11 Aug Why you might HAVE to sell when you don't want to – Garth Brown
There’s a huge change coming for the two million people living in apartments in New South Wales and it looks like the problem is set to spread to other states. The change surrounds the collective sale and termination threshold within an apartment complex, so only 75% of owners have to agree to terminate, forcing the remaining 25% to sell.
We ask if that is really fair and talk to a conveyancer about what it all means. Today we talk to Garth Brown.
Kevin: The days of a single apartment owner holding out against a developer are over, certainly in New South Wales after changes to strata title law were passed and came into force on the 1st of July. Now there are other state governments who are echoing that they may do exactly the same thing, Queensland being one of them. I thought we’d take a quick look at what the impact has been, if there’s been any impact already in New South Wales. Joining me to talk about that from Brown & Brown Conveyancers is Garth Brown.
Garth, thank you for your time.
Garth: Thanks, Kevin.
Kevin: Explain to me just briefly what has happened, and then we’ll look at the impact of it. What does this law actually mean?
Garth: What it means now is if 75% of the owners of an apartment building, if they agree to sell to a developer to knock down the building and put up a new complex, they can do that rather than have the agreement of all the owners.
Kevin: Is it just on a redevelopment proposal? And why have they done this?
Garth: The government is trying to increase the availability of units and apartments in housing. There are a lot of older units that are in a very good position in the inner city [1:15 inaudible], and the government believes that by reducing the amount of obstacles to developing bigger properties and higher towers of strata complexes, that will alleviate the housing problem.
Kevin: It seems very unfair to me. You have some people who have probably lived in some of these apartments nearly all their lives, and then all of the sudden, they find that they have to move. From their perspective, I guess they’re saying, “Everyone’s just getting too greedy. Why can’t I stay in my own place?”
Garth: I can understand that if you’ve been in an apartment building for a long time and you don’t want to go ahead with it. There is a bit of a convoluted process after the 75% agree to it. You can look on the Internet under “New South Wales changes in strata law.” There are about 13 different steps that need to happen, and then there’s the Land and Environment Court at the end to give it the seal of approval.
Kevin: How big is the impact of this going to be? How many units and schemes are there in New South Wales?
Garth: This is pretty amazing. There are apparently approximately 2 million people who live in unit complexes in New South Wales. I think the state’s population is about 7 million. You have 75,000 strata schemes – no doubt, most of these would be in the Sydney area – and they’re worth about $350 billion in assets.
Kevin: We’re only looking at one element of the change that’s come into place here. There are other reforms focused on a lot of the smaller irritations with strata life, such as changes to bylaws, going digital, pets, smoking, increased accountability for strata managing agents, and so on. But this is the one that really stands out because it’s going to impact so many people, especially elderly people or even tenants.
Garth: Definitely. Elderly people, if you have the majority at over 75%, it’s going to be hard to change that decision. And with tenants, it’s the owner who makes the call.
Kevin: What mechanisms are in place to make sure that those who don’t want to sell are going to get fair value?
Garth: What would happen is that you would have a valuation conducted by the developer – I assume you could also conduct your own valuation – to receive market price for your unit. I believe the developer will also probably offer you incentives like moving costs and other costs like that to help you move to another area.
Kevin: From my reading of this, there’s no compensation that’s going to be made available to tenants, though. I guess if the owner has a tenant in there and they’ve negotiated a sale through the strata title, maybe they would have to compensate the tenants for breaking the lease, anyway.
Garth: Yes, that’s right. It all gets back to how much is offered in the beginning and whether it’s a workable business solution.
Kevin: We’ll watch this with interest. Have you had any feedback at this point in time, or is it just early days yet to see how this has impacted?
Garth: It’s early days. I believe it’s just been passed into law. It comes into effect in November. But it’s always been an interesting question if you’re an owner in a strata complex: do all the owners have to agree to it for a developer to come in, knock it down, sell out to them, and put up a new complex? Now, it’s just 75% of the ownership.
Kevin: We’ll watch this with interest. Thank you very much for your time. Garth Brown from Brown & Brown Conveyancers. Thanks, Garth.
Garth: Thanks, Kevin.