This Q&A about the collective sale process has been supplied by Sophia Jiang, Omega Legal.
Question: Is it ok for a developer to convene the strata meetings to buy out a strata during the collective sale process? What can we do to take back control?
A developer has approached the members of the strata committee and is refusing to deal with the committee to set up a proposal/offer but instead is insisting on creating their own meeting off-premises and invite all owners.
As a committee member, I have asked the developer to put their proposal and offer in writing so we can assess this and pass it on to the owners. The developer claims that we must all be at their scheduled meeting for a written offer/proposal to be put forward.
They held a meeting and only a few turned up. Again no written documentation was provided and when I request that they should put their claims in writing the developer insists that they require all owners to be present before this can be done.
I feel that the developer is not following the collective sale process. He is taking away the control of these proceedings from the strata committee and the owners corporation by these actions. Am I correct to assume this?
What can I do for the owners corporation and the strata committee to take back control of the collective sale process? It is causing certain anxieties among some unit owners.
Answer: It is indeed unusual for the developer to conduct the process in this particular manner.
For a collective sale to proceed under the Strata Schemes Development Act the processes, as prescribed under that Act, must be followed. So it is indeed unusual for the developer to conduct the process in this particular manner.
From what you have described, it appears that the following key processes required by the Act have not been followed:
- a general meeting for the owners to ‘opt in’ (For readers who want to find out more, see our previous blog on what preliminary information a developer can provide);
- a written strata renewal proposal, after at least 50% of the owners agree to opt in; and
- a general meeting convened by the strata committee to consider the proposal.
Who can convene a general meeting to consider a strata renewal proposal?
A general meeting can only be validly convened by the strata committee or the secretary of the strata corporation, whether on its own volition or after receiving a request from at least 25% of the owners by unit entitlement.
An attempt by the developer to take control of the process in the manner that you have described will undesirably waste everyone’s time for the purposes of the collective sale process. The owners should be put on notice that the developer’s direct contact with the owners for a collective sale is not approved or supported by strata committee and consequently the enforceability of any agreement reached with the developer cannot be guaranteed.
Reminder to owners – obtain your own legal advice early
The developer may still acquire each unit individually by inviting all of the owners to attend a meeting it organises so as not to take advantage of the collective sale process. But this is difficult to achieve and I recommend that the owners obtain their own legal and financial advice earlier on to ensure their interests are protected.
- NSW: Q&A What Do We Do When A Developer Comes Knocking?
- NSW Strata Renewal: Tips For Oc’s – Finding A Way Through The Renewal Maze
- Collective sale and renewal
- History made as NSW court orders strata collective sale
This post appears in Strata News #264
Have a question about the collective sale process or something to add to the article? Leave a comment below.