Introduction

The NSW strata renewal process, established in November 2016 under the Strata Schemes Development Act 2015, provides a framework for lot owners to collectively sell or redevelop their strata scheme. This guide explores the intricacies of strata renewal in NSW, outlining the steps involved, key requirements for approval, and the rights of both supporting and dissenting owners.

From understanding the initial strata renewal proposal and the role of the strata renewal committee to navigating the 75% threshold requirement for owner support and the Land and Environment Court’s involvement, this guide will equip you with the knowledge to navigate this complex process. We’ll delve into owner compensation, the rights of dissenting owners, and address frequently asked questions to provide a comprehensive understanding of strata renewal in NSW.

Understanding the NSW Strata Renewal Framework

What is Strata Renewal?

Strata renewal in NSW refers to the process where owners of lots in a strata scheme decide to collectively sell or redevelop their property. This process, introduced in November 2016 under the Strata Schemes Development Act 2015 (NSW), provides a legal framework for owners to consider major changes to their strata scheme.

Imagine a scenario where an older strata building requires significant repairs and upgrades. Instead of each owner managing these individually, strata renewal allows them to explore options like selling the entire complex to a developer or collectively undertaking a major redevelopment project. This can be a more efficient and financially viable solution for all owners involved.

Schemes Established Before 30 November 2016

Strata schemes registered in NSW before 30 November 2016 are not automatically bound by these new strata renewal laws. However, these older schemes can choose to “opt-in” to the new process. This opt-in requires a majority vote at a general meeting of the owners corporation. If the resolution passes, the scheme can then proceed with receiving and considering strata renewal proposals. This ensures that older schemes can also benefit from the updated framework if they choose to do so.

The Strata Renewal Process

Submitting a Strata Renewal Proposal

The journey towards strata renewal in NSW begins with a formal written proposal submitted to the owners corporation. This proposal, known as the Strata Renewal Proposal, can be put forward by anyone, not just lot owners, as long as it adheres to the requirements outlined in the Strata Schemes Development Act 2015 and its associated regulations.

Imagine a scenario where a property developer identifies a strata scheme as a potential redevelopment opportunity. The developer would prepare a Strata Renewal Proposal outlining their vision for the property, including whether it involves a collective sale to the developer or a redevelopment project. This proposal would then be formally presented to the owners corporation for their consideration.

Formation of the Strata Renewal Committee

Once the Strata Renewal Proposal is submitted, the owners corporation has 30 days to consider its merits. If the owners corporation, through a majority vote at a general meeting, decides that the proposal holds potential and warrants further investigation, they will then form a Strata Renewal Committee. This committee, composed of owners within the strata scheme, plays a pivotal role in steering the renewal process.

Developing the Strata Renewal Plan

The Strata Renewal Committee is tasked with developing a comprehensive Strata Renewal Plan based on the initial proposal. This plan delves into the finer details of the proposed renewal, providing lot owners with a clear understanding of what the proposed changes entail. The plan must include a range of information, such as:

• A general overview of the proposal, clearly stating whether it involves a collective sale or redevelopment.
• A statement from the interested party – either the potential purchaser in a collective sale or the developer in a redevelopment – outlining their intended use for the strata parcel.
• Details of all existing estates, interests, caveats, and priority notices affecting the lots and common property.
• A breakdown of current unit entitlements.
• If the proposal is for a collective sale, the plan must specify the proposed sale price, the proposed completion date, the date owners would need to vacate, and how costs and expenses will be deducted from the sale price.
• If the proposal is for redevelopment, the plan needs to detail the developer’s information, required planning approvals, estimated redevelopment timeframe, periods when owners might need to vacate, financing arrangements, terms of settlement for both dissenting and supporting owners (including buy-back rights), and the proposed completion date.
• A report from an independent valuer, assessing the market value of the entire building and site at its highest and best use, and determining the compensation value of each lot.
• The plan must guarantee that the purchase price or compensation offered to owners is not less than the determined compensation values.

