Question: Our unit entitlements were determined 20 years ago. About five years ago, a property carried out significant extensions. What’s the process to update our unit entitlements?
Our North Fremantle strata scheme has seven properties. There are three stand-alone houses and four that are semidetached.
Our unit entitlements were determined 20 years ago. About five years ago, one property carried out significant extensions, which changed the value of the property considerably. The unit entitlements were not updated. Soon after, the property changed hands.
One owner wants the unit entitlements reviewed as they pay higher levies than the house owners with the extension. Who pays for the review of unit entitlements, the strata body or the new owners? Including the re-survey fees and the cost of the Landgate plan lodgement fee, we’ve been quoted $5000 for the review.
Answer: Do all the owners agree? I know it’s a silly question, but I have to put it out there.
Without a copy of the strata plan, I can only give a generalised explanation.
It might be that the strata scheme was registered prior to the Strata Titles Act 1985. If so, all the land outside the buildings shown on the strata plan is common property.
If the strata scheme was registered under the 1985 STA then the land around the building may be shown as a Part Lot but would still require approval from the strata company.
The situation gets more involved from here, as the previous owner has either built on the common property land or has built the extension on the Part Lot land, which is owned by that proprietor.
So, if we do a summary so far, the unit entitlements (assuming that they were done by a valuer under the 1985 STA) are based on the capital improved value of the land. The value of the building is a capital improvement as opposed to a vacant lot.
Section 37 of the 1985 STA
37. Schedule of unit entitlements
- The schedule of unit entitlements for a strata titles scheme must —
- allocate a whole number (a unit entitlement) to each lot in the strata titles scheme; and
- state the number that is the sum of the unit entitlements of all the lots in the strata titles scheme.
Note for this subsection:
The unit entitlement of a lot determines —
- the interest of the owner of the lot in the common property in the strata titles scheme: see section 13; and
- subject to the scheme by-laws, the contributions payable by the owner of a lot in the scheme: see section 100; and
- the voting rights that attach to the lot: see section 120.
This will mean that the original unit entitlement (UE) values done by the valuer when the strata plan was registered will now be incorrect.
The lot with the extensions will be worth more, and its UE value should increase, causing the other lot UE’s to go down.
Here comes the tricky part. Do all the owners agree? I know it’s a silly question, but I have to put it out there…
Updating the strata plan will result in a Type 4 re-subdivision – a surveyor will be required to draw up the new boundaries for the lot – see Section 35(1)(c)(i) a unanimous resolution will be required, plus more expense for the surveyor.
The new owner should have been aware of what they were buying or had the strata plan explained to them, as the lot purchased would not be the same as on the strata plan.
Documents will also need to be prepared for lodgement at Landgate.
Consent from mortgagees will need to be obtained.
In some cases, there may be an error in the UE figures. Provided there is a difference greater than plus or minus 5% supported by a new valuers schedule of UE, a change in the UE can be made.
The motion to amend the UE will require a resolution without dissent. See section 38 STA.
It may not win any friends, but if there is a dissenting vote at the General Meeting, an application to the State Administrative Tribunal (SAT) can be made.
This post appears in the November 2023 edition of The WA Strata Magazine.
Shane White Strata Title Consult E: shane.white@stratatitleconsult.com.au