Old strata apartments could be knocked down for redevelopment with just 75 per cent of owners’ approval under long-awaited draft legislation released by the NSW government for comment today (Wednesday).

The changes could be among the most controversial to hit property owners since strata laws were developed, given the anticipated backlash and feared headlines of long-standing residents being “forced onto the street”. However, the prospect of ageing blocks of flats in growing disrepair and the need to build up density is also creating pressure for governments.

More palatable will be that the proposed laws also tackle strata defects. Unpalatable for many people is that they fail to address the difficulty of installing sustainability infrastructure like solar panels, another major irritant to those wanting to retrofit strata blocks with carbon and money saving features.

New research from the University of NSW’s City Futures Research Centre says more than 8000 apartment buildings in Sydney could be demolished to make way for more dense development, if the lens of market fundamentals is applied, lead author Bill Randolph says.

However, most of these apartments are in upmarket areas such as Mosman on the Lower North Shore, in Liberal Party heartland, which could cause additional pressures for the state government. It’s here that there is a preponderance of “six-pack” and other low density blocks in areas where property prices have surged enough to justify demolition and replacement costs, Professor Randolph told The Fifth Estate.

Fair trading minister Victor Dominello said half of Sydneysiders would be living in strata apartments by 2040.

“The proposed reforms are reflective of present needs and future demands,” he said.

The changes to hurdle requirements (from 100 per cent of owners needing to give approval) were first mooted back in 2013, and drew criticism from the Tenants Union of NSW, which said it would force out elderly and vulnerable owner-occupiers from their homes.

”We are worried about owner-occupiers as well as tenants in the older strata schemes – particularly older owner-occupiers who have either few or no other assets than their apartment,” senior policy officer Chris Martin said last year.

”We have a housing system that doesn’t have enough affordable housing options, especially for older people. If the NSW government wants this urban renewal agenda it also needs to develop an affordable housing agenda.’’

The government says the reforms include protections for vulnerable and elderly owner-occupiers. These include the establishment of a Strata Renewal Advice and Advocacy Program to provide free advice for residents, which would include an assistance hotline and an advocacy service for vulnerable residents.

“The proposed reforms are designed to ensure that owners receive at least the market value of their lot plus an extra amount to cover costs like those associated with moving, as required by the Land Acquisition (Just Terms Compensation) Act 1991,” a government statement said.

Renewal plans would be referred to the Land and Environment Court for final consideration. The court would be able to reject a renewal plan if:

  • it has not followed proper processes or been developed in “good faith”
  • the amount to be paid to a dissenting owner was less than the compensation value of the lot
  • the terms of settlement were not just and equitable

Shelter NSW, a nongovernment peak body for housing, said that the government had given “only partial recognition to concern that fast-tracking redevelopment of strata schemes could lead to massive displacement of lower-income homeowners and renters”.

“We anticipate that the people who are likely to be badly affected by the proposed change will be lower-income and disadvantaged homeowners and renters,” Shelter NSW acting executive officer Craig Johnston said.

Urban Taskforce chief executive Chris Johnson, though, said the change in hurdle requirements was necessary for “the renewal of thousands of substandard walk up flats constructed prior to 1990”.

“Previously a single owner could hold a body corporate to ransom by demanding an exorbitant price for their apartment,” he said. “The reduction to 75 per cent is in line with models that operate in New Zealand, Singapore, the United Kingdom and North America.”

Tackling defects

The limited protections available for owners of strata units has been discussed in length in The Fifth Estate in recent weeks.

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The government’s solution is to require developer to lodge a two per cent bond for the contracted price of the building as a form of security to fix any defective work. This would apply to the construction of high-rise strata over three storeys, and would “maintain developer and builder accountability for their work”, a government statement said.

“A process for the early identification and rectification of defects would be implemented, requiring developers to engage an independent building inspector to carry out a defect inspection report, at their cost, between 12 and 18 months after the completion of the building,” the statement said.

“If the defects are not rectified the building bond will be used to carry out the repairs and if there are no defects or they are rectified, the bond would be returned to the developer.”

Renovations easier, but sustainability not on the agenda

Restrictions to making minor alterations (like adding wall hooks) would be removed under the proposed changes, though renovations with a lasting impact, like installing floorboards, would require approval, though only a general resolution (50 per cent of the vote).

Renovations affecting the structure or external appearance of the building would still require a special resolution (75 per cent of the vote), meaning installing sustainable infrastructure like solar panels or rainwater tanks is still difficult.

In contrast, Western Australia’s proposed strata reforms propose a simple majority vote for this type of infrastructure.

Head of sustainability at developer Psaros Chiara Pacifici added a submission to the WA strata reform that suggested the reforms make specific mention to sustainability infrastructure, and further remove barriers to the installations of sustainability infrastructure in strata developments.

The deadline for submissions to NSW’s reforms is Wednesday 12 August 2015. Submissions can be emailed to policy@finance.nsw.gov.au

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  1. Not only in WA can an owners corporation install sustainability equipment with just an ordinary (simple majority) resolution of a general meeting. See also s.23 of the ACT’s Unit Titles (Management) Act 2011. In the ACT, if a proposal includes a list of items such as siting details, a statement of costs and benefits, any easements required etc., the proposal can be approved by an ordinary resolutions.
    Blocks of flats that have a steady continuous load running lights in corridors and parking areas all day could easily match that with solar panels. Commercial hot water systems have been on hotels for years. Now (in ACT and WA at least) you could have solar preheating of the water that goes to each unit. Each unit, could have its local small electric tank to ensure the water is hot when the supply is not sufficiently heated.