An owner wants to change unit entitlements

I can only comment from a NSW perspective, but I think ACT would be similar.

It would require the consent of all owners to such a proposal. You can bet that any lot thst potentially faces higher levies is going to vote against the proposal.

Anecdotally there are many strata that have UEs somewhat out of whack.

This particularly applies to older strata, where more value was placed on lots closer to the ground ( less steps) to walk, whereas today lots on higher levels are more valued especially if they have a view.

Its quite expensive to redo UEs so there would need to be a very good reason to do so.

kaindub wrote:

It would require the consent of all owners to such a proposal.

As you say, that would be unlikely if not impossible to achieve – why would the person who benefits from this inequality wnat to change?  You can’t get turkeys to vote for Christmas.

However, there is a legal procedure but it would require presenting a compelling argument which would include surveying all the apartments – to which Mr Turkey would also object – and then hiring property lawyers to argue your case.

Then you would have to calculate to potential benefit versus the cost saving and most people would say it wasn’t worth the money or the hassle.

The only occasions on which I have heard of this being a cost-efficient exercise was where the developer had set the UEs for commercial premises on the ground floor at ludicrously low levels to attract purchasers.  The inequity was so obvious that it was hard for the shop owners to argue against the case.

I have seen an example where a few owners in a class B ACT development were pushing for a reallocation of unit entitlements due the inequity they perceived as resulting from some unit having been extended (within their unit area) while others had not been extended. Several ECs looked into it diligently at various times and always concluded that even a very substantial alteration was unlikely to make such a difference to the allocation of unit entitlements as to make it worth the expense and bother.

The bother involved was substantial. Not only did it require a special resolution, but also various steps had to be performed within tight time frames. Eg. One would have to have the OC agree to pay for a comprehensive valuation, which would be needed before the special resolution to reallocate in line with that valuation, without any guarantee of benefit or success, and then the valuation could not be more that some number of months old and still be used for the reallocation. If it took longer, the multi-step process would have to start again.

Note that the valuation for this purpose is not the same as the usual valuation for insurance purposes.

There was more to it, but that is the gist – very complicated, multi-step, expensive and potentially divisive without a guarantee of success for an only marginal potential improvement in fairness and equity.

Bristte wrote:

…Do you have a reference for “the valuation could not be more that some number of months old and still be used for the reallocation”? Haven’t seen that in the Act? What I have seen is that the special resolution must be not more than three months before the application.

From hazy memory (there was a lot of back and forth), I might be remembering the special resolution time frame. We came to the conclusion that we would need people to agree in principle with really knowing the effect because we would need agreement and cooperation to do the valuation, which would include a budget allocation for the valuation.

Only when we had the valuation, could we have put a motion at a second meeting to reallocate unit entitlements according to a new schedule based on that valuation. Otherwise, how could we expect to get a special resolution passed for a change of unknown effect?

Also, how much of this could the Executive (Strata) Committee do on their own? Could the EC commission the comprehensive valuation without reference to the full OC?

Not much, I think. The valuation would be a non-trivial expense so it would need to have been included in an OC-approved budget. Also, you would probably need the cooperation of all members to have access to all units, or at least more of them than you would need for an insurance valuation.

p.s. In relation to “Note that the valuation for this purpose is not the same as the usual valuation for insurance purposes”, what sort of valuation are we talking about? The Act refers to “the improved value of each unit relative to each other unit”.

A valuation for insurance purposes is simpler and cheaper. It is really about just the cost to rebuild, which is a completely different question from the relative sale values of the units. Eg. Two identical units might cost exactly the same to rebuild if they burned down but one might be worth more than the other due to a more desirable location eg. on elevated ground away from the street next to a park vs on a noisy street corner.

In researching this, I found one strata managing company’s website with the following statement: “The allocation is typically based on various factors such as the size, location, and features of each lot. Larger or more strategically positioned lots may have a higher Unit Entitlement.” Does this sound right to you? It doesn’t sound formulaic to me, and is more in keeping with my interpretation of “improved value”.

That sounds right. Where I am, we have units with the same floor plan but different UEs due to location and we have units in similar location and with same floor area but different plans, and the plans of one style were valued more highly than the other style.