VIC: Q&A Forced sale and the 75% rule

These Victorian Lot Owners are wondering whether there is any information available about Forced Sale in Victoria.

Table of Contents:

• QUESTION: How are the proceeds from the collective sale of a strata building divided amongst all lot owners? Is the money distributed based on lot entitlement, market value, or owners come to some sort of agreement?
• QUESTION: Do the changes to Victoria legislation make reference to OCs where owners are interested in selling their block. Is there a new percentage of owners who need to agree to the sale?

Question: How are the proceeds from the collective sale of a strata building divided amongst all lot owners? Is the money distributed based on lot entitlement, market value, or owners come to some sort of agreement?

Answer: The distribution of sale proceeds is typically determined by agreement among the lot owners.

A collective sale involves selling an entire building, including all individual lots and common property, to a third party. Owners may opt for a collective sale for a range of reasons, which often include unlocking the redevelopment potential of the land, avoiding escalating repair costs and future special levies, and simplifying the management of ageing buildings, particularly when a developer offers a premium that far exceeds the value of selling lots individually.

In Victoria, this process is governed by the Subdivision Act 1988, and it requires the termination of the plan of subdivision. Under section 32 of the Act, Victoria requires unanimous consent. This is stricter than other states like NSW and WA, where only 75% owner approval is needed. International thresholds vary between 80% and 100%. While the legislation refers to the consent of ‘members’, in practice the interests of mortgagees and tenants may also need to be considered.

Once a collective sale is completed, the distribution of sale proceeds is not governed by statute. Instead, it is typically determined by agreement among the lot owners. Common approaches include:

• Lot entitlement: where proceeds are apportioned according to lot entitlement as recorded on the plan of subdivision, reflecting the proportional ownership interest in the scheme.
• Market Valuation: Independent valuations can be used to assess the fair market value of each lot, which can result in a more tailored and equitable distribution, particularly where lot sizes or conditions vary significantly.
• Negotiated Agreement: Owners may agree to a bespoke formula for distribution, taking into account qualitative factors such as views or lot size.

The best method for distributing proceeds from a collective sale often depends on the circumstances of the property and the preferences of the owners, but there is an argument that apportioning based on independent market valuations is generally the most equitable.

This approach reflects the actual value of each lot at the time of sale, taking into account differences in size, condition, orientation, and improvements. While using lot entitlements is simpler, it may not fairly account for variations in market value between lots. A negotiated formula can work well where owners are cooperative and the differences are well understood, but it can also lead to disputes if not clearly documented.

Fabienne Loncar
Moray & Agnew Lawyers
E: [email protected]
P: 03 8687 7319

This post appears in the August 2025 edition of The VIC Strata Magazine.

Question: Do the changes to Victoria legislation make reference to OCs where owners are interested in selling their block. Is there a new percentage of owners who need to agree to the sale?

Answer: It’s ignored completely, there’s no change.

Unfortunately, no. In my opening I made the point that I thought there were a lot of missed opportunities in this legislation, and that’s one of them. They’ve gone into so much detail about contracts, the disclosure of any beneficial relationship on the part of the manager, if you’re going to receive a commission or other benefit. There’s just so much regulation and proscription tied up in those things, which is really not necessary because again, there’s a dearth of cases where that’s ever occurred.

Philosophically, I will say that government is informed by the government department, which is Consumer Affairs and Consumer Affairs is the entity that receives consumer complaints. So it’s looking at it from bottom up, not top down, unfortunately. That’s what drives policy.

Anyway, back to the direct question. It was completely ignored as were a lot of other things that really should have been considered – important issues. There are a lot of distractions in this legislation about minor or superfluous nugatory points. We had the model of New South Wales went in at 75% five years ago. There are different regimes around the world. Everywhere is trending towards something less than unanimous and it just didn’t get mentioned. It’s ignored completely, there’s no change unfortunately. I’m very critical of that, if that is not already palpably obvious.

But you do have VCAT. So in the same way that VCAT can order the amendment of a plan in an unanimous resolution, the same applies to termination of an Owners Corporation. I’ve got one running at the minute that I’ll be able to report on one day hopefully (if we win of course).

VCAT is there and can make that order. Unfortunately, legislation ignored it, and it’s lamentable that it did so.

Tim Graham
Bugden Allen Graham Lawyers
E: [email protected]
P: 03 9086 5832

This post appears in Strata News #547.

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