Wednesday, May 25, 2022

Changing unit entitlements

There are a number of reasons why changing unit entitlements may be required.

Unit entitlementsimpact more than just an owners’ voting rights within the strata. Unit entitlements also govern an owners’ contribution to strata levies or any special levy, council rates, land tax and the amount of claimable depreciation for investors. Errors in unit entitlements, even of a minor nature, can cost an owner thousands of dollars over the term of their ownership. 

Some of the reasons for changing unit entitlements

  • The developer made a ‘shady’ decision in the original allocation of unit entitlements
  • All lots have equal entitlements but lots are quite different in size and/or location
  • A collective sale is on the cards and the unit entitlement allocation has become unreasonable over time. (proceeds would be divided between individual unit owners according to their unit entitlements)
  • A change in permitted land use, such as rezoning.
  • A change of a lot to common property

Importantly, from 30 November 2016, all NSW strata schemes that are registered will require their unit entitlements to be apportioned on a market value basis. 

Prior to this date there was no requirement for the allocation to be based on a valuation of lots in the strata scheme. This self-assessed determination of unit entitlements left the door open for developers to manipulate unit entitlements to benefit certain lots.

How can you change unit entitlements?

Owners corporation

When a strata plan includes common property, the owners corporation are permitted to change the unit entitlement of lots in the scheme with the passing of a special resolution which must include a valuer’s certificate and the provision of an approved form (11).

See clause 4,Schedule 2 Strata Schemes Development Act 2015.

Civil and Administrative Tribunal 

The Strata Schemes Management Act 2015 (Section 236) allows NCATto order a reallocation of strata unit entitlements which were initially allocated unreasonably or overtime became unreasonable.

Revising unit entitlements at the conclusion of the Development

At the conclusion of a development scheme the owners corporation may consider that the schedule of unit entitlement does not reflect the market value of the lots, a revised schedule of unit entitlement may be lodged.

See section 90, Strata Schemes Development Act 2015.

You should consult a qualified property valuer and a strata lawyer when considering changing unit entitlements.

Strataville Editorial
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