The Strata Renewal Plan serves as a vital document, ensuring transparency and providing owners with the necessary information to make informed decisions about the proposed renewal.

Key Requirements for Approval

The 75% Threshold Requirement

For a strata renewal plan to proceed in NSW, it needs the support of at least 75% of the lot owners. This is a crucial requirement designed to ensure that a significant majority of owners are on board with the proposed collective sale or redevelopment. This threshold is calculated based on the number of lots, not the unit entitlements. For instance, in a strata scheme with 100 lots, at least 75 owners must support the plan for it to move forward.

Support Notice Process

Once the strata renewal plan is finalised, each lot owner receives a copy of the plan, a support notice, and an information sheet outlining their rights and obligations. The owners then have at least 60 days to review these documents, seek independent advice, and decide whether to support the plan. If they choose to support the plan, they sign and return the support notice to the returning officer, an independent party appointed to oversee the process.

Land and Environment Court Approval

Even with 75% owner support, the strata renewal plan needs final approval from the Land and Environment Court. The owners corporation will submit an application to the court, which will then consider various factors to ensure the plan is just and equitable. This includes assessing the compensation offered to lot owners, particularly those who dissent, and ensuring the process has been transparent and fair. If the court approves the plan, it becomes legally binding, and the collective sale or redevelopment can proceed.

Owner Compensation and Rights

Determining Fair Compensation

In any strata renewal process in NSW, ensuring fair compensation for lot owners is a cornerstone of the process. The NSW strata renewal laws have specific provisions to protect the interests of owners, particularly when a collective sale or redevelopment of the strata scheme is on the table.

The strata renewal process requires a valuation report from an independent valuer as part of the strata renewal plan. This report considers the market value of the entire building and its site, assuming its highest and best use. Importantly, the compensation an owner receives cannot be less than the determined compensation value. This valuation process ensures that owners are compensated fairly, considering the market conditions and potential future use of the property.

The calculation of compensation for each lot owner is based on the principle of “just terms compensation,” as outlined in the Land Acquisition (Just Terms Compensation) Act 1991. This principle ensures that owners are not left financially disadvantaged by the strata renewal process. The compensation value takes into account not only the market value of the individual lot but also considers additional factors such as:

• Any special value attached to the property that might not be reflected in the market value. For instance, a lot owner who has made significant improvements to their unit might receive additional compensation.
• Disturbance costs incurred by the owner due to the relocation, such as moving expenses.
• Other reasonable losses suffered by the owner as a direct result of the strata renewal.

Rights of Dissenting Owners

While the NSW strata renewal laws aim to facilitate redevelopment or collective sale, they also recognise that not all owners may agree with a proposed strata renewal plan. The legislation provides certain rights and protections for dissenting owners, those who do not support the plan.

A dissenting owner still has the right to independently assess the strata renewal plan and seek their own legal and financial advice. This step is crucial for dissenting owners to understand their rights and options fully. Dissenting owners can voice their concerns and objections during the strata renewal process. They can attend meetings, raise issues, and propose alternatives. The owners corporation and the strata renewal committee are obligated to consider these concerns.

Importantly, dissenting owners cannot be forced to sell their lots for less than the calculated compensation value, even if the majority of other owners support the strata renewal plan. If a dissenting owner believes they are being offered inadequate compensation, they have the right to challenge the valuation in the Land and Environment Court.

Conclusion

Understanding the strata renewal process in NSW is crucial for both lot owners and developers. The process, while complex, provides a structured framework for the collective sale or redevelopment of strata schemes. Familiarity with key aspects such as the 75% threshold requirement, the role of the strata renewal committee, and the significance of a comprehensive strata renewal plan is essential for all stakeholders.

Navigating this process requires careful consideration of the legal, financial, and practical implications involved. Seeking expert advice from strata lawyers and other professionals can help ensure that the process is conducted fairly, transparently, and in the best interests of all parties.

Frequently Asked Questions