The Domain section of the Sydney Morning Herald recently reported that two strata schemes in Cronulla pooled their resources and sold their blocks to a developer for double the current market value of each apartment.
While selling an entire apartment block to a developer for a substantial profit isn’t new, this is potentially the first time it’s happened since the new strata laws came into force. There was a raft of changes that were passed into legislation last year including the provision to allow strata schemes to sell the entire block with just 75% agreement of owners.
Known as a collective sale, according to Fair Trading, “Owners can collectively sell and redevelop their block if 75% of the lot owners agree and if certain requirements are met. Each owner must have at least 60 days to consider the ‘strata renewal plan’ and the NSW Land and Environment Court must check and approve all plans and approvals. All owners must receive at least market value for their property.”
This law was designed for buildings that are aging and where the majority of owners prefer to sell rather than cover the cost of expensive repairs and maintenance.
If you currently live in an older building that’s starting to look rough around the edges, at Netstrata, we would advise that you first have a casual chat with your neighbours to hear their thoughts. Selling your home and finding another apartment is a stressful process. So we think it’s best to hear what the other residents in your scheme are thinking and feeling. It might be that everyone has come to the same conclusion but were too afraid to voice their opinion.
For schemes set up before November 2016, the process begins with a majority of owners agreeing to start. A proposal is then drafted for the consideration of the strata committee and then all owners at a general meeting.
If the majority of owners agree to the proposal, a strata renewal committee is elected to develop a strata renewal plan. This plan is the framework for the sale and is used by owners to make an informed decision on whether to sell or not. The plan should include the developers intentions for the land, the purchase price for each apartment and the date owners need to vacate.
The plan is then issued to all owners to consider for at least 60 days. Owners must then register their decision for or against the plan. The plan must be supported by 75% of owners within 3 months. If the plan is approved, it then progresses to the Land and Environment Court for consideration. The Court has the power to reject the plan if it isn’t just and equitable or if it wasn’t developed in good faith.
If you have any further questions around collective sales, please contact your strata manager at Netstrata.