Posted by Grant Beaumont on August 19, 2019

Strata Collective Sales: First One Over the Line

News came out last week that the first “collective sale” under New South Wales’s “new” legislation has now been ordered by the Land & Environment Court. It seems remarkable that it has taken until now for the 159-lot mixed residential/commercial building in Sussex St, Sydney to set the benchmark given the legislation allowing the collective sale was part of the significant strata law reforms in 2015 and 2016. However, while remarkable, I would not say that this is surprising.

The legislation enabling a collective sale is complex – prior to the new legislation, all lot owners of a strata titled needed to consent to the winding up of a strata scheme that could precipitate a redevelopment of the site. The new legislation allows for the majority (i.e. more than 75%) of owners to force the sale of all the lots to a developer. Naturally, there were a range of protections embedded in the legislation to ensure that minority received fair compensation for their units.

This particular collective sale is noteworthy because of its size – corralling all 159 owners, many of whom are possibly overseas, would have been a monumental if not impossible task if 100% consent was required. Accordingly, the legislation has succeeded in its aim to facilitate the redevelopment of a site that in the present market conditions is more valuable as a hotel development site.

An unintended, and perhaps somewhat underestimated, benefit that the collective sale legislation has brought is the number of owners corporations seriously considering a collective sale and, rather than taking advantage of the legislation and pursuing the matter through court (which is clearly a time consuming and expensive procedure), owners are working together to seek the best result for their properties.

In our experience, a number of owners corporations are readying themselves for the next wave of development in Sydney and, by and large, are seeking consensus amongst the owners to make that happen. There is no doubt that this is far easier where there are a lesser number of owners however, given the risk to the overall development of an owner holding out, and the uncertainty that brings to the selling process, there is a great incentive to avoid having to go via the court process.

This collective sale will show the public that collective sales are certainly possible, will become more prevalent and, the likelihood of Mrs Mangle in Unit 1 holding the rest of the owners hostage by refusing to sell, should reduce. Hopefully, she will see that that benefits of cooperating with her fellow owners will benefit all. As many of Sydney’s older buildings reach the end of their useful lives, it is critical that we have mechanisms to enable sensible redevelopment, while not disenfranchising homeowners.

The new legislation allows for the majority (i.e. more than 75%) of owners to force the sale of all the lots to a developer.

About the Author, Grant Beaumont

Grant Beaumont

As Director of Beaumont Strata, Grant is passionate about the management of Commercial & Industrial Property. With an enthusiastic attitude toward innovation, and adoption of modern practices, the businesses have significantly developed in terms of the internal processes, creating business efficiencies and enhancing the customer experience for clients and customers. In addition, he handles much of the administration side of the businesses, comprising legal, accounting, human resources and office matters.

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