Steps to Sell Off or Purchase Common Property

NSW Lot Owners have questions about selling off common property and also purchasing the right to use common property. Emma Smythies, Bugden Allen Graham Lawyers provides a few options plus the steps involved. [the_ad id="39455"] Table of contents: QUESTION: We would like to sell off an area of common property to a neighbouring property, with proceeds going to the capital works fund. Would we need to pay income tax and would the sale change unit entitlements? QUESTION: I want to purchase the roof space above my apartment to build another bedroom and the committee has agreed. What happens now and how do we work out the appropriate price to pay? [su_button url="https://lookupstrata.us7.list-manage.com/subscribe?u=475482014a8d5617737f94131&id=422c8a14f2" target="blank" background="#8a041d" size="6" wide="yes" center="yes"]CLICK HERE TO BE NOTIFIED WHEN WE PUBLISH CONTENT TO THE SITE[/su_button] Question: We would like to sell off an area of common property to a neighbouring property, with proceeds going to the capital works fund. Would we need to pay income tax and would the sale change unit entitlements? We have an area of the common property which has never been used since the original SP was established in 1975. We would like to sell this area (approx 190 m2) to a neighbouring property, with the proceeds going to our Capital Works fund. However, we are not sure about two issues: Would the Owners Corporation be liable to pay income tax and/or GST on the proceeds? Due to the change in our property boundaries, would legal or conveyancing changes mean a change to each of the 20 lot owners' titles? Answer: Normally, the sale of part of the common property would be subject to capital gains tax as the sale of a capital asset. If it is only common property that is being sold there will be no changes to unit entitlements. Response to Question 1: Income tax Normally, the sale of part of the common property would be subject to capital gains tax as the sale of a capital asset. GST would also ordinarily be payable as the part of the common property being sold is a vacant area of land and not an existing residence. We recommend you seek advice from an accountant on the tax consequences of the sale as there may be circumstances specific to your scheme which may change the usual tax consequences of the sale. Response to Question 2: Unit entitlements If it is only common property that is being sold there will be no changes to each of the individual lot titles or unit entitlements. The owners corporation is empowered to transfer common property under section 33(1)(a) of the Strata Schemes Development Act 2015. The process for selling the common property area is generally as follows: A special resolution of the owners corporation will be required to authorise the subdivision and sale of the part of common property. A deposited plan of subdivision will be required which subdivides the part of the common property to be sold into a new lot (New Lot). The owners corporation will need subdivision development consent from the local council and a certificate of compliance from the water authority confirming that the subdivision complies with the water authority’s requirements. The neighbour purchasing the land and will need to pay stamp duty on the transfer of the New Lot. The New Lot is transferred to the neighbour and the purchase price is paid to the owners corporation. Emma Smythies Bugden Allen Graham Lawyers E: emma@bagl.com.au P: 0412 046 966 This post appears in Strata News #362.