This Q&A about what happens in NSW when a developer contacts your building has been supplied by Yuhao Gu, Omega Legal.
Table of contents:
- QUESTION: We have five owner/occupiers. Seventy-five-percent of five is 3.75. Does that mean that only three owner votes are required for sale? Does it round up or down?
- QUESTION: When a developer contacts your building with an offer to buy, what steps should you take? What are the committee member’s obligations to the lot owners? What questions do you need to ask the developer?
Question: We have five owner/occupiers. Seventy-five-percent of five is 3.75. Does that mean that only three owner votes are required for sale? Does it round up or down?
Answer: If you don’t know the unit entitlements of the other owners, then best have at least 4 out of the 5 owners who fully support your vote.
In NSW, a special resolution is a vote by unit entitlement with no more than 25 percent of the total number of votes cast against it. The strata scheme plan determines the unit entitlement for each lot. Not all lot owners have the same unit entitlement.
If you don’t know the unit entitlements of the other owners, then best have at least 4 out of the 5 owners who fully support your vote.
Yuhao Gu
Omega Legal
E: info@omegalegal.com.au
P: 0402 990 108
This post appears in Strata News #255
Question: When a developer contacts your building with an offer to buy, what steps should you take? What are the committee member’s obligations to the lot owners? What questions do you need to ask the developer?
A developer has contacted our building via phone and has requested I pass on their inquiry. They are interested in buying our block of apartments and would like to hold a meeting to address all owners within the building. As a Committee Member, at what point do I become liable or responsible to pass on this information? Our building has around 50 units with only a few owner/occupiers. At the moment, I have no interest in selling.
Answer: As a strata committee member, you have the duty to act in the benefit of the owners corporation with due care and diligence.
The Strata Schemes Development Act 2015 (NSW) (Act) provides the processes for the acquisition of an entire strata scheme. Since your strata complex was likely registered before 30 November 2016, the majority of the owners (more than 50% of the owners) need to first agree for the processes in the Act to apply to your scheme in a general meeting (opt-in meeting), otherwise the developer may have to acquire each unit in the Strata individually from its owner. For an overview of the strata renewal process visit the NSW Office of the Registrar General webpage.
As a strata committee member, you have the duty to act in the benefit of the owners corporation with due care and diligence. Some initial steps for your consideration include:
- qualify the developer’s interest by asking them to put their expression of interest in writing to the owners corporation, rather than approaching you as an individual
- avoid putting yourself in a position of conflict – even if you do not presently have any intention to sell does not mean you can outrightly reject an approach by the developer for the entire strata if their approach is a genuine expression of interest
- consult the strata committee about any preliminary information you have received from the developer before taking further action.
What preliminary information can the developer provide before calling the ‘opt-in meeting’?
Before the strata committee calls the opt-in meeting, it would be prudent to ask the developer to substantiate that their interest is genuine by asking for written expression of interest. The expression of interest could outline some important preliminary information to satisfy the committee members that the developer’s interest is genuine and therefore warrants further exploration.
The information could include background on the developer, current valuations of the property, indicative proposal for the acquisition, its source of funding, and any fee reimbursement for the owners corporation to undertake the required work to progress the developer’s request.
If the strata committee is satisfied with the developer’s written expression of interest they can then call the opt-in meeting for the owners to decide whether the acquisition processes prescribed by the Act should apply. If the majority of the owners do not agree, then no further action can be taken in respect of the processes under the Act. The developer may still negotiate with each owner for the acquisition of individual units.
What if the owners opt-in?
Once the owners opt-in to the processes under the Act, the developer will need to submit a strata renewal proposal, which is a prescribed document under the Act for consideration and approval by the owners at a general meeting.
At least 75% of the owners by lot need to approve the strata renewal proposal. This majority is a much higher threshold than the usual standard for passing of a resolution under an ordinary general meeting (which is normally the majority of the owners present/by proxy).
If the strata renewal proposal is approved, then certain prescribed steps under the Act will need to be taken, including obtaining a court order for the acquisition by the developer, before the sale of the entire complex can be affected.
If your strata scheme has few owner occupiers, attendance of the general meeting by a sufficient number of owners to approve the strata renewal proposal could be quite a challenging task. Therefore it is important that before any effort is spent accommodating the developer’s request, steps are taken to verify the genuineness of the interest and readiness of the developer.
Yuhao Gu
Omega Legal
E: info@omegalegal.com.au
P: 0402 990 108
This post appears in Strata News #255
Have a question about what to do when a developer contacts your building or something to add to the article? Leave a comment below.
Read next:
- NSW: Q&A Proxy Votes & Quorum Requirements for Annual General Meeting
- NSW Strata Renewal: Tips For Oc’s – Finding A Way Through The Renewal Maze
- NSW: Q&A If Executive Committee isn’t Acting Appropriately
Visit Strata Committee Concerns OR NSW Strata Legislation.
Looking for strata information concerning your state? For state-specific strata information, try here.
After a free PDF of this article? Log into your existing LookUpStrata Account to download the printable file. Not a member? Simple – join for free on our Registration page.
Hi, Block of 8 units, a developer expressed interest four units on ground level have different sized courtyards whilst four units on first level have none. How do we treat area of large common area and car park value.
My experience of the value of strata property is that the value of the buildings is much higher than the Valuer General’s value upon which rates are applied for each strata lot.
Example; Rates are applied on each lot according to the proportion of valuer generals rate for the site.
The current land rated value for the site is $2.84m whereas the current market sale values for the lots is c.$9.6m
There is a difference in what type of valuation is applied and what lot owners would accept, I would presume.
We have five owner/occupiers. Seventy-five-percent of five is 3.75. Does that mean that only three owner votes are required for sale? Does it round up or down?
We have responded to your comment in the article above.
Should the Body Corporate get a land or site valuation prior to moving forward?
Yes, a land valuation report can be useful in providing an indicative price range.
Thank you Sophia for a really intelligent and helpful response.