Pittwater Life April 2017 Issue

Business Life: Law
Business Life
Navigating new Strata
Schemes negotiations
Back in August 2015 we
wrote that “the Minister
for Fair Trading, Victor
Dominello, has released
two exposure draft bills for
community consultation
to reform strata living
throughout New South Wales”.
Following extensive
consultation, The Strata
Schemes Management Act
2015 (‘SSMA’) commenced on
November 30, 2016.
As with any new legislation
it takes testing and time to
work through the changes
and, to a certain extent, to
understand the full impact of
the changes.
Reactions from clients have
given rise to some disquiet
and anxiety concerning
collective sale and renewal
or redevelopment, a concept
introduced by the 2015
legislation.
The reason for the
introduction of collective sale
and collective redevelopment
was threefold:
First, over the past 30 to
40 years, Sydney residential
development occurred by
greater density of buildings
on land and in time this
spread out to older industrial
areas. However, this failed
to occur in older residential
areas serviced by transport
corridors. The aim of
government to promote
density of older established
residential areas was
impeded by, for example,
the difficulty of obtaining
an order from the Supreme
Court for a termination order
of the strata scheme, or
obtaining the agreement of
all owners agreeing to the
Registrar General terminating
the scheme.
Second, in October 2015
there were around 75,000
registered schemes in New
South Wales. In many of the
30- to 40-year-old schemes,
major structural problems
had emerged and the cost
of ongoing maintenance
and repair was becoming
prohibitive and uneconomic.
Often the costs of upgrading
and repairs were estimated
to be more than the cost
of upgrading the building
and required continual and
substantial special levies
being struck.
All in all, the constant
upgrading of these buildings
became unviable and a
struggle to maintain to meet
the standards of the Building
Code of Australia.
Three, prior to last
November, there were only
with Jennifer Harris
two methods available to deal
with the problems outlined
above. They were:
(1) Obtain an order from
the Supreme Court to
terminate the strata scheme;
and
(2) Obtain an order from
the Registrar General’s
office where all lot owners
and mortgagees, not just
a majority, agreed to the
termination of the Strata.
As to (1) obtaining such an
order was almost impossible
if one or more of the lot
owners objected. As to (2)
if one or more owners or
mortgagees objected it was
defeated and could not be
pursued.
The 2015 Strata Schemes
Development Act at Part 10
and titled ‘Strata Renewal
Process for Freehold Strata
Schemes’ provides for two
alternative solutions if at least
75% of the unit holders agree
their options are as follows:
(a) Pursue a collective sale
– which means “the sale of
the whole strata scheme” to
a single purchaser, usually
a developer who will do the
following:
n Offer to purchase all the
lots in the strata plan
including the common
property in accordance
with the steps for a strata
renewal plan as set out in
54 APRIL 2017
Celebrating 25 Years