The new NSW strata legislation commenced late in 2016 with the showstopper reform that owners in a strata scheme can now take part in a collective sale of the whole scheme on a 75% and above vote.
It would not surprise anyone who has read the legislation that no group of owners have yet reached the end of the process and achieved a sale based on a 75% vote. The process is lengthy and culminates in the Land & Environment Court approving the sale based on set considerations of equity and fairness.
Of course where 100% of the owners agree to participate in a sale, it is not necessary to go through the process set out in the legislation.
There is strong evidence that the existence of the legislation (and increased focus on the opportunity) has provided the impetus for owners to get together and explore a collective sale based on 100% agreement.
This is not surprising – some owners see the prospect of receiving up to double the market value of their apartment. This can certainly help incentivise groups of owners to put aside any and all disagreements and reach consensus.
In this surge of excitement and opportunity we thought we would take the time to provide our observations as to the type of schemes where the opportunity is the greatest (if you are lucky to be an owner).
Small to medium sized blocks of apartments.
Blocks which can be consolidated with adjoining land or blocks to create a larger development site and where there is favourable zoning.
Commercial strata properties where residential redevelopment is possible.
Practically, the greater the number of owners the harder it will be to get agreement.
The greatest value will be where the number of potential new apartments significantly exceeds the number of existing apartments.
Very large schemes
Mixed use schemes where there are multiple uses (ie retail / commercial) within the same strata scheme.
Schemes where there are substantial differences in the value of strata lots and the unit entitlement does not necessarily reflect these differences.
Under the legislation a collective sale requires each owner to receive the same share of the collective sale proceeds, subject only to unit entitlement apportionment. An operating business in a strata scheme can be worth far more than this mechanism would value it as.
Schemes where the unit entitlement is not perceived as fairly reflecting relative value will no doubt attract an argument as to how proceeds of sale are to be shared.