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I am involved in a strata scheme that is falling apart.
The particular scheme is a mixture of apartments and a nursing home. Residents now occupy only 30% of apartments. The apartments are unsellable due, in part, to damage from subsidence due to a dysfunctional storm-water system.
The insurer for the strata scheme recently cancelled some policies and imposed large excesses on other policies after reading an engineering report on the buildings. The insurer has now indicated that it will only reinstate the policies if the repair work recommended by the engineer is carried out. The cost of repairs estimated by this engineer varies between two and three million dollars.
Several geotechnical reports over a period of ten years indicated that the complex had been built on unconsolidated fill and the only satisfactory long-term solution to continuing instability was demolition and rebuilding.
As most of the owners are pensioners, retirees or estates in limbo (due to unsellable apartments) very few will be able to contribute extra levies for repairs. Of those owners who responded to a postal poll on the future of the complex there was a 3:1 majority in favour of selling or winding up the strata over repairing.
The strata plan cannot function if un-insured; the insurer won't insure if the repairs aren't done and owners cannot afford the repairs. However it appears that the Strata Manager, who has assumed the role of Executive Committee, will press for extra levies to be approved by the OC.
Could this be a case where the strata plan is declared insolvent?
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