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: 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: Our owners corporation would like to sell some common property. One owner out of 8 says “no”. Can we proceed?
• QUESTION: Our ageing building has escalating maintenance costs and no sinking fund. Should we sell? Do we need 75% of owners to agree?
• QUESTION: I live in Victoria and own a strata title office suite. Most of the 85 owners want to sell the building. Three lot owners chose not to respond to correspondence or were simply not interested in selling. Is there any legal mechanism such as forced sale we can use against the three owners?
• QUESTION: We were wondering if we could have information about a rule that we have just heard of which allows a strata title to sell when 75% of owners decide to sell. Has a reform for a Forced Sale been approved in Victoria and if so where can we find information on this rule and what our rights are?

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.

Question: Our owners corporation would like to sell some common property. One owner out of 8 says “no”. Can we proceed?

I own a unit in a block of 8. There is a block of land at the end which is owned by our block. The land is worth about $200,000, so each owner’s stake is $25,000.

Seven owners would like to sell the block, but every time the matter is raised one owner votes “no”. She owns the unit next to the block and has moved her fence in order to use some of the block for her garden. She doesn’t want anything built next to her.

Is a vote of 7/8 enough to be able to sell? Can we force her to move her fence back to its original position?

Answer: Like every case, it would come down to evidence about what the proper value is and what other amenity type issues there are

Well, I think two things arise out of that. One is the plan amendment and the other is the notion of the fence.

Dealing with those separately, factually It sounds very much like the Butten v Khung & Ors (Real Property) [2010] VCAT 252 or the ‘ALDI’ example* where most owners want to sell but one person doesn’t. This isn’t a circumstance where they lose Title. I’d imagine that this parcel is common property that can be carved out and disposed of. It very much looks like it’s the ‘ALDI’ example if that’s the case.

If you get a fair purchase price the tribunal would require some evidence that the sale value has some relationship with proper realisable value. That would deal with the economic best interest.

As far as the social best interest goes, well I suppose the sole lot owner’s arguments are going to be probably more planning arguments such as:

• overshadowing
• overlooking
• and the proximity of any construction that might occur

Those would have to be balanced out, so this case, like every case, would come down to evidence about what the proper value is and what other amenity type issues there are. It looks pretty similar to the ‘ALDI’ example on its general principles.

In regards to the fence, it’s of course common where owners abutting parts of common property see them as their fiefdom and that they can use them as their own and fence them off, etc. It’s a plain breach of the model rules. Whether or not you’re owners corporation has registered rules, I don’t know but you probably don’t need them. The model rules make it clear that an owner or occupier must not obstruct other owners and occupiers or lawful interests from their ability to access common property so that fence can be removed apropos a rule breach.

*Refer to Tim Graham’s recently recorded VIC Webinar: How to alter your plan of subdivision

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

This post appears in the October 2021 edition of The VIC Strata Magazine.

Question: Our ageing building has escalating maintenance costs and no sinking fund. Should we sell? Do we need 75% of owners to agree?

We live in an ageing 2 story Strata title block of 24 units built around 1970. There are two separate brick buildings.

The complex has big external common areas. Maintenance and upkeep of these areas takes up 29% of the Budget.

We have extreme maintenance and repairs that need to be attended to including leakage issues, drain problems, cracks and movement etc.

Repairs and maintenance of the building are currently 21% of the Budget, rising every year unless extensive remedial works are undertaken.

There is currently no sinking fund. Our Units are at the lower end of the market, both in cost and rents. 25% of the lots are owner-occupied. Filling rental vacancies during COVID has been problematic.

Is a redevelopment buy-out proposal too dramatic for our situation? What can we do?

Answer: Selling the property collectively to a developer, rather than having to deal with the maintenance issues and constant upkeep the property, could make sense

It comes down to the appetite of the other owners and if it makes sense that it’s going to be a lot easier and cheaper for lot owners to sell the property collectively, rather than having to deal with the maintenance issues and constant upkeep the property, then selling to a developer could make sense.

It’s about surveying your fellow lot owners and seeking their feedback as to whether they would be keen for that scenario to occur. In NSW, there’s legislation that has been introduced recently, and I understand that it only requires 25% of owners to agree to sell the property as long as a few other conditions are met.

However, in Victoria the threshold is still 100% of owners, (which is an unanimous resolution) to agree to sell the property. If you can’t get that support from other lot owners, then it may be worthwhile for you to consider whether you sell your own apartment to get out of the future obligations of the maintenance requirements.

Gregor Evans
The Knight
Email
P: 03 9509 3144

This post appears in Strata News #484.

Question: I live in Victoria and own a strata title office suite. Most of the 85 owners want to sell the building. Three lot owners chose not to respond to correspondence or were simply not interested in selling. Is there any legal mechanism such as forced sale we can use against the three owners?

