Disclaimer: This article was first published in UDIA Queensland's Establish magazine.
It has been recognised for some time that there is need for reform of our strata title laws in Queensland to better enable termination of community titles schemes for re-development.
The reality is that buildings do deteriorate over time and in some cases, may reach the end of their economic life. The ability to re-develop existing schemes has a role to play in affordable housing targets, especially by increasing stock within in-fill areas. Planning schemes have changed significantly over the last 20 years and traditional "six packs" may no longer reflect the best and highest use of the land.
Of course, any reform needs to balance these considerations with the rights of lot owners who should not be forced to sell their property without appropriate protections in place.
Currently in Queensland, a scheme can be terminated only by resolution without dissent, or by an order of the District Court, if it is just and equitable in the circumstances. This is a high threshold to meet and is a real impediment for potential re-development.
About 18 months ago, new legislation was passed in New South Wales which introduced a process whereby the owners of 75% of lots in a strata scheme can agree to terminate the scheme (regardless of the age or state of repair of the building), so the site can either be:
- redeveloped ('strata title renewal' by the termination of the strata scheme and replacement with a new strata scheme); or
- sold to a developer ('collective sale').
Previously, 100% of lot owners had to agree to terminate a strata scheme, which resulted in just over 1.1% of total strata schemes having been terminated in New South Wales since 1961.
The collective sale process is complex and must be strictly complied with in order to obtain a court order accepting the strata title renewal or collective sale which is required to force the sale on any dissenting lot owners. Nonetheless, since the new laws commenced, there has been a significant increase in the termination of strata schemes and collective sales.
Colin Biggers & Paisley has acted for both developers and participating lot owners in New South Wales to negotiate and exchange strata collective sale deals for 11 different residential strata buildings, consisting of 156 participating lots. In most cases to date, there have been dissenting lot owners, however, the developers and participating lot owners are in the process of, or hold appropriate legal rights (under option agreements and ancillary documents and the legislation) to procure the sale of the units of the dissenting lot owners by order of the court.
There is no doubt that the changes to the collective sale process in New South Wales has assisted developers in acquiring sites which would have been otherwise unable to occur, whilst still affording protections to lot owners.
Whilst there is no Bill currently before the Queensland Parliament, the issue continues to receive attention within legal reform circles. The Queensland University of Technology latest options paper on scheme termination proposes similar changes to the Body Corporate and Community Management Act 1997 (Qld) as adopted in New South Wales, however, it suggests that the agreement by 75% of lot owners should only apply when there are economic reasons for the scheme termination (ie the building is of a certain age or is uneconomic to repair). If scheme termination is proposed just for financial reasons (ie for the redevelopment value of the scheme land), the options paper proposes that 100% of lot owners must agree to terminate the scheme.
If this were to be adopted, arguably the result may be less effective than the New South Wales experience. It remains to be seen what the final outcome for Queensland will be, suffice to say that some reform in this area is perhaps inevitable.
This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal or financial advice. Please seek your own legal or financial advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.