general overview of the proposal
- a full and frank statement by the proposed purchaser or developer. This will state how they intend to use the strata parcel (the building/s and land)
- when owners must vacate their units
- the amount each owner will receive. This must be no less than the compensation value for their unit.
An independent valuer’s report should accompany the plan. It will show the market value of the whole strata complex and compensation value of each unit.
Find out how to prepare a strata renewal plan on the Office of Registrar General website.
5. Consider the plan
The owners corporation elects an independent returning officer. Their role is to oversee voting on the plan.
Owners must have at least 60 days to consider the plan and seek independent advice. Owners in favour must give the independent returning officer a signed support notice. The plan lapses within 3 months if the owners of at least 75% of the lots do not support it.
If the required level of support is obtained, the owners corporation may decide to apply to the Land and Environment Court. This involves applying for an order to give effect to the plan. The plan lapses if the owners corporation decides not to apply.
6. Approve the plan
The Land and Environment Court must approve the strata renewal plan before it can be carried out. Before approving it, the Court would:
- consider if the process has been properly followed
- initially seek to resolve any disputes through conciliation or mediation.
The Court can reject a strata renewal plan if:
- it was not developed in ‘good faith’, or
- the process has not been properly followed.
The Court would check on the compensation value for each unit. The terms of settlement provided by the plan must be just and equitable in all the circumstances.
If a strata renewal plan lapses (for any reason), there is delay before the owners corporation can reconsider the plan or a similar one. This is 12 months from the day after the plan originally lapsed.