Hi, everyone, it’s Allison Benson here from Thoughts From a Strata Lawyer.

Today, I’m going to give you a little bit of a whirlwind tour of a really, well, to me, exciting series of three cases. Those cases are all about strata renewal in New South Wales.

Now, for a really, really long time, we have only had one case that took the 2015 reforms under Part 10 of the Strata Schemes Development Act 2015 and ran with them for strata renewals under that Act. Now we’ve had a second case that’s gone, or a second matter that’s gone, all the way through the process. And in fact, there’s actually been a series of three cases, all involving this one development.

So what was it?

It’s a development called the Chimes. It’s in Potts Point. It’s a 107 lot scheme. There were at the date the application was made for orders to give effective the strata renewal plan. approximately 20 dissenting lot owners. Throughout the course of the application process in the Land and Environment Court (“LEC”) that whittled itself down until those dissenting orders, all but one, dissenting owners, I should say, all but one had become supporting owners. So we still had one dissenting owner.

So very different in that sense from the previous decision of Justice Pain. I discussed this case here: https://allisonbensonau.com/2019/08/14/nsws-first-strata-renewal-decision-unpacked-procedural-tips-for-your-scheme/

The other difference to the decision of Justice Pain that this was for a strata redevelopment, not for a collective sale.

A strata redevelopment, basically, is that the whole scheme is going to be developed in such a way that the strata plan has to be terminated and a new strata plan instituted or registered when the development is complete.

So what happened?

Well, an application was made after all of the steps (and some would say some rather tedious, long steps) under Part 10 of the Strata Schemes Development Act 2015 were taken. An application was made to the LEC. Then the dissenting lot owners, but one of the dissenting lot owners, throughout the course of proceedings, eventually agreed to either enter into options for sale or entered into contracts for sale of their lots with the proposed developer.

What that meant is, we needed to have an amended application to give effect to a different purchase price for the dissenting lot owner because the contracts with the other dissenting or the former dissenting lot owners, I should say, had increased the price (of the dissenting lot owner’s lot).

So there was an amended application, that amended application included the new support notices from the formerly dissenting lot owners. There was also a a discussion, about could the contractual relationship between the lot owners and the potential purchasers where there were options for sale and there were contracts for sale between between the purchaser and lot owners, could that be a breach of the good faith provisions that would prevent the strata renewal plan prepared in good faith?

Well, no, it was found a mere contractual relationship by itself didn’t breach the ability of the strata renewal plan to be prepared in good faith. So we’ve got some decisions around that. We have got some feedback around how options and sales contracts are to be considered when we’re looking at strata renewal plans and whether a change to a strata renewal plan is of a minor nature.

In this case, there had to be a change to the dissenting, lot owner’s purchase price. It was actually, it was an increase. It was found that because there was only one lot sales price that was increasing, that t(the change) was of a minor nature. And so the LEC was empowered to make that particular change .

So really exciting news. There was, in the second case, which was in April, that was where the orders to give effect to the strata renewal plan for the redevelopment was approved.

The third case came about, and it’s all the same scheme I should keep emphasizing, because the dissenting lot owner had not signed their contract for sale. And in this case, we get some good precedent to say that, okay, well, we know the Strata Scheme Development Act, effectively gives dissenting lot owners a bit of a free kick because unless the LEC orders otherwise, their costs are to be paid by the Owners Corporation. In the third of these Chimes cases, the LEC considered whether an order to appoint a trustee to sell the lot (the dissenting lot owner’s lot on behalf of the dissenting lot owner) was that going to be coming under the cost order provisions or, because it’s an ancillary or consequential order, does the LEC have discretion just to make an order as it normally would in the sake of costs?

So it did. Effectively, the dissenting lot owner was ordered to pay the owners corporation’s costs of appointing a trustee so that the trustee could sign and oversee the sale of the dissenting lot. The trustees’ costs were also to be paid out of the proceeds of sale of the dissenting owner’s lot, and the LEC decided this way because it said it’s not fair on the complying lot owners, so those lot owners who had complied with the LEC’s orders to sell their lots, it wasn’t fair upon them for a dissenting lot owner through their conduct of not signing a contract and not complying with the orders, it wasn’t fair to the supporting and complying lot owners that they would then have to pay the dissenting lot owners costs.

So a nice tidy decision for us here and a great outcome for the majority lot owners.

As always, if you’re looking at doing something like this, please seek legal advice, particularly in this area because the devil is in the details. Thank you.