This is a short discussion on the restrictions imposed on the voting rights of developers of strata schemes in NSW. NOTE: The transcript has been updated to correct my maths and, as it was recorded before the Strata Legislation Amendment Act 2023 commenced, to account for changes under that Act. Please read the transcript in relation to 2 lot schemes.

TRANSCRIPT

Hi. It’s Allison Benson from Thoughts of a Strata Lawyer talking about voting restrictions on the original owner of the strata scheme. This often comes up with new schemes where the original owner, also sometimes called the developer, is trying to use their voting power to force through a resolution.

There are key restrictions on the original owner’s voting rights and these are triggered where the original owner owns lots that have not less than half the aggregate unit entitlements for the scheme. In everyday terms where the original owner owns lots that have at least half the total unit entitlements for the scheme. By way of example, take a 10 lot scheme where each lot has one unit entitlement making a total of 10 unit entitlements for the scheme. The restrictions apply where the original owner owns at least five of the lots meaning they have at least 50% of the total unit entitlements for the scheme.

Assuming the original owner owns lots with at least 50% of the total unit entitlements for the scheme and the scheme has more than 2 lots then their voting rights are restricted for the following types of motions:
1. on motions requiring a special resolution (due to section 5(2A) of the Strata Schemes Management Act 2015); and
2. on motions to elect the strata committee, to appoint officers of the owners corporation (that is the treasurer, chairperson or secretary) or to appoint a strata managing agent (due to schedule 1, clause 14(2) of the Act); and
3. on motions where a poll vote is called (due to schedule 1, clause 14 (3) of the Act).
In all three cases the value of the vote in respect of their lots is reduced by two-thirds ignoring any fraction. In our example above, the value of the original owners 5 lots with 5 unit entitlements would be reduced by two-thirds to be 16% (ignoring fractions) rather than 50%.

The original owner’s voting rights are not restricted if it is a two lot strata scheme.

The purpose of these restrictions are to prevent the original owner having an overwhelming influence on the decisions of the owners corporation in schemes larger than two lot schemes.

There are other restrictions on the original owner or developer of the scheme in the Act and if you or your scheme is looking at its rights then legal advice specific to your situation should be sought.