NSW: Can you split a mixed townhouse and apartment strata scheme in NSW?

This article discusses the NSW strata scheme subdivision process and the key hurdles in splitting a mixed townhouse and apartment scheme.

Question: Our strata plan has 3 blocks of 6 townhouses and one block of 9 apartments. The expenses of the townhouses are very different to those of the apartment block. Can we split the strata plan into two?

We own a townhouse in a strata plan in NSW. The Strata Plan includes 3 blocks of 6 townhouses and one block of 9 apartments. I am a member of the strata committee and we are finding that the needs and expenses of the townhouses are very different to those of the apartment block.

Is it possible to split the strata plan into two i.e. the 3 townhouse blocks in one and the apartment block in another? The buildings are all quite separate but share some common services and property although there are clear boundaries between each of the buildings.

Answer: It appears the problem you are experiencing arises from the allocation of the unit entitlements.

It appears the problem you are experiencing arises from the allocation of the unit entitlements. The unit entitlements are determined at the time of the registration of the strata plan and should be based upon the market values of the lots. You may have a situation where the townhouses have higher market value and accordingly higher unit entitlements whereas the apartments are smaller and have lower unit entitlements and pay lower strata levies but, due to the additional services they require, the apartments have higher maintenance costs.

There are two ways the unit entitlements can be changed. By the creation and registration of a strata plan of subdivision or by obtaining orders from the NSW Civil and Administrative Tribunal pursuant to section 236 of the Strata Schemes Management Act 2015. In either case you will likely face opposition from the apartment owners. A strata plan of subdivision which includes common property will require a special resolution (that is, not more than 25% of the value of the votes are against the resolution) which may make it difficult or impossible to implement. Obtaining an order pursuant to section 236 is also not easy as the application needs to be supported by a certificate from a valuer which will need to take into account the unit entitlements for all of the lots in the scheme.

My suggestion is that the strata committee start by making enquiries with a valuer who has experience issuing valuation certificates for the registration of strata plans and obtain preliminary advice in relation to whether there is the potential to adjust the unit entitlements. If the owners corporation receives advice from a valuer that the unit entitlements are unreasonable the owners corporation will need to obtain legal advice on how best to proceed.

This post appears in the December 2022 edition of The NSW Strata Magazine.

Shane Williamson
Williamson Lawyers Pty Ltd
E: shane@williamsonlawyers.com.au
P: 0404 045 605