Rules which enable individual owners of multi-residential property to single-handedly block moves to terminate community title schemes in Queensland are preventing necessary building upgrades from taking place and should be changed, according to a new report.
In their Strata Title Scheme Termination report, Griffith University researchers Dr Sacha Reid and Ms Melisa Pocock have called upon the Queensland government to change current strata title law to enable strata title schemes to be terminated upon the approval of owners who own at least 75 per cent of all lots in the scheme.
In their report, Reid and Pocock argue that current laws whereby schemes can be terminated only by either unanimous (100 per cent) consent or by court order are overly restrictive and are creating a number of problems.
For one thing, it was enabling termination proposals, which typically occur where a developer wishes to purchase an entire complex with the intent of redevelopment, to be blocked by individual ‘hold outs’ even though such proposals may be supported by a clear majority of unit holders.
This could enable these owners to make excessive and unreasonable demands regarding the price at which their lot would be sold, the researchers argued.
In one such case, a ‘hold out’ owner of a lot which was part of a block of five units on the Gold Coast was reportedly able to secure a price which was 2.76 times what a developer wanting to purchase all units on the block claims represented fair valuation and 1.51 times the price paid to other lot owners.
In this case, the owner reportedly held out for a long and protracted battle despite the fact that the building was aging and in need of significant refurbishment in order to be brought back up to code – the site remaining largely empty and barricaded during the period of negotiation.
Cases like this, the report argues, illustrate the extent to which individual holdouts can unduly delay the purchase of entire blocks of units by developers for redevelopment purposes or in some cases dissuade developers from undertaking such activity altogether.
This has flow on effects, including the holding up of new housing supply, serving as a barrier to urban regeneration and renewal and impacts associated with having property boarded up for long periods of time including the potential to encourage crime, the report states.
Both around the world and in Australia, rules relating to thresholds for termination of community title agreements vary.
Whilst most states require all lot owners to agree before a termination can proceed, New South Wales requires only 75 per cent whilst the Northern Territory adopts a sliding scale based on the age of the building and the size of the scheme in question.
Internationally, the United Kingdom, most states in the US and Singapore adopt and 80 per cent threshold (although Singapore’s increases to 90 per cent for newer buildings) whilst New Zealand adopts a threshold of 75 per cent.
Property Council of Australia Queensland executive director Chris Mountford said the report demonstrates a need for Queensland to follow NSW’s lead and move toward 75 per cent acceptance thresholds for strata title scheme termination.
“Under the Body Corporate and Community Management Act 1997, the unanimous consent of all the lot holders in a community title scheme is required to terminate a scheme,” Mountford said in a statement. “The consequence of this requirement is that many sites that are reaching the end of their economic life are having redevelopment opportunities thwarted by lone objectors.
“With close to a million Queenslanders now living within community title scheme complexes the Government must move to protect the economic future of these assets. A move to a 75 per cent threshold would ensure that lone obstinate objectors will not be able to trump the will of an overwhelming majority of lot holders, creating jobs and catalysing urban renewal.”