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Collective sale and renewal 

The law now provides for a collective sale and renewal procedure if owners want to sell or redevelop their scheme. The collective sale or renewal (redevelopment) of a scheme may be proposed for a number of reasons, but commonly in circumstances where the building may be aging, and the vast majority of residents would prefer to sell their scheme instead of having to pay the costs of extensive repairs.

To protect the rights and interests of all lot owners, there is a set process that applies.

Ultimately, for a collective sale or renewal to go ahead, owners of at least 75% of the lots in the scheme must agree to the scheme being sold or redeveloped, and the Land and Environment Court must be satisfied that the sale or renewal plan is just and equitable.

Steps for collective sale and renewal 

There are several stages that strata schemes will need to follow in pursuing a collective sale or redevelopment.

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1. Vote to opt into the process 

The new process will not apply to existing schemes (i.e. those registered before the commencement of the legislation on 30 November 2016) unless the owners corporation agrees to opt in. If the majority of owners (more than 50%) do not support the decision, no further action can be taken.

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2. Initiate the collective sale/renewal process 

A proposal to sell or redevelop a scheme must first be considered by the strata committee (formerly known as the 'executive committee'). A general meeting of all owners is then called to consider the proposal.

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3. Form a strata renewal committee 

If the majority of the owners (more than 50%) agree to pursue a proposal, a committee (the 'strata renewal committee') is elected to investigate and develop the proposal. The committee can appoint professionals such as valuers, lawyers, and tax experts to assist them.

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4. Develop a strata renewal plan 

The strata renewal committee develops a plan (a 'strata renewal plan') that must set out certain information to help lot owners make informed decisions. The strata renewal committee, and the owners corporation may hold meetings to discuss and further develop the plan. The plan must:

  • provide a general overview of the proposal
  • include a full and frank statement by the proposed purchaser or developer of their intended use of the strata parcel
  • address matters like the amounts to be paid to an owner in the renewal process and when owners will be required to vacate units
  • provide for the purchase of each owner’s unit in a collective sale, or a dissenting owner’s lot in a redevelopment, for an amount not less than the compensation value of the unit. To assist in this explanation must also provide a report of an independent valuer showing the market value of the whole strata complex as well as the compensation value of each unit.

The Office of Registrar General will provide Guidance material on how to prepare a strata renewal plan.

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5. Consider the plan 

Owners have a minimum of 60 days to consider the plan and seek independent advice. Owners in favour of the plan must sign a support notice, which is given to the independent returning officer. The independent returning office will have been elected by the owners corporation to oversee the voting. The plan lapses if it is not supported by the owners of at least 75% of the lots within 3 months.

If the required level of support is obtained, the owners corporation may decide to apply to the Land and Environment Court for an order to give effect to the plan. The plan lapses if the owners corporation decides not to apply to the Court for an order to give effect to the plan.

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6. Approving the plan 

The strata renewal plan must be approved by the Land and Environment Court before the collective sale or redevelopment can proceed. Before giving its approval, the Court would consider whether the process has been properly followed and would initially seek to resolve disputes through conciliation or mediation.

The Court can reject a strata renewal plan if it was not developed in 'good faith' or if the steps in the process have not been properly followed. The Court will also examine the amount to be received by each owner. For a collective sale or for dissenting owners in a plan for redevelopment, the amount must be no less than the compensation value of the lot, which is based on the principles used to determine Just Terms Compensation. The Court must be provided with a report by an independent valuer to assist in this process.

Importantly, the terms of settlement provided by the plan must be just and equitable in all the circumstances.

The collective sale or renewal of the strata scheme cannot go ahead without the approval of the Court. If a strata renewal plan lapses (for any reason) a person cannot submit the proposal, or another strata renewal proposal that is substantially similar to that proposal, to the owners corporation within 12 months after the day it lapses.

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Advice and advocacy service 

Owners and other interested parties can call Fair Trading on 1800 214 023 to seek more information on a proposed collective sale or renewal. Lot owners can also contact the NSW Law Society to obtain information on legal practitioners specialising in property law to obtain legal advice.

Additional services are in place for elderly and vulnerable owner-occupiers. Affected owners from vulnerable groups, such as those who are on an aged or disability pension, may be eligible to access a free advocacy service on the sale and renewal plan as well as advice on alternative housing choices. For more information read the Strata Collective Sale Advocacy Service page on the Fair Trading website or call Fair Trading on 1800 214 023.

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