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Hello
We have a complex with one strata plan for both townhouses and apartments.
The townhouses pay higher levies due to larger unit entitlements and are subject to escalating apartment costs, which drain funds. Townhouses receive materially less benefit and contribute to many services for which there is no benefit.
How can we work through this structural inequity?
Is it unreasonable for all owners to have costs aligned with benefits? Every owner should pay for what they actually use.
Common benefits are basically limited to insurance, some common area gardening and smoke detector annual checks.
All fire safety expenditure other than smoke detector checks is costs exclusively associated with the apartments. Other exclusively associated costs to note are cleaning, basement, electricity, general electrical works, intercom failures, and fobs, to name a few.
What can we do?
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In NSW it is possible to do this https://www.bannermans.com.au/library/change-of-unit-entitlements/
It seems that unit entitlements are going to usually based on valuation, and it is probable that valuations of town houses will be greater and so they pay more.
The Bannerman article is pretty comprehensive but raises issue about control of the scheme as well as the allocated levies. In this case, as well as paying more, the townhouse owners have greater voting power and the Tribunal might not want to upset the balance.
One option might (an I stress might) be to get 75 per cent of owners to agree to extinguish the existing scheme and create two new schemes under a Community Title arrangement. I don’t know how feasible that is and it strikes me that it’s going to be hard to get the apartment owners to agree to any changes as they will result in legal costs followed by increased levies on a permanent basis. You can’t get turkeys to vote for Christmas.
One option might be to pass by-laws isolating apartment-only payments from townhouse-only payments. Either way, speak to an experienced strata lawyer to explore the feasibility and costs of any options.
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In theory, changing the value of Unit Entitlements, can be done, but in practice, this is mostly impossible, because of the need to get all the owners to co-operate to arrange it (See NSW SSMA s.236). When you buy into a strata plan building, you have to consider that all the common property is owned and paid for by the Owners Corporation split among owners according to Unit Entitlements. Buying a town house in a mixed apartment/house development usually depresses the price of the town houses as a consequence.
The principle of strata law is that common property is owned collectively. So the argument that because you own a ground floor lot, you shouldn’t have to pay to maintain the lift, as one (common) example, does not fly.
However there are arrangements where costs can be shared more equally by creating exclusive use by-laws, which allocate some items of common property to a sub-set of owners, along with their costs. This is often done with mixed commercial/residential strata plans, where the escalators and air conditioning maintenance for the commercial lots is funded just by the commercial lots. So the owners, if the majority are interested, could investigate that, which will require a strata lawyer to draft the by-laws. However, again adopting this will require most owners to agree – in NSW it will require a special resolution (ie majority approval and less than a quarter voting against) and the written approval of all the lot owners affected by the by-law. So any owner disadvantaged by the by-law might be able to derail it. These arrangements are often made in new strata buildings, with the developer approving the excusive use by-laws at the start. These are then difficult to change for the same reasons, as the building ages.