Answer: It is difficult under the current legislation to arrange the sale of a strata property.

Section 32 of the Subdivision Act (1988) stipulates that a unanimous resolution is required to alter a subdivision. This means that any plan to sell an Owners Corporation needs to be approved by every owner. It is therefore difficult under the current legislation to arrange the sale of a strata property.

The unanimous decision would need to be made either by ballot or at a Special General Meeting. If the three owners are not responding to the ballot or do not attend the meeting, your strata manager should be able to assist in following up these owners for a response.

Ballots go out by post or email which can easily be ignored. You may wish to ask your manager to try calling the owners who are not responding. If you do not have a phone number for the owner and they live in the property, the building manager or another owner can try knocking on their door or leaving a note under it.

If the owner lives overseas, you may wish to try contacting the real estate agent or even the tenant as they may have alternative contact details for the owner. You can even arrange a title search on their property to ensure you have the correct address.

Failing this, the Owners Corporation may apply for an exemption order from VCAT for the need to obtain a unanimous resolution under section 170 of the Owners Corporation Act 2006. In order to gain this order, you need 75% of the total votes to be in favour and none opposed as per section 171 of the Owners Corporation Act. Please also note that there is no guarantee of success in this endeavour and it is up to the discretion of VCAT whether an exemption order is granted.

Can We Force a Sale?

If the three owners are voting against the motion, it may be helpful to try and have a conversation with them and understand the reasons why. You could hold a Special General Meeting (which all owners would be invited to) and debate the pros and cons of selling the property. You may not have the right to force them to agree to sell under the current legislation, but you can use soft pressure to try and persuade them.

If they continue to vote against the motion, under section 34D of the Subdivision Act (1988) the Owners Corporation or a member of the Owners Corporation may make an application to VCAT for an order requiring the Owners Corporation to alter a plan. However, this order cannot be made unless VCAT is satisfied that more than half of the members of the Owners Corporation approve the action and the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the members who voted against it.

Again, there is no guarantee that VCAT would grant such an order, so rather than rush to make an application, it is best to first try to convince the other owners to approve the motion or try to understand their reasons for voting against it. Should you choose to proceed to VCAT, it is recommended the Owners Corporation seek legal advice about the viability of any such action.

Alex Smale
Owners Corporation Manager
The Knight
https://theknight.com.au/
Email

This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.

This post appears in Strata News #274.

Question: We were wondering if we could have information about a rule that we have just heard of which allows a strata title to sell when 75% of owners decide to sell. Has a reform for a Forced Sale been approved in Victoria and if so where can we find information on this rule and what our rights are?

Answer: There are no forced sale provisions in Victoria that would force a lot owner to sell their own lot.

There are two parts to the reader’s question that needs answering. My first response will focus on a forced sale of a lot owner’s own apartment and then secondly look at the forced sale of common property.

Forced Sale of an Owner’s Lot

There are no forced sale provisions in Victoria that would force a lot owner to sell their own lot.

Forced Sale provisions were recently introduced in New South Wales and have received some media attention in Victoria. The New South Wales procedure is quite robust and allows owners and other stakeholders (e.g. developers) to input into developing the best Strata Renewal Plan for owners to vote on. A 75% approval of the Strata (Owners Corporation) is required prior to the Strata seeking final approval of the Collective Sale in the Land and Environment Court.

In Victoria, the 2016 Consumer Affairs – Property Law Review Options paper sought responses from the community to the 5 different proposals (including the NSW procedure). The Victorian Government is likely to revisit this topic with significant changes expected to be proposed to the Owners Corporation Act later this year.

Collective Sale of Common Property

Under the Subdivision Act (Vic) a unanimous resolution of members is required to sell or transfer all or part of the common property.

However, if the majority of members having more than half (50%) of the lot entitlements consent to the resolution, then a lot owner/ the Owners Corporation/ a person with an interest in the owners corporation may apply to VCAT under s34D of the Subdivision Act for an Order binding all lot owners to sell the common property. In which case, the VCAT Member must consider the economic and social benefits and disadvantages such an order would bring to the development collectively and to member(s) who voted against the resolution. The provisions of the Subdivision Act do not extend to a compulsory sale of an owner’s private lot.

Naturally, with the aging of many strata buildings, expensive repairs or refurbishment or property developers presenting attractive offers to owners corporation, we can expect to see an increase in these types of sales occurring. The recent sales of a strata titled office building in Franklin Street and residential buildings on both St Kilda Road and in Southbank are examples of unanimous support by lot owners to redevelop.

Robert Savage,
McClusky Lawyers
E: [email protected]
LinkedIn Profile

This post appears in Strata News #187.

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