Mascot owners’ plan to walk away is blocked

Mascot-misery.jpg

Owners in the Mascot tower have failed in their efforts to have the collective sale of the block authorised so that they could sell the site to the highest bidder – despite a minority of owners not wishing to do so – and clear off what they could of their debts and walk away from the rest.

Now they have called on NSW Premier Chris Minns to step in and offer a resolution to their considerable woes, as he promised to do during Labor’s state election campaign.

As the Mascot owners see it, it was the failure of the NSW government to enforce its own inspection and building codes that allowed the defects to occur in the first place.

You can’t fault the Mascot Towers owners from wanting to abandon their benighted building and get on with their lives. The block that was going to be their homes or investments lies empty due to structural failures that emerged five years ago and rendered it too dangerous for occupation.

At the end of their tether, a majority of Mascot owners wanted to liquidate the strata scheme and sell the site collectively at literally a knock-down price: they might have ended up homeless but at least they’d possibly be debt-free and have no ongoing financial commitments.

However, the NSW Supreme Court ruled last week that the state’s collective strata sale and renewal legislation, which allows 75 per cent of owners to compel the other 25 percent to agree to the joint sale of their building for demolition, was an inappropriate instrument for this purpose.

This was especially so since it had been shown that the block could be repaired for much less than was originally thought and that the repaired value of the block might exceed the debts accrued.

The problem is that this would still cost many, many millions to achieve and the Mascot owners have neither the financial nor emotional reserves to embark on another rescue plan.

Through no fault of their own, the Mascot Towers residents have been left with no homes, mounting debts and, adding insult to injury, continuing levies payments for homes in which they can’t live.

The following is an unedited but understandably emotional press release issued by Mascot Towers strata owners:

Mascot Towers owners lose in bid to dissolve strata plan

In a devastating blow to Mascot Towers owners, the Supreme Court of NSW has denied the owners’ application to wind up their strata scheme so that they could have a liquidator pursue a collective sale of the 2 towers to a developer (who could then proceed to either knock-down and redevelop or remediate the property).

The decision means that the owners remain stuck in a nightmarish Catch-22 where they cannot occupy the building because it is unsafe, cannot afford to remediate it and, now, they cannot take the final steps to sell the building as a collective sale to a developer.

Desperate and exhausted owners now face certain financial ruin and permanent debt-enslavement to the banks and to Lannock Strata Finance as they remain liable to pay strata levies and will be liable for mounting debts with no ability to exit the pain and realise any sort of value in their property.

After exhausting its legal avenues, the last hope for the owners is that the NSW Labour Government will finally deliver on Labor’s election promise to do what is fair and right and provide support certainty.

Chris Minns, campaigned alongside the Mascot Owners and told them and voters that he would partner with owners to remediate the building and allow them to safely return. He promised a loan or to act as guarantor for the loan to fix the building. Now that the owners are effectively prevented from selling the towers in a single sale, the Government needs to finally deliver on its promise.

Why the owners needed the Court to intervene

In 2020, the Owners sued the developers and engineers responsible for the adjoining development of Peak Towers which involved a deep excavated basement directly abutting Mascot Towers.

The primary focus of the Owners claim was the structural engineer, ACE (Australian Consulting Engineers) whom, it was alleged by the Owners, provided negligent advice causing the failure of the shoring system and the loss of support under Mascot Towers and the resultant cracking to the basement slabs and support beams.

At that time, ACE was facing numerous lawsuits for negligent advice across Sydney including for its involvement in Toplace’s developments and its director Anthony Hasham had been referred by the Building Commissioner to Engineers Australia for investigations into [alleged] professional misconduct (and HERE).

Ultimately, ACE was tipped into liquidation and the owners were left to recover what was left from ACE’s professional indemnity insurance policy (which was insufficient to meet the costs of rectification). A confidential settlement [was] reached in 2022.

The NSW Government has a serious case to answer for creating and presiding over a system that allowed engineers to provide advice and certifications on deep excavations next to existing multi-storey apartments with no minimum levels of insurance coverage. This leaves helpless owners completely high and dry when the company is wound-up because it can’t pay its debts and there is no proper insurance backing.

The Owners then tried to sell the towers in April 2021 after receiving a firm offer from a developer. However, as is inevitable with large-scale residential developments, obtaining the requisite unanimous approval from 132 lot owners was a bridge too far. The deal fell over.

At the time many owners were entering bankruptcy or contemplating that course of action if the property could not be sold, significant mental health issues were prevalent amongst the ownership

As reported in October 20233 the Building Commissioner was separately working to support the owners in a sale of the building by securing debt-mitigation agreements with the main creditors, Lannock Strata Finance and the banks holding mortgages over various units. Despite numerous promises and assurances, those attempts by Mr Chandler were unsuccessful – leaving the owners now with no ability to sell and extract themselves from all of the mounting debt.

The Court considered the expert evidence from both parties and found  that remediation was viable and that it would provide the Owners with a better price (more than double the value) than if the Owners had accepted the earlier offer to sell the building in an unmediated state.

In the face of this decision by the Court, the NSW Government cannot now reasonably maintain that remediation is not a viable option.

A Government problem requires a Government solution

A Government problem requires a Government solution. To avoid further catastrophe for the owners, the Mascot owners need and deserve a proper rescue package that acknowledges and corrects the wrongs of the past and which ensures the owners have some hope of rebuilding their shattered lives.

The time has come for Premier Minns to honour his commitment and to either fund the works, provide an alternative low-interest loan or otherwise guarantee the payment of the loan so that owners can move back into their homes.

When Labor first met with owners and made its election promise, Courtney Houssos publicly confirmed that the previous Coalition Government should have offered low-interest loans to residents when they were evacuated more than 4 years ago.

“We think that it’s important that (the owners) retain the ownership of the building, and allow the capital increase in the assets to be realised once its remediated” she said.

The owners completely agree and press Premier Minns and Minister Chanthivong to make good on their promises.

If the Government is not prepared to back a remediation solution then it ought to present a one-off rescue payment or buy-back scheme to support an immediate sale that would enable the owners to realise the value of their properties (and which would be capable of garnering unanimous support of all lot owners – including the commercial lots).

Whatever happens, the owners of Mascot Towers cannot wait any longer.

NB: Lannock Strata Finance is a long-term sponsor of this website.

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    Jimmy-T
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      Owners in the Mascot tower have failed in their efforts to have the collective sale of the block authorised so that they could sell the site to the hi
      [See the full post at: Mascot owners’ plan to walk away is blocked]

      The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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