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    Flatchatter

    I own a commercial strata in a very old building, in Sydney, that is ripe for demolition/redevelopment. Over 75% of lot owners support a redevelopment of the site, however an owner, with 20% of the allocated strata lots is resisting redevelopment,claiming that their 20 year lease (to an associated entity) takes precedence over the express wishes of the majority decision (80%) of other lot owners.

    Is there a legal precedent? How does the new strata legislation handle this  situation?

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    It seems to me to be all quite academic until you actually get an offer from a developer. And who knows, if the offer is enough, the owner/ landlord might like the look of the money.

    If you read the procedure required:

    https://www.fairtrading.nsw.gov.au/ftw/Tenants_and_home_owners/Strata_schemes/Collective_sale_and_renewal.page

    you don’t get to the 75% requirement (of owners agreeing to sell) until you actually have 

    • a full and frank statement by the proposed purchaser or developer. This will state how they intend to use the strata parcel (the building/s and land)
    • …….
    • the amount each owner will receive. This must be no less than the compensation value for their unit. 

    So you can certainly go ahead with the procedure to opt into the idea of selling, forming a strata renewal committee, developing a plan (ie getting an offer), considering the plan etc. Finally, you can go to the Land and Environment Court to have them approve the plan, which you may well end up doing in these circumstances.

    I can find nothing online which addresses your question directly (and I’m sure you’ve looked too), but if you look at the intent of the legislation – to promote urban renewal, and not to let the majority be held hostage by a minority, I’d like to think that the Land and Environment Court might think – well, the majority of the owners are going to be very happy (you’d hope) with the outcome; the one owner who isn’t is a commercial entity who leases the premises. With the money they obtain from the sale they can obtain other premises to let out, so why should they, as the minority, thwart the desires of both the owners and the intent of the legislation? (The only protection afforded by the government in the process is for minority etc groups.)

    This passage is also instructive (https://www.registrargeneral.nsw.gov.au/strata-renewal/renewal-process):

    The approval of the Land and Environment Court is an important and final safeguard in the strata renewal process and provides protection for all lot owners.

    The Court will initially seek to resolve any disputes through conciliation or mediation. It will consider whether the legislation has been properly followed. The Court can reject a plan if it was not developed in ‘good faith’.

    The Court will also examine the amount to be received by each owner under the plan. For a collective sale, or for dissenting owners in a redevelopment, the amount must be no less than the compensation value of the lot, which is based on the principles used to determine compensation under the Land Acquisition (Just Terms Compensation) Act 1991. This means that not only is the market value of the lot taken into account, but other matters such as the reasonable expenses attributable to disturbance and relocation (including legal costs and stamp duty) must also be taken into account.  The Court must also be provided with a current report by an independent valuer to assist in this process. The Court must be satisfied that the terms of settlement provided by the plan are just and equitable in all of the circumstances.

    This reads to me that if there’s a bucketload of money in it for all concerned, what’s the problem?

    I wonder if there is anything to be gleaned from the second reading speech etc that introduced the legislation?

    There may be wiser heads than mine out there.

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