QLD: Can 75% of lot owners force 25% to sell when terminating a strata scheme for a developer?

Question: What does the legislation say about the termination of a strata scheme in Queensland? If 75% of owners want to sell, can the majority force the remaining 25% into selling? How is the price for each lot determined?

I own an apartment in a small QLD complex. The managers want to terminate the scheme and sell it to a developer. Can I be forced to sell my apartment to the developer and how is the price for each lot determined?

The manager presented me with a contract. The price offered doesn’t cover my apartment cost and the renovations I completed last year. There has been a verbal agreement of more money and also a lease after the sale, but I’ve received nothing in writing. I haven’t signed either option deed or contract.

What does the legislation say about the termination of strata schemes? If 75% of owners want to sell, can the majority force the remaining 25% into selling? Can I be forced to sell my apartment to the developer and how is the price for each lot determined?

Answer: The manager cannot arrange for the lots to be sold to a developer. Each owner would need to individually agree to this; Any reduction to a lower threshold (such as 75%) does not presently exist.

Section 78 of the Body Corporate and Community Management Act 1997 (Qld) relevantly provides that the Scheme can be terminated through either:

Termination of scheme

1. a resolution without dissent and entry into an agreement about termination issues; or
2. by the District Court if it is just and equitable.

A resolution without dissent is only passed if no lot owners vote against the motion.

There has been very little judicial consideration of circumstances of when it is just and equitable. Mahoneys acted in one case that was ultimately resolved by consent with the parties. However, this did consider a number of issues such as the costs to continue maintaining the scheme.

Law reform in this area has been discussed for a long period of time and QUT has published some detailed research on this issue. I have extracted some of that research below:

Determining ‘just and equitable’

The District Court should have reference to the following factors when determining whether a termination plan is just and equitable:

• any structural engineer’s report, quantity surveyor’s report or valuation prepared for the purposes of scheme termination at the scheme;
• any termination plan, collective sales agreement or redevelopment plan prepared by the person proposing the termination;
• the economic reasons for the termination plan;
• the consequences to lot owners (both individually and as a whole) if the scheme is terminated;
• the consequences to lot owners (both individually and as a whole) if the scheme is not terminated;
• the age and condition of the building or any structures on scheme land;
• sinking fund forecasts and current balance;
• the aggregate market value of individual lots compared to the market value of the scheme as a whole in its highest and best use;
• any other factor specified in the relevant Regulation Module; and
• any other factor the Court decides is relevant.

Accordingly, for present purposes:

1. the manager cannot arrange for the lots to be sold to a developer – each owner would need to individually agree to this;
2. any reduction to a lower threshold (such as 75%) does not presently exist;
3. it would not be wise to sign a sale contract that does not include all the promises being made about what you will receive; and
4. it might be worthwhile receiving some formal advice as to the documents you have been sent. Option contracts can be relatively complicated as far as sale contracts go.

Todd Garsden
Mahoneys
E: tgarsden@mahoneys.com.au
P: 07 3007 3753