This article is about the termination of a strata tiles scheme or bylaw review process in WA, particularly after the amendment to the Strata Titles Act 1985.
Question: There is interest in selling our Perth strata complex to a developer, but there are 8 unit owners who stubbornly say they will never sell. Are there new Strata rules that allow for termination of schemes by a majority vote?
I am the owner of a Perth unit in a complex of 27 units. The whole complex is more than 50 years old and showing signs of ageing.
At Strata meetings, there is interest in selling the whole complex to a developer, but there are 8 unit owners who stubbornly say they will never sell. Can we force the issue? I was told the new Strata rules allow for termination of schemes by a majority vote. What is the legal position for termination of schemes?
Answer: Part 12 of the Act is quite detailed and fairly onerous.
Firstly, it’s always important to point out that section 91 (1) the general duties of the strata company require that they must keep in good service and repair, properly maintain and if necessary, renew and replace the common property. So there is a positive obligation for schemes to maintain their buildings.
By the sounds of it, this complex is now starting to show signs of its age and depending on where it’s located you may see that the underlying land value exceeds the gross realisation of the units.
The new legislation did introduce termination of schemes, Part 12 of the Act: Termination of strata titles scheme. It is quite detailed and fairly onerous. But it’s not a majority vote, it’s actually an 80% requirement that owners vote in favour. If there is 27 units, they need 22 units to vote in favour of the termination of the scheme. If there is a suggestion that there are eight units that stubbornly refuse not to sell, it would be very challenging for them to be able to achieve an outcome that sees the scheme terminated.
Ultimately, I think they need to get their 10 year maintenance plan undertaken, and look to get ahead of some of those maintenance issues that seemed to be a concern now. If you get a 10 year maintenance plan drawn up, it will draw the attention to how much money you’re needing to put into the reserve fund over the next five plus years.
It’s certainly a big debate with some of our older schemes that we’re seeing right now. Particularly in the western suburbs were you have such a high land value. We are having these discussions with our owners on a very regular basis about what their strategic plan should be going forward, particularly when they do get a 10 year maintenance plan and there might only be eight lots and yet you’ve got concrete cancer, and you’ve got subsidence and some of these very expensive maintenance issues that need to be addressed.
Owners are now starting to question ‘Do we want to have to keep contributing $100,000 a year and a reserve fund for such a small scheme? Or do we now have to think about realising the underlying land value and potentially terminating the scheme and and moving on?’
This post appears in the July 2021 edition of The WA Strata Magazine.
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- WA: Leasehold Strata Schemes: an Introduction
- WA: Section 110 (Previously s43) of the Strata Titles Amendment Act 2018
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