Mark said: “The legislation doesn't automatically apply to existing strata schemes. If anybody wishes to apply this legislation to an existing scheme, there must be an opt-in.
“The opt-in occurs if 50% or more of the owners in a general meeting of the owners corporation resolve that the legislation applies.
“Once the opt-in has been approved, anyone is free to make a strata renewal proposal.”
Strata renewal proposal types
A strata renewal proposal can be either one of two types.
1.
A buyout of all owners, which is called a collective sale
2.
A redevelopment proposal.
Mark said: “A redevelopment proposal means more than a simple agreement to repaint the building or fix up the common area. It must be so significant that the strata scheme is terminated and replaced with a new strata scheme. But most interest, at the moment, is in collective sale proposals."
Strata renewal process procedure
The process will usually start with a developer issuing its strata renewal proposal to the owners corporation. The proposal must provide information prescribed by statute.
The strata committee has 50 days to consider and determine whether to put the proposal to the owners corporation in a general meeting.
Alternatively, if 25% of the owners wish to call a general meeting to consider it, they can override the strata committee and require that meeting.
If a majority of owners in general meeting vote to take the proposal further, they must appoint a strata renewal committee to review the proposal in detail.
The purpose of the strata renewal committee is to produce what's called a strata renewal plan.
If the strata renewal committee doesn't produce the plan within three months, the proposal lapses, and it can't be put to the owners corporation again for at least 12 months.
If the strata committee produces the plan on time, another general meeting is called to decide if the plan should be put to the individual owners for consideration.
The decision to put the proposal to the owners individually must be passed by a special resolution at this meeting of the owners corporation.
If this special resolution is passed, a returning officer is appointed to issue to (and receive from) the individual owners an "approval notice" confirming whether an individual owner approves the scheme or not.
Mark added: “A slightly curious feature of the approval form is that it also has to be counter-signed by the owners mortgagee.
“I think that's going to come as a bit of a shock to banks because I'm not quite sure how they would handle this sort of process. It's something which is completely new to our banks, so it might take some while for them to get their heads around it.”
If the returning officer receives back approval notices signed by at least 75% of owners (by number, not by unit entitlement), the returning officer so advises the strata committee and (but only if that advice is given to the strata committee within three months), a general meeting is called to approve the plan.
If the owners in that general meeting approve the plan, the owners corporation must then apply to the Land and Environment Court for approval of the plan.
Mark explained: “Provided all of the boxes have been ticked, it's unlikely that the court would not approve the plan. However, there are stated statutory circumstances in which the court must not approve it and, in addition to this, the court has a discretion refuse to approve the plan if it is considered in any important respect unfair.”
For a more in-depth look at this area, please watch the webinar with Mark
here.