Selling or leasing common property

I can see why your SM would suggest leasing. There would be no need to adjust unit entitlements, for a start, and I’m sure there could be some way of ensuring that owners could on-sell the lease with their apartments at some time in the future.

As far as valuations go, there is a formula established by the Supreme Court for purchasing Common Property to improve existing lots.  Basically you get professional estimates of how much the property will be worth with the addition of the terrace and how much it is is worth now.  You subtract the latter from the former, and also take off any costs associated with the work and remainder is what the lot owners pays the OC.

So I would be tempted to use that principle, only with rents.  Get valuations of how much it would cost to rent the apartments as is, and then with the terrace/balconies, and subtract one from the other.  The difference would be the basis for your lease.  The OC pays to fix up the balconies and the lot owner pays for installing the doors etc (to your approved design).

You could then take that money from the leased space and go to a strata finance company like Lannocks and find out how much that would get you in a loan to pay for some of the work you need to do. 

Selling the space may sound easier but it really isn’t when you get into things like adjusting unit entitlements for the whole building.

Even if you “sold” them, they would probably still be considered common property in regard to structural maintenance (and you wouldn't want it any other way).  However you could write into the leases that the lot owners would have to pay for any damage done, for instance, to the seal and restrict them from doing anything to the space that would interfere with the integrity of the structure. 

I think, in fact, all it requires is a special resolution (75 percent) but you have to make sure that no one is being unfairly disadvantaged ( I think the term is “defrauding the minority”).  In other words, if there is a benefit to some owners in buying common property, a fair amount has to flow back to all owners, even if the majority agrees otherwise.  That’s why the Supreme Court established the formula described above.

The answer is in the detail and the ‘deal’ that the ec could negotiate with the respective lot owners/party that you are looking to sell the rights to.

It could be a contract condition that the purchaser makes the area good or ‘fit for purpose’ and factored into the purchase price.

From the purchaser’s perspective I would envisage a strata subdivision would be better as it is more secure title.

Keep in mind which ever way the OC wishes to go you will need to lodge a DA and get council approval.

What Mr Strata says is probably correct but it involves a long and involved process that would require a reassignment of Unit Entitlements for the whole building which is a long and involved process in itself.

However, it would seem time is of the essence since this chunk of common property is deteriorating and the Owners Corporation has an obligation to repair it (and no money with which to do so).

A long-term transferable lease of, say 30 years, linked to CPI, would provide the necessary security for potential purchasers.

I would be talking to Lannocks or Strata Finance about a loan to allow you to get the work done, and to the owners of the lots about leasing the space.  That way it’s possible to get this work done quickly – which is the OC’s legal responsibility – without having to impose a special levy.

If all owners involved want to buy the balconies, then they’d have to share the cost of the new surveys and legals etc etc and, as the prvious posters have said, the cost of the repairs could be factored into the price.

By the way the structure of these balconies would still be common property and it’s not always a good idea to pass their repair and maintenance on to individual owners.  As you’ll see from other posts to this Forum, some owners just don’t bother with maintenance until it’s too late and the damage is done.

This forum has been so helpful. We are in a similar situation – one of the units in our block wants to buy an unuseable parking space to turn in to a garden. No-one is opposed to this in principle, but they have been extremely difficult when negotiating a price. First they wanted us to sign it over to them for free. Then they wanted to pay “under the table” to avoid stamp duty. Then they wanted to pay us but for us not to tell the owners of the other unit (!!!) – it is a block of three – so they could avoid paying us.

I am really relieved to find out that there is an agreed formula for pricing this kind of thing from the Supreme Court – can you let me know where I would find a copy so I can refer to it?

Also, I am worried that the owner who wants to buy the land has gone to the other owner with some story about not being able to afford it, or may be trying to do a deal “under the table” (since he already did that to us) and that the two of them will be able to outvote us at the upcoming AGM. Is this possible? Or are their some kind of minority shareholder rights? I was hoping it would have to be a unanimous resolution, but have no idea where to find this kind of information. How does voting work when it is a Strata of 3?