Understanding The New QLD Strata Laws On Scheme Termination

One of the more significant reforms in the recent changes to body corporate legislation enables the termination of economically unviable community titles schemes, in an effort to facilitate renewal and redevelopment efforts.

Termination Mechanisms:

Previously, termination of a Scheme required unanimous support from all lot owners, or a court order. The new laws introduce a new mechanism for scheme termination based on ‘economic reasons’. Under this provision, termination can proceed with the support of 75% of all lot owners voting in favour of the motion.

The legislation defines ‘economic reasons’ to encompass scenarios where the Scheme is not financially viable to sustain, especially if all lots are utilised for commercial purposes, or if the Scheme won’t be economically feasible within five years to undertake necessary repairs or maintenance, irrespective of whether the Scheme includes residential uses.

These reforms align Queensland with New South Wales’ approach to terminating Schemes post the 2016 reforms to the Strata Schemes Development Act 2015 (NSW).

Termination Process: The new process for terminating uneconomic Schemes centres on balancing the property rights of lot owners. Key steps include:

  1. Drafting a ‘pre-termination report’ to aid the body corporate in assessing economic reasons for termination.
  2. Holding a general meeting where an ‘economic reasons resolution’ is passed, signalling acknowledgment of economic grounds for termination.
  3. If passed, the body corporate may proceed with a termination plan resolution, necessitating the preparation of a termination plan detailing the potential process for sale and termination.
  4. Providing the termination plan to lot owners for consideration, followed by a general meeting to vote on its implementation; a 75% majority vote is required for termination to proceed.
  5. Notifying relevant parties and appointing a facilitator to assist in implementing the termination plan, ultimately leading to the Scheme’s dissolution through lodging relevant documents under the Land Title Act 1994 (Qld).

 

For cases where economic reasons don’t apply, termination would still require unanimous lot owner support or a court order.

Property Rights Implications:

The reforms aim to strike a balance between termination benefits and respecting individual property rights. By facilitating the renewal and redevelopment of ageing or uneconomic Schemes, the reforms aim to expand housing opportunities. However, there are potential implications, especially concerning involuntary lot sales and financial impacts on service providers and contractors.

To address these concerns, the Act proposes:

  1. Requirements for professional reports and information to inform decisions regarding economic reasons.
  2. Minimum compensation requirements for affected parties.
  3. Review and dispute resolution mechanisms, including provisions to mitigate costs for lot owners.
  4. Broad discretion for the District Court in deciding termination orders in disputes.
  5. Prohibiting by-laws banning animals or imposing restrictions on their ownership.

 

Feel free to reach out with any questions or concerns you may have regarding the changes.

(Please note that the building displayed in this article’s feature image is a general representation of a strata scheme, it is not a representation of a building that is “economically unviable”)

How Can We Help You?

Call us on 07 3435 5300 and one of our friendly consultants will help