The sale of common property

Morris – if the Owners Corporation (O/C) of your Plan wants to handle the sale / purchase properly, so that the Owner involved bears the costs of acquiring the additional land portion, has that shown on their Property Title instead of on the O/C’s Title, and has the Unit Entitlement for their Lot adjusted to reflect the resultant increase in value due to the extra land and the extension, then the process (in NSW) is:

1. All Owners need to agree to the sale and to the proposed extension via resolutions at a General Meeting, which I believe needs to be unanimous for the former, so it might as well incorporate the consent for the extension as an “addition to the common property”. 
2. A Valuer needs to determine the value of the acquired land and of the extended Lot as proposed, and the Unit Entitlement for the latter.
3. A Surveyor needs to prepare a Plan of Strata Sub Division showing the reduction to the Common Property and the extent of new (larger) Lot.
4. The Valuer’s Report and the Surveyor’s Plan need to be submitted to Land & Property Information (incorporating the former Land Titles Office) for Registration of the changes to the Common Property and to the Owner’s Lot. 

The Owner concerned would pay the O/C for the extra land based on the valuation, for the costs of the valuation, the survey/plan, and for the Registration/s.

Of course your O/C needs to ensure that full access to the pump area is formalised.

The Owner probably won’t wish to proceed now, but if they do there’s a bit more to be done with the inclusions in the O/C’s consent to the extension, but that may best be covered later .  

Jimmy, if by a “lease” you mean a licence under Cl 65B, then that would indeed be a less cumbersome means of allowing the Owner to use as opposed to own a portion of the Common Property.

I’m just not sure about that Owner then extending the built-construction of their Lot onto the area covered by a licence, after all the proposal is not for a fairly simple construction such as a tacked-on patio or a carport but rather for the more integrated and substantial construction of a bathroom and its associated plumbing, drainage, power etc.

Not saying it can’t be done under a licence, but just that I wouldn’t do it; but then I am the arch conservative and a stickler for gold-plating everything (a euphemism for doing it properly)!

Relauctant as I am to contradict the Mighty Cetacian, I’m tending to agree with your SM.

The closest I could find to a reference was under the Strata Schemes (Freehold Development) Act 

25   Transfer or lease of common property

(1)  A body corporate may, pursuant to a special resolution, execute a transfer or lease of common property other than common property the subject of a lease accepted or acquired by the body corporate under section 19 (2).

Any more authoritative views gladly accepted.

Granting an owner exclusive use of an area of common property and transferring title to an area of common property are two different things.  Although they may have the same effect for most purposes, the legal requirements and consequences are different.

Granting exclusive use of part of the common property can be done by way of a by-law which requires approval by special resolution.  You would want to make sure that the by-law set out in enough detail who was responsible for what in relation to that part of the common property. You would also want to look at requiring the person to pay the OC an amount of money for something which is in effect perpetual.

However, the property remains the property of the OC at law, i.e. the OC is the party on the title and that means certain things can’t be done with it, for example the person who has exclusive use couldn’t take out a mortgage using that part of the property as security.

If the OC wanted to sell and transfer the title of part of the common property there are a number of steps that would have to be taken, including a plan of subdivision that is lodged with the Titles Office, as outlined by Whale.  And I think that does need unanimous resolution because effectively you are taking something away that the OC effectively holds on trust for each of the owners forever, so all the owners have to agree.  You would think the Act would be clearer on that.

Thanks for all the replies – however I still remain confused as to the need for a 75% or unanimous vote to sell common property. What sort of issues require a unanimous vote?

The proposed common property sale in my Strata has followed all the guidelines and requirements however the legal costs incurred by the EC and SM to do so, that is facilitate legally and correctly the investigation, transaction & transfer of title will have outweighed the cost of the income from the sale by some $5000!! If the sale of the common property does NOT go ahead, the Owners Corp will lose the $20,000 spent in legal fees to date.

I find it unacceptable – and unbelievable – that our EC and or SM allowed the Owners Corp to run up bills of $20,000 in legals and other expenses etc to investigate a common property sale of $15,000 when costs were only recoverable if the sale proceeded. Surely they should have stated up front that all expenses incurred were the responsibility of the  Lot Owners requesting the purchase.

If the $15,000 common property sale is NOT allowed – the Owners Corp will be $20,000 out of pocket. 

If the $15,000 common property sale is allowed – the Owners Corp recover their $20,000 legal expenses.

An EGM has been called and all Owners have been encouraged to support the sale. To maintain some financial balance, it seems as if we have no options, yet I feel the EC and SM have questions to answer in regard to the position they have created.

Your thoughts, comments or suggestions would be appreciated? 

For a sale I would expect you would not only require unanimous vote but unanimous agreement from those who did not vote as well. The common property belongs to everyone and so every owner needs to agree to the sale.

If you have already spent $20,000 and the sale has not completed yet your costs are going to be higher than this. Also if you have spent $20,000 on advise why haven’t they told you what sort of approval is needed.

Seems to me you should cut your losses and abandon the sale because the buyer is never going to pay $15,000 plus costs $20,000 +.

The buyer should have agreed to pay these costs before any spending was done not the EC.

Cappy in fact this spending is illegal as far as I can see if a motion approving this spending was not passed by the OC.

80D Legal action to be approved by general meeting
(1) An owners corporation or executive committee of an owners corporation must not seek legal advice or the provision of any other legal services, or initiate legal action, for which any payment may be required unless a resolution is passed at a general meeting of the owners corporation approving the seeking of the advice or services or the taking of that action.

So unless a motion was passed authorizeing this spending the OC have no liability to pay. The EC do not have the power to initiate this spending

BUT The SM and whoever authorized this on the EC are liable for the costs incurred.

Hi All, what if.. alterations where already made to CP without consent and the property is sold. The illegal CP acquired to the value of 50 or so sq. metres and the OC and new owners are trying to resolve? Happy to sell, lease, exclusive use or whatever. Can the OC demand back pay of levies as unit entitlements are greatly increased and have been unpaid for a few years?

Cheers CBF