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Steps for strata renewal process

There are a number of steps in the strata renewal process that must be followed:

1. Vote to opt into the process

The new process will not apply to existing schemes (schemes registered before 30 November, 2016) unless the owners corporation agrees to opt in. For these schemes, the owners corporation must first agree (by resolution) that the strata renewal process (Part 10 of the Act) applies to their scheme. If the majority of owners (more than 50%) do not support the decision, no further action can be taken.

For strata schemes registered on or after 30 November 2016, this step is not required to be followed as the new provisions will apply automatically.

2. Initiate the collective sale/renewal process

A proposal (a strata renewal proposal) to sell or redevelop a scheme must first be considered by the strata committee. Any person (including an existing owner of a lot in the strata scheme) may submit a proposal for consideration.

The proposal must include the information set out in the Regulation. This includes the name and address of the person submitting the proposal, details of any financial interests that person may have in any of the lots in the scheme, a general description of the proposal and its purpose, how the proposal will be funded, whether there will be any monetary contributions towards reasonable expenses incurred by the strata renewal committee or the owners corporation, when owners will be required to vacate their lot and any potential to buy back into the development following the collective sale or redevelopment.  

An important warning notice must form part of the  proposal to alert the owners of the significance of the proposal not only on each lot owner, but also on others who may be impacted by it, for example mortgagees and tenants.

The strata committee must consider the proposal no later than 30 days after receiving it. If it is decided that the proposal should be further considered by the owners corporation, a general meeting of the owners corporation is held no later than 30 days after the making of that decision. Notice of the meeting must be given to each owner at least 14 days before the meeting.

A general meeting of the owners corporation may also be held if one or more owners of a lot or lots who have a total unit entitlement of at least 25% of the aggregate unit entitlement make a request (a ‘qualified request’) that the proposal be further considered.

Existing schemes (those registered before 30 November 2016) may pass the resolution to opt into the process (outlined in Step 1 above) at the general meeting held to consider the proposal. However, the resolution to opt in must be passed before the proposal is considered at that meeting.

Lapsing of the proposal

A proposal lapses if the strata committee decides that it should not be given to the owners corporation for further consideration, and a qualified request has not been made within 44 days of that decision.  

3. Form a strata renewal committee

If the majority of owners (more than 50%) agree to pursue the proposal, a committee (a strata renewal committee) is elected to investigate and develop the proposal. If authorised by the owners corporation, the committee can engage professionals to assist it including valuers, lawyers and tax experts.

Safeguards in the legislation ensure who is eligible to vote on a resolution to establish the committee and who can be elected as a member. The secretary of the owners corporation must, within 14 days of the establishment of the committee, give written notice to each owner of a lot.

The Regulation provides for the form of the notice and for the information it must contain, including the functions and operation of the committee, its budget and its authority to engage people to assist it. 

The Act sets out the procedures for the conduct of the committee including voting, the keeping of minutes and the recording of decisions.  Safeguards exist to deal with any conflicts of interest that may arise with a committee member.

Lapsing of the proposal

If the owners corporation decides that the proposal does not warrant further investigation by a committee, the proposal lapses.

4. Develop a strata renewal plan

The committee prepares and develops a plan (a strata renewal plan) for either the collective sale or redevelopment of the scheme. The plan must set out certain information prescribed by the legislation to help lot owners make informed decisions.

While the committee may incur costs in preparing the plan, it cannot spend more than the amount approved by the owners corporation for this purpose. The committee and the owners corporation may hold meetings to discuss and further develop the plan.

The Act and Regulation set out what must be included in the plan including a general overview of the proposal, a full and frank statement by the proposed purchaser or redeveloper of their intended use of the strata parcel. It must also address areas such as the amounts to be paid to an owner in the strata renewal process, when owners need to vacate units and further information specific to whether the plan is for a collective sale of for a redevelopment of the scheme. 

The plan must provide for the purchase of each owner’s lot in a collective sale, or a dissenting owner’s lot in a redevelopment, for an amount not less than the compensation value for the lot. The plan must include a report by an independent valuer that provides details of the market value of the whole building (at its highest and best use) and details of the compensation value for each lot.

The information provided in the plan is comprehensive so that the owners corporation can consider whether the plan should be referred to the owners for their decision on whether to support it, and that there is enough detail for owners to be able to make that decision.

For information on how to prepare the plan, see the Guide to the Preparation of Strata Renewal Plan (PDF 122 KB).

The owners corporation will consider the plan at a general meeting. In doing so, it may resolve, by ordinary resolution, to amend the plan itself, or return it to the committee for amendment. 

