The days of a single apartment owner holding out against a developer are over in New South Wales after changes to strata title law were passed by state parliament this week.
The legislation, passed by the NSW upper house on Tuesday, changed 90 existing laws, including the rules on collective sale and terminating strata titles, renovations, defects and parking. Labor and the Greens opposed the changes, which passed with support from the Christian Democrats and Shooters and Fishers.
The state has around 75,000 strata schemes worth $350 billion in assets and the new laws would come into effect in July 2016, will affect around two million strata owners and residents.
Innovation and better regulation minister Victor Dominello said the changes were an overdue reforms to 40-year-old laws.
“The new laws will modernise collective decision making processes, increase protections against unresolved building defects and improve outdated regulation impacting on renovations,” he said.
While some reforms focus on the small irritations of strata life, such as changes to by-laws, going digital, pets, smoking, and increased accountability for strata managing agents, the most controversial aspect is the changes to the collective sale and termination threshold, so only 75% of owners have to agree to terminate, forcing the remaining 25% to sell.
The government argues that similar models already operate in New Zealand, most North American states, and the UK and says protections will be in place for the elderly and vulnerable owner-occupiers of strata units. The changes are part of the Baird government’s push to increase residential density in urban areas, and give developers the power to take control of a four apartment strata block if one of the owners is holding out against selling.
But many groups, including pensioner organisations, have argued that the changes will leave them vulnerable to losing their homes to redevelopment.
The government says owners forced to sell would at least receive market value of their home, plus extra money to cover moving, under the Land Acquisition Act and “renewal” plans would be referred to the Land and Environment Court for a final decision, taking into account “good faith” negotiations and terms of settlement.
There is no compensation for renters.
The change could potentially have a dramatic effect on the high number of small strata blocks in Sydney. Research by the faculty of built environment at the University of New South Wales found that developers would most likely target more affluent suburbs to maximise the returns on redeveloping old strata blocks.
Dr Cathy Sherry, an expert in strata title and senior lecturer in the Faculty of Law at the University of NSW, said changes were needed, especially when buildings were beyond repair, but there are serious concerns that developers will target more affluent suburbs to maximise profits.
“I hope that the legislation produces good results, but it seems to me that there is a very clear risk that some people will lose their homes and the only benefit will be that their neighbours and a developer make a profit,” she said.
“The fear is that we’ll see cosmetic redevelopment of small to medium strata schemes in expensive waterfront suburbs for developer profit. The vast majority of strata schemes in Sydney are small ones. Less than 24 lots is the norm.”
Their small size means they’re unlikely to achieve the government’s stated aim of increasing density, going upmarket instead, especially because there is nothing in the legislation to require an increased number of lots on the site.
“What we may see is replacement of one set of owner-occupiers with another set of owner-occupiers who just happen to be wealthier,” Dr Sherry said.
Under the previous legislation, developers had the option of applying to the Supreme Court for a termination without unanimous agreement, but because there were no clear grounds for finding in a developer’s favour, they were reluctant to pursue the legal option.
The new 75% rule dramatically lowers the bar in terms of home owners losing their property under pressure from a “majority”.
“A strata scheme is just the vertical subdivision of land,” Dr Sherry said. “I live in a terrace and there’s no doubt that if I banded together with my neighbours and we sold our homes to a developer, we’d make more money, but I have no right to sell my neighbour’s house.”
Public consultation on draft regulations to accompany the new Acts, including model by-laws, will begin in early 2016.
Fair Trading has more details on the changes here.