The NSW Land and Environment Court is in the final stages of deliberations in relation to the first ever strata collective sale under the Strata Schemes Development Act 2016.
The vibe is that the decision that will be taken for approval, is imminent. This is the first time that the provisions of the Act have been tested where the sale or redevelopment of a strata scheme only requires 75 percent of the owners to agree. The Court is required to approve the application if a number of criteria are satisfied including that the sale is just and equitable.
The strata scheme in question is a 159 lot strata scheme in a nineteen (19) storey building and is currently operating as serviced apartments. The proposal is for this building to be converted into a new hotel for the CBD.
This case of a collective sale is a perfect example of the new legislation in action and, if passed, will be an encouragement for other schemes who are considering sale or redevelopment of their schemes.
There is a complex legal process to be undertaken and any lot owners considering such a collective sale action, should most definitely engage legal professionals to assist them through this process.
Strata Managers are often in the middle of discussions with lot owners regarding the advantages and disadvantages of a collective sale for redevelopment purposes, as people consider having a new home in their current address and also the possibility of making a profit in the process. It is definitely a fact that some apartments built in the 1960s,‘70s and ‘80s would benefit from a redevelopment which could incorporate new energy efficiency measures, better living spaces and improved communal areas. This is where Strata Managers need to understand this process and be able to refer their Owners Corporations to the appropriate professionals to support them through the process. Strata Managers also need to remember that they represent ALL of the lot owners in a strata plan, not just the ones pushing for the collective sale process. Impartiality and balance are required throughout this minefield for strata managers.
Salespeople may well be in negotiation with lot owners wanting to redevelop their site. If you come across a plan where only 75% of the owners are wanting to take this step, then a knowledge of the collective sale process is essential. It is important that as a salesperson attempting to put a deal together, that you are providing accurate advice to the lot owners in relation to the complexities and financial cost of commencing and undertaking the collective sale process.
It is also important for salespersons to know if owners who are part of a collective sale process will have the ability to buy back into the building once the re-development has concluded. This can mean that you as the agent already have a number of potential purchasers to deal with once the process completes.
A final note for salespeople in this area is regarding the sale of units or lots prior to the decision for a collective sale being finalised is that an owner may choose to sell their lot rather than going through the collective sale process. If this is the case, and you are aware, you MUST disclose this to any potential purchasers as well as advising the solicitors involved. This is a material piece of information that must be disclosed in the Contract for the Sale and Purchase of Land and not something any of the parties to the contract will want to miss. As always, complete disclosure is always the best option.