If the owners corporation decides to give the plan (whether amended or not) to the owners of the lots for their consideration, it must do so by passing a special resolution. A special resolution is where not more than 25% of owners vote against the motion, based on unit entitlement.

Lapsing of the plan

The plan lapses if the owners corporation decides not to give the plan to the owners.

5. Consider the plan

Owners will have at least 60 days from the date they receive the plan to consider it and seek independent advice (such as legal and financial advice) on the contents of the plan and its implications. The owners will also be given an Information Sheet, a Support Notice and address details for the return of the Support Notice to an independent returning officer who has been elected by the owners corporation to oversee the voting.  The address details for the returning officer must be provided in the approved form of support notice. 

The Information Sheet (PDF 140 KB) and Support Notice (PDF 306 KB) must be in an Approved form.

Owners who are in favour of the plan will complete and provide the Support Notice to the returning officer.  The Support Notice must be signed and witnessed by the owner and each registered mortgagee or covenant chargee of the owner’s lot.  If a lot is owned by more than one person, each of the owners must sign the Support Notice.

A Support Notice may be withdrawn within the time specified in the Act by sending a Withdrawal of Support Notice (PDF 278 KB) in the Approved form to the returning officer.

Important note: In giving a Support Notice, an owner is agreeing to participate in the proposed collective sale or redevelopment of the scheme under the plan. The owner must therefore ensure they are able to fulfil their obligations under the plan to enable it to proceed.  

If the owner(s) of at least 75% of the lots (other than utility lots such as a carspace or storage lot) support the plan before the plan lapses, the required level of support is reached. If the required level of support is reached before the plan lapses, the returning officer will provide written notification to the secretary of the owners corporation. 

The secretary must, within 14 days after receiving the notice, give written notice that the required level of support has been reached to each owner of a lot and to the Registrar General (who will  make a recording on the folio for the common property to show that the strata scheme is the subject of a strata renewal plan). Owners who have given a support notice in favour of the plan are unable to withdraw that support notice after this has occurred. 

Lapsing of the plan

The plan lapses if the required level of support is not obtained within 3 months after the day the owners corporation decided to give the plan to the owners.

6. Approval of the plan 

If the required level of support is obtained, a general meeting of the owners corporation will be held to resolve whether an application should be made to the Land and Environment Court (the ‘Court’) for final consideration and approval of the strata renewal plan.  If the owners corporation resolves not to apply to the Court, the plan lapses.

The approval of the Land and Environment Court is an important and final safeguard in the strata renewal process and provides protection for all lot owners.

The Court will initially seek to resolve any disputes through conciliation or mediation. It will consider whether the legislation has been properly followed. The Court can reject a plan if it was not developed in ‘good faith’.

The Court will also examine the amount to be received by each owner under the plan. For a collective sale, or for dissenting owners in a redevelopment, the amount must be no less than the compensation value of the lot, which is based on the principles used to determine compensation under the Land Acquisition (Just Terms Compensation) Act 1991. This means that not only is the market value of the lot taken into account, but other matters such as the reasonable expenses attributable to disturbance and relocation (including legal costs and stamp duty) must also be taken into account.  The Court must also be provided with a current report by an independent valuer to assist in this process. The Court must be satisfied that the terms of settlement provided by the plan are just and equitable in all of the circumstances. 

If the Court is satisfied that the matters set out in the Act have been complied with, it will make an order giving effect to the plan. The Court can make minor variations to the plan but any significant changes would need to be given back to the owners for approval. The order may also include directions on other matters including when the scheme is to be terminated and the day that vacant possession of the lots and common property is to be given.

Once made, the order must be lodged with the Registrar General within 7 days. The Registrar General will record the order on the folio of the common property and on each lot in the scheme.

Lapsing of the plan

If the Court is not satisfied that the owners are receiving adequate compensation, that the terms of settlement are just and equitable in all of the circumstances, or that other matters set out in the Act have been met, it cannot approve the plan and the plan lapses.

Effect of Court Order

 Once the Court has made an order giving effect to a strata renewal plan:

  1. In a collective sale, the owner of each lot must sell their lot in accordance with the plan and the terms of the Court order.
  2. In a redevelopment, the dissenting owner must sell their lot in accordance with the plan and the terms of the Court order.

The strata scheme will then be ended and wound up by the Registrar General in accordance with the legislation and Court order.

NOTE:  Limits on submitting new strata renewal proposals and the effect of ‘lapsing’

A person cannot give the proposal, or another strata renewal proposal that is substantially similar to that proposal, to an owner corporation within 12 months after the day the strata renewal proposal or strata renewal plan lapses.

 

 

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