Tuesday, May 24, 2022

QLD Strata Collective Sale Precedent

QLD Strata Collective Sale Precedent

Nobby’s Outlook saga sets strata collective sale precedent

When it comes to strata, the benefits are plenty.

As we know, it means you hold your own title within often big and affordable apartment blocks – you’re the owner.  But you then have a legal entity that takes care of general maintenance and major repairs, not to mention a great sense of community and security.

What’s not to love?

Well, how about this for a major ‘con’ … a three-decades old bitter dispute that cost hundreds of thousands of dollars in lawyer fees, and bucket loads of time and tears.

So what happened?

Welcome to Nobby’s Outlook.  Located in Miami, just south of Surfers Paradise, it’s an apartment block that contains 46 otherwise completely normal apartments.  It overlooks a couple of pools and it’s a pebble’s throw from the beach. Perfect!

Actually, it’s been an awful lot of trouble.  And it’s trouble that dates back years.

Nobby’s Outlook may sound like Queensland heaven, but many of the assets at the site needed desperate upgrades and repairs dating all the way back to the 70s.

The repair quotes came in at just under $4 million, or $100,000 per apartment – a hefty bill indeed.  Too much, as it turned out, for the Body Corporate.

Desperate for a solution, plenty of options were explored, and many of them involved bringing in property developers.  In 2010, one developer offered a whopping $40 million for the property, but a single apartment owner said no.

And so it wasn’t sold.  Rejected offers for Nobby’s Outlook, a prime location on the Gold Coast, actually date all the way back to the 80s, when property prices were booming.

Desperate for a solution, the Body Corporate moved to terminate the strata titles scheme.

But even that hit a terminal snag.  Community titles schemes like the one at Nobby’s Outlook actually can’t be terminated unless there is “unanimous agreement” – something that is often practically impossible in a sizeable and diverse community.

And so in 2013 it went to the Brisbane District Court – because, like the deadlocked Body Corporate, it too has the jurisdiction to terminate the title scheme.

In a landmark move, the court approved the termination and sale.

Read related: The 7 steps of the lucrative Strata Collective Sale

“I am satisfied that the court has power to make an (termination) order for the purpose of exercising the jurisdiction conferred on the court by the Body Corporate and Community Management Act,” Judge Kingham ruled in December 2013.

But even then it wasn’t over.

A lengthy period of mediation began, a trustee was appointed, and Body Corporate members raised concerns about whether any sale deal would make commercial sense and be fully transparent.

“We (the owners) had money but just could not agree on a sale price,” said Bronwyn Bartal.

Ms Bartal has been involved with Nobby’s Outlook for decades.  In the 70s, her parents bought an apartment there and she eventually became chair of the Body Corporate Committee.

She told the Australian Financial Review that the Nobby’s Outlook case uncovered “defects in the law”, and set a precedent for how similar disputes might be resolved in the future.

Indeed, the outcome of the Nobby’s Outlook saga is already being used as inspiration by property owners who have strata apartments on the Gold Coast that now require major renovations or even demolition.

Ben Seccombe, a lawyer who played a major role in the outcome, said Body Corporate disputes are common and understandable.

“Those who see it (their apartment) as an investment look at financial return while those who consider it their home are concerned about somewhere else to live,” he said.

And it’s a problem that is just going to get worse, another lawyer – whose firm was the trustee in the Nobby’s Outlook deal – said.

“The reality is many buildings are ageing and in the next decade we are likely to see more disputes between apartment owners of strata titled schemes as buildings begin to deteriorate from age and exposure to the elements,” said Ann Fordyce, of Pilot Partners.

She said the key to the Nobby’s Outlook resolution was the precedent, including the appointment of a trustee.  It was the first such termination of a Body Corporate in Queensland.

“Appointing a trustee takes the emotion out of the sales process for the owner and puts it in the hands of an independent third party who is obligated to act in their best interests,” said Ms Fordyce.

How did the saga end?

Nobby’s Outlook finally went onto the market as a prime beachfront Gold Coast redevelopment site for luxury units.

At auction in September 2017, it sold for just under $24 million.

It was a veritable ‘who’s who’ of prominent property magnates doing the bidding, like billionaire Bob Ell but also among swathes of international interest.

35 bids were made in total, and the eventual buyer was an anonymous one from Melbourne.

“The property sold above reserve and valuation which is a fantastic outcome for the owners and the Nobby’s Beach community,” said Ms Fordyce.

Her colleague, Bradley Hellen, added: “We’ve helped the owners, many retirees, move on with their lives after more than a decade of failed attempts to sell.”

As for what comes next, it is believed that other Australian states and territories are using the Nobby’s Outlook case as a reason to review strata laws, especially as buildings are ageing and populations are ever growing.

Nobby’s Outlook – now a landmark in the Australian strata landscape.

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