Chapter 4: Significant periods in the life of a
4.4 Termination / knocking down the building 26
change or cancel the by-laws or make extra by-laws that do not give a right or obligation to all owners or all lots
alter common property (except under a develop-ment contract)
incur a debt for more than is set aside in its funds to repay
borrow money or give securities
appoint a strata managing agent or caretaker to con-tinue after the first Annual General Meeting (AGM) There are also regulations governing the types of infor-mation that the original owner is required to hand over to subsequent owners.
There are further restrictions placed on the power of the original owner under the legislation. For example, if there is a motion to determine that a person’s office as a member of the executive committee should be vacated and the original owner owns half or more of the lots, their vote is reduced to one vote for each three lots they own2.
Despite these legislative protections, in practice, prob-lems can still arise during, or as a result of, this hand-over period. These issues are discussed in Chapter 8 and 9 of the report.
4.3 In-use / building life
During the longest period in the life of a strata scheme, the owners corporation (and hence all owners) is re-sponsible for the effective governance and management of the scheme. In practice, this means that the owners corporation and its executive committee is responsible in the first instance for managing the common property of the scheme (the building and grounds) and manag-ing the funds needed to do this effectively.
But property management is not the only task of the owners corporation. Managing people is also an impor-tant task, and the management of conflicting interests and priorities and the resulting disputes amongst own-ers and residents is essential for the smooth running of a strata scheme.
Undertaking these roles requires effective governance of a scheme, as well as access to the necessary information on which to base decisions. This phase of a strata build-ing’s life cycle is the main focus of this report and Chap-ters 7 to 11 address each of these issues in turn. How-ever, the two preceding phases can have critical impact on how well the in-use phase of the scheme works in practice for those who live in and own strata properties.
Many of the issue aired in the report will reflect matters that have their origins in the decisions that were made during these two initial phases.
4.4 Termination / knocking down the building
Before a strata titled building can be demolished and the land redeveloped, the strata scheme must first be terminated. When a strata scheme is terminated, the owners corporation is dissolved. The land and assets of the owners’ corporation then pass to the owners in shares proportional to their unit entitlements.
There are three main scenarios in which strata buildings would be demolished to enable re-development:
1. A strata building requires so much remedial work that it makes more sense to knock the building down and build a new one in its place than to undertake the work.
2. A low-rise strata building is in an area that is re-zoned to enable higher-rise developments, and there is profit to be made by the property owners in knocking down the low rise property and building a higher-rise property in its place.
3. A strata building (or buildings) are situated in a larger area (e.g. a few blocks) that could be redeveloped as part of a broader urban renewal project. In many areas with a high potential for redevelopment (such as near transport nodes like railway stations), there are already existing strata titled dwellings.
There are two ways to terminate a strata scheme in NSW currently:
1. By unanimous agreement. 100% of owners, leasees, mortgagees, charges and covenant chargees must agree to terminate the scheme, and sign the applica-tion for terminaapplica-tion, which is decided by the registrar general or Supreme Court3.
2. By court order. These are very rare and focus on proce-dural issues, rather than resolving disputes between owners.
In practice, the difficulty of achieving a 100 per cent vote has meant that very few strata schemes have been terminated in NSW4.
There has been significant discussion about the options to change the legislation in order to make termination easier. This issue has been raised in commonwealth and state government reports (COAG 2010 attachment B; NSW Transport and Infrastructure 2010: 26). It has also been raised by numerous peak body organisations (including Property Council of Australia 2010, Strata Community Australia (NSW) 2012 and the Urban Devel-opment Institute of Australia 2010).
Other countries have already changed their strata legislation to make termination of strata schemes easier.
For example, in Singapore, the vote required to agree to a collective sale to a developer (for the purposes of terminating and re-developing a strata scheme) is 80%
for buildings more than 10 years old.
As more strata title schemes reach an age at which it make more sense to re-develop them than to continue to maintain them, strata owners and owners corpora-tions will increasingly confront the question of whether to knock down their buildings in order to re-develop.
However, the issue of strata termination largely lies outside the focus of this research, which is concerned to better understand how schemes work during the man-agement phase of the building’s life cycle.
(Endnotes)
1 Strata Schemes Management Act 1996 (NSW) ss 50, 113 2 Strata Management Legislation Amendment Act 2008 (NSW)
Sch 3(4)
3 Strata Schemes Freehold Development Act 1973 (NSW) ss. 51, 51A
4 In April 2012, the total number of strata plans that had been ever been terminated in NSW was 826 (information from LPI NSW).
B THE
PROJECT
Chapter 5: Research methods
This chapter outlines how the information informing this research report was collected. The research project was undertaken over a period of three years, beginning in February 2009, and concluding in March 2012.
The project involved the following research tasks, which are described in more detail below:
Interviews with strata peak body representatives around Australia
Review of the NSW strata legislation
Analysis of the NSW strata title database
Survey of executive committee members in NSW
In-depth interviews with executive committee mem-bers in NSW
Survey of strata managing agents in NSW
In-depth interviews with strata managing agents in NSW
Survey of strata owners in NSW
In-depth interviews with strata owners in NSW
Stakeholder consultation and awareness-raising The project partners, through an Advisory Group, were involved at all stages of the research, and provided detailed input and advice on the selection of peak body representatives for interview, as well as the design of the three surveys with strata stakeholders. Advisory Group meetings were held approximately once every six months to obtain feedback and advice from the project
partners on the research project. The project partners also assisted in raising awareness about the surveys with the target groups, as did journalist Jimmy Thom-son through his Flat Chat column in the Sydney Morning Herald.
At the end of the first year of the project, a workshop was held with the project partners and other invited stakeholders to present the research findings to date, and receive feedback on the progress of the research.