Strata Law – Power to the People?

The Sydney Morning Herald recently reported on the complex issue of potential new legislation that may have implications regarding the termination of strata agreements by a 75% majority of investors or owners.

It is clear that more affordable housing is required in the major metropolitan centres in Australia, and an increase in housing density may provide the solution as the market moves toward more space efficient, apartment-style blocks.

The need for a shift in inner city lifestyles is reflective of the changing demographic profiles of the population. For a snapshot of how Sydney and surrounding areas continue to shift, the Australian Bureau of Statistics provides a report on some key social trends here.

The flow on effects of the government’s drafted legislation changes may have complicated effects on residents currently residing in strata living. The new legislation is designed to increase availability in the housing market, through increasing living density in areas of urban growth.

This can be achieved by a gradual restructuring of the types of housing available, however the issue for residents will lie in how these redevelopments take place and which existing buildings will be redeveloped.

If a 75% majority of owners or investors (in some cases this may be a single investor) decide that redeveloping the existing dwelling is a favourable outcome, then it may be possible for the site itself to undergo development or be sold on, leaving other residents facing the prospect of being forced to sell and move house.

This becomes an ethical issue when considering the motivation for undergoing redevelopment to housing lots – can the increase in housing availability be the sole driver of redevelopment and possible displacement of existing tenants? As profit projections will presumably draw investors to vote in accordance with their best financial interests, the issue of compulsory acquisition becomes very tricky.

The effects of the new drafted legislation may stimulate a mini-market of residents undertaking cash-grabbing development projects and selling off to the highest bidder at the cost of others who may not see the value in chopping up the existing premises in order to repackage.

As we move toward a new model of living in major metropolitan environments, it will be interesting to see how the wide array of stakeholders in strata living arrangements are affected by updates to government legislation regarding redevelopment.