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  • #46008
    AvatarBroccolian
    Flatchatter

    We have enjoyed your articles in the Financial Review and it occurred to me that you might like to discuss an issue which currently confronts our body corporate which is responsible for a block of 14 units in an inner Melbourne suburb. The block is at least 40 years old and contains 1 and 2 bedroom units.
    A little over 12 months ago there was an unsolicited offer for the land and all the units. The offer was through an agent but one of the owners seems to have some sort of inside knowledge of the offer and perhaps even a relationship with the agent. The offer was greater than the total value if all the units were sold separately.
    Since then there has been a second offer, from a different prospective buyer, possibly as a result of an approach from one of the owners.
    Of the owners, about one third are very keen to sell. At least another third would entertain the offers. Of the balance, there is one person who, at this point in time, does not want to sell at all (this is a person who was one of the original owners).
    Issues that have come up over the last 12 months or so have included the following:
    •       Concern at the relationship between the person driving the sale and the agent and possible buyer
    •       Difficulties in getting all the owners together
    •       Concern that the agent (for the first offer)  is in line for a substantial commission after doing very little work
    •       Understanding of the issues/legalities of selling a block of units eg it is our understanding that the sale has to be approved by all owners. This is not the same in all states.
    •       Some owners are concerned that undue pressure may be exerted on the one owner that definitely does not want to sell
    •       Difficulties in obtaining good, independent valuations and advice.
    For our part, we are probably in the third group. There is no real reason for us to sell at this point in time. We’d appreciate Flatchatters’ thoughts on this.

    #46019
    Jimmy-TJimmy-T
    Keymaster

    Unlike NSW, Victoria still requires a unanimous vote for a decision to sell off all the units and the common property in an apartment block (according to Section 32 (g) of the Subdivisions Act 1988) and according to this factsheet from Consumer Affairs Victoria, a unanimous vote means means a vote all owners, not just all owners who vote.

    So even if you were in the pro-selling group, you’d have to persuade the one person who has no interest in moving under any circumstances, regardless of the deal offered.

    There are probably exceptional circumstances – such as the building has become unviable or uninhabitable – under which you could take legal action to force the hold-outs’ hands.  But that doesn’t seem like the situation here.

    Apart from all that, any offers have to be worth the current owners while.  You’d be looking at not just a premium price, but one that made it worth all the hassle, plus the opportunity to buy somewhere better than where you are currently living, so I’d say one-and-a half to two times current values would be your starting point.

    I wouldn’t even worry about commissions and who is in cahoots with whom.  It all comes down to the bottom line of how much the developer is going to make and how much they are going to pay owners to get them to sell the whole block.

    One question would be, how much would it cost for you to buy a unit in the new block.

    One thing for sure, if you move forward with this but don’t act as a group, you will get screwed.

    And, as I said, unless the hold-out yields or the law changes, nothing will happen anyway.

     

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