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Attempt 3
Problem perception number one: Building one sold to a single owner as a Deposit Plan property. Building two (lagging in construction phase by two months) sold as Strata Plan property, “off the plan”. During sales process, buyers asked, can we get a unit (lot) in building one? Answer, no they are all sold. Inference was that all Strata Plan lots, in first building, had been sold. First deception (some might say lie). An unfortunate history. Move on.
Problem perception number two: As outlined in my earlier hypothetical scenario, the developer secures the sale of one building to use as equity for funds to develop a second building, selling the second to fund a third and so on to the fourth. A fairly common and logical industry practice. However, sales of building two turn out to be abysmal. Financing hits a road bump. This could jeopardise the development company’s ongoing development dreams. Maybe even jeopardise the three shareholders’ personal fortunes. What can the development company do?
Well, selling six lots will make sales figures much more impressive for the financier and show that the end of the Interim Period (SSMA Section 4, Definitions, Initial Period (b)) has been reached. Another good sign for financiers. Nobody has been buying them, so how can these six be sold? Let’s have some trusted companies buy them.
The development company has three controlling entities, entity 1, entity 2 and entity 3. Each of those controlling entities has exclusive ownership of each of three separate proprietary limited companies. Entity 1 owns, exclusively, company A. Entity 2 owns, exclusively, company B . Entity 3 owns, exclusively, company C. Let’s have those three companies buy two lots each. That’s two problems solved. Financier gets positive sales data and part of original asset is now separated from developer liability End of hypothetical scenario.
Problem perception number three: The twelve owner occupiers are asking difficult questions about finances. Why are those expenses being charged to the Owners Corporation, when the Strata Manager was not advised of the need for the expenses, nor involved non-original owners in any approval process.
Oops, the budget estimates fell short on the amount of levy collections to pay the initial, mandatory insurances. But they have to be paid. OK, let’s just initiate a twelve month loan, in the name of the Owners Corporation, so SSMA Section 160 is not contravened.
In order to remove any owner occupier questions on financial issues, a General Meeting was called, with no other forum than an email vote on three motions. Confirmation of previous general meeting minutes. Reappointment of Strata Manager, up to First Annual General Meeting. That all financial matters be exclusively delegated to the Strata Manager, with zero input from owner occupiers. The motions offered no opportunity to debate, no opportunity to amend, just vote. The voting decision is overwhelming decision in favour of all three motions. Those in favour, 24 original owner votes, 6 lots of three new company owner votes, total 30. Those against, six owner occupiers. Not voted, 5 car park lots (original owner), 1 investor owner and 6 owner occupiers. SSMA, Schedule 1, Section 14 (2) & (3) was not applied.
Problem perception number four (the last for now): Life imitates hypotheses. New owners, companies A, B & C, bought the six lots in January 2021. Possibly satisfying conditions for an end to the Initial Period. No notice is issued, under SSMA Section 14 (1), by the original owner, nor their appointed Strata Manager. No additions are made to the Strata Roll.
Following the General Meeting, referred to in problem perception number three, above, when publishing the voting results for that meeting, the Strata manager reveals, for the very first time, that companies A, B & C have joined the Strata Roll and that the conditions for the end of the Initial Period have now been satisfied. Fifteen days notice is now given for the First Annual General Meeting.
There are two main concerns of the owner occupiers. First, the legitimacy of the three new owner companies, as separate to the original owners, when they do in fact share the same three entities. Second, does the emergence of these three company owners legitimately satisfy the end of the Initial Period?
Looking forward to your unscrambling of these explanations.