Major body corporate reform has paved the way for hundreds of prime development sites across Queensland to be unlocked, providing much-needed relief to the state’s housing crisis.

The Body Corporate and Community Management and Other Legislation Amendment Act 2023 was passed this week by the State Government, overhauling several Acts that regulate community title schemes in Queensland.

Under the Act, a community title scheme can be terminated with the approval of 75 percent of lot owners when the body corporate has concluded that it is more financially feasible for lot owners to terminate rather than maintain or remediate the scheme. Previously, a community titles scheme could only be dissolved if no owner objects or if the District Court determines that it is right and equitable to do so.

Kollosche Managing Director Michael Kollosche said the amended law will have major ramifications for unit owners and new development in Queensland.

“To date, the legal landscape has allowed a minority – sometimes one lot owner – to control a community titles scheme and refuse its dissolution,” said Mr Kollosche.

“This has seriously impeded city growth and prevented the highest and best use of many Queensland property assets.

“The amended Act represents a forward-thinking approach, ensuring community title scheme terminations in Queensland are rooted in transparency, comprehensive analysis, and the collective agreement of the community and all stakeholders.

“These reforms are a win for the majority of Queensland apartment and unit owners while freeing up sites for the new housing this state so desperately needs.

“This is also an essential step in solving the state’s ongoing housing crisis by paving the way to redevelop unviable buildings into newer, fit-for-purpose accommodation in high amenity areas.”

That sentiment was echoed by Queensland Housing Minister Meaghan Scanlon:

“There are cases where a majority of owners want to sell but even a single person can stop them from being able to make that collective decision about their property,” she said.

“This Bill is about weighing the rights of people who want to facilitate new housing projects and terminate expensive, uneconomic title schemes while also providing protections and safeguards for lot owners.

“Stakeholders made it clear at the Queensland Housing Summit that scheme termination was a key area that required reform to help support getting more supply into the market.

“These changes will make it easier for underutilized sites to be redeveloped for more housing, which is good news for Queenslanders looking for a new home.”

The reformed legislation extends to a number of other areas too, with provisions for smoking, pets, and vehicles parked in common areas.

In summary, the body corporate changes will:

– Allow body corporates to make by-laws to prohibit smoking (including vapes) in outdoor areas and communal areas of strata communities.

– Prevent body corporates from making by-laws with blanket pet bans in community title schemes and introduce a mechanism for pet approvals.

– Clarify and enhance the ability for body corporates to tow vehicles from common property in a timely manner.

COMMON QUESTIONS ANSWERED

On what grounds can a scheme be terminated?

The legislation allows for the termination of community title schemes under specific “economic reasons.” These reasons include the scheme no longer being economically feasible if all of its lots are used for commercial purposes, or in a residential context, the predicted expenses of maintaining properties or assets become economically unviable within a span of five years of the proposal to terminate the scheme.

How might a 75% vote be achieved?

Post the body corporate’s acknowledgment of the economic reasons for termination and dissemination of the termination plan to all stakeholders, they have the power to convene a general meeting for voting. Here, a substantial 75 percent of property owners must consent for the motion to proceed. Importantly, each property gets a single vote, proxies are forbidden, and owners with unpaid dues to the body corporate still hold the right to cast their vote.

What protections and safeguards are there for lot owners?

Under the new bill, lot owners within a strata scheme are provided protections in that the proposed law mandates the creation of a comprehensive “pre-termination report” before the body corporate can contemplate ending the scheme.

Measures include:

– Market valuations of each lot within the scheme.

– A market valuation of the entirety of the scheme’s land.

– Documentation detailing the estimated values of body corporate assets and potential liabilities.

– When necessary, specialized reports verifying the economic reasons for termination. These can include expert evaluations about the economic viability of the lots and assessments by structural engineers regarding property conditions and estimated repair costs.

To ensure an unbiased report (and to address perceived concerns around conflicts of interests), the proposed legislation contains stringent conditions designed to mitigate conflicts of interest.

Any appointed person with a conflicting interest must disclose it promptly. Moreover, they cannot act on the report if a potential conflict might influence their actions, unless expressly approved by the body corporate.

There will also be minimum compensation requirements for lot owners, and review and dispute resolution pathways, including provisions to reduce lot owners’ exposure to costs associated with proceedings relating to a proposed termination.

In all other situations, termination of a community titles scheme will still require either that the body corporate pass a resolution without dissent or that an order of the District Court is obtained.

How has this legislation come about?

Attorney-General and Minister for Justice and Minister for the Prevention of Domestic and Family Violence, Yvette D’Ath explains:

“By reforming the process for terminating community titles schemes, the Palaszczuk Government is delivering a key action from the 2022 Queensland Housing Summit.

“We have listened to the concerns of unit owners who are facing excessive and exorbitant costs for maintaining, repairing, and rectifying buildings in their schemes.

“For these owners, a collective sale of the whole community titles scheme makes economic sense but cannot be achieved if a small number of lot owners are not agreeable to a sale.

“Often, these uneconomic schemes are located on sites that could provide an opportunity for potentially opening up more housing and investment opportunities for Queenslanders.

“In reforming the process for terminating community titles schemes, the Government has been careful to balance the need for renewal and redevelopment with respect for people’s property rights.

“Like other body corporate issues, when it comes to selling and terminating community titles schemes, it is critical to strike the right balance between the legitimate but sometimes competing interests of everyone within a body corporate.

“Our new laws recognise that it might not make economic sense for lot owners to have to pay large body corporate levies to repair and maintain their buildings when a significant majority of the lot owners would rather the scheme be sold for redevelopment.

“These laws also recognise that the rights of lot owners who do not wish to sell and terminate their community titles scheme must be respected.

“That is why the [Act] includes important safeguards such as minimum compensation requirements for lot owners and rights for lot owners to seek reviews of key decisions made during the termination process.

“Importantly, decisions about whether economic reasons exist for terminating a community titles scheme will be informed by a comprehensive package of information (including professional reports) for all lot owners to consider.”