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Could legislation changes make way for forced evictions?

Industry reacts to draft legislation: Warning as legal minefield looms over Queensland body corporate scheme termination changes

Proposed changes to Queensland body corporate legislation have been designed to make it easier for units to be redeveloped. But some say they could open the way for forced evictions and endless re-runs of courtroom scenes of the kind that made the Australian comedy “The Castle” such an enduring hit.

Queensland’s Attorney-General Shannon Fentiman says the changes will allow for the termination of a community titles scheme with the support of just 75 percent of lot owners.

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The Palaszczuk Government announced the proposed draft legislation following the October 2022 Housing Summit and say the new rules will make it easier to sell and redevelop ageing or rundown community title schemes in Queensland.

But a legal minefield might be in the path of implementing the new legislation.

ARAMA CEO Trevor Rawnsley said that his association had consulted extensively with the government on scheme termination.

ARAMA CEO, Trevor Rawnsley

ARAMA agrees with the government that the termination of a scheme should be possible with less than 100 percent approval from lot owners, to prevent one stubborn owner from holding out on the others in the hope of extracting a huge windfall, but Mr Rawnsley says the 75 percent figure is way too low.

“At the moment the law requires a resolution without dissent,” he said.

“If you have one person in the building who votes ‘no’ to the termination, nothing can happen.

“But we do not agree that it should be only 75 percent of the vote to terminate a scheme. It should be higher. At 75 percent it means that in a scheme with 100 lots, 25 of those people are voting “no” for their home to be destroyed. We think that is setting a dangerous precedent.

“It’s 75 percent in New South Wales, too, but there are lots of other hurdles there that people need to jump over before you can terminate that scheme, and there hasn’t been a successful scheme termination there when someone has appealed.”

Mr Rawnsley said Queensland body corporate managers would be happy with the 75 percent figure because “they will make a lot of money administrating the scheme termination and the new development.”

“Developers will make a lot of money too,” he said, “but in the rush to create new developments, they are going to displace up to 25 percent of homeowners who don’t want their home destroyed.

“It’s all very well for supporters of this change to say it is going to help the housing crisis, but it’s not. The reality is they’re going to terminate those old unit blocks that are currently available for rent to low-income earners. They’re going to replace them with luxury apartments.

“I haven’t seen any high-rises come out on the Gold Coast in the last few years that aren’t multimillion-dollar apartments. Developers need to make a profit and we’re all for that but if anybody suggests this is going to be a solution to the housing crisis it’s not.”

Mr Rawnsley said there were also other important considerations when it came to scheme termination before any new legislation was passed.

“If there are existing long-term service contracts in place – such as lift maintenance they should be factored into the cost of the rebuild and honoured,” he said.

“Then there is the resident manager who is sitting on a 25-year agreement. Someone comes along and says, ‘well we only need 75 percent of a vote to terminate your agreement’. That business must retain its value and while the little old lady can appeal and say, ‘I don’t want you to destroy my home and I’m not going’, the caretaking service provider should also be able to say, ‘this is my livelihood, you should have a good reason for wanting to terminate and there should be compensation from the developer’. A valuer should come in and value the business and there should be a payout to the value of that business for the resident manager.”

Laura Bos, the General Manager of the Strata Community Association (Qld), applauded the draft legislation.

Laura Bos, General Manager, SCA QLD

Ms Bos said: “I want to commend the Queensland Government on the suite of reforms they have released over the past six months.

“Two tranches of positive body corporate law changes in six months are more than has been done in the past 25 years.”

“These changes are all extremely positive and a great start. My message to the government today is simple, this is a great start, but let’s work together to finish the job.

“Big picture reforms including changes to management rights, regulation of body corporate and finishing the job by reforming the dispute resolution framework are things our communities are crying out for.”

Currently, a community titles scheme may only be terminated if no owner opposes the termination of the scheme, or if the District Court is satisfied it is just and equitable to terminate it.

The proposed changes will allow for the termination of a scheme with the support of 75 percent of lot owners, where the body corporate has agreed it is more financially viable for lot owners to terminate rather than maintain or remediate the scheme.

In all other situations, termination of a scheme will still require that no owners dissent to the termination in order for it to be approved.

Consultation on the draft legislation will occur this year.

Attorney-General Fentiman said: “I’ve heard many stories of rundown units, townhouses, or complexes with unsustainable ongoing maintenance costs where owners want to terminate, but a single owner blocks this from occurring.

“The government recognises that some owners may not wish to sell their unit or move to a new home so termination arrangements must balance the rights and interests of all lot owners in a scheme.

“The new process will include safeguards to protect owners in the minority who do not support termination. If the body corporate approves a termination plan, a dissenting owner will be able to make an application to the District Court, which would consider a set of just and equitable factors in deciding whether the termination should proceed.”

Leading property lawyer Frank Higginson, from Hynes Legal, said “mechanically”, the new legislation was “going to be problematic.”

Frank Higginson

“New South Wales has had the 75 percent rule for a while, but it has come unstuck because the mechanics of dealing with a dissenting owner don’t really work for someone who is looking to buy the site – because of court proceedings,” he said.

“In New South Wales they can terminate a scheme with a majority vote without any reason whereas up in Queensland they’re saying there must be an economic reason to do it (a write-off of some description) when the units cost more to repair than replace.

“Or will it be just a case of ‘we’ve got four units on a 2000m square beachfront site, and the highest and best use is absolutely the sale of the site as a whole rather than the units individually’. So that’s the sort of issues they’re going to have to work through.”

Mr Higginson said an issue in New South Wales “that has caused conniptions” is that if a resident is one of the 25 percent that doesn’t want to go, they can file a proceeding and the cost of that legal challenge must be paid for by the body corporate.

“There’s no disincentive not to go to court,” Mr Higginson said. “If you’re running your own race and potentially having to wear the cost yourself you think twice about filing something, but when there’s no cost downside there’s no stopping you. When these changes to legislation first popped up 20 years ago, they were deemed un-Australian. It was ‘The Castle’ (the vibe’ all over again) kicking someone out of their house who doesn’t want to go.

“So, it’s been spoken about for more than 20 years and finally we have a government who say they are going to do something, but the mechanics of that something are going to be incredibly interesting.

“They probably won’t just produce draft legislation; they’ll produce it and send it to the Community Titles Legislation Working Group of which ARAMA is a member and I’m sitting there for ARAMA.

“Even if it appeared as legislation, it’s still going to be 12 months to two years before we get any real guidance about how it’s going to work.

“From an ARAMA perspective, one of the big questions is going to be for management rights owners – what happens to me? And we’ve proposed and built into previous legislation that the management rights has to be bought out at market value.”

Mike Murray, the President, of the Unit Owners Association of Queensland said that his association “objected to in the strongest possible terms” to the new proposal.

UOAQ Committee representatives have been attending the Community Titles Legislation Working Group for just under two years and say they are the only stakeholder representing the owners of the subject properties affected.

He said the considerations of owners or more than 600,000 units each with median values exceeding $500,000, “the owners of $300 billion of Queensland property”, were not involved in the change.

“Despite unit owners having been consulted via the Community Titles Legislation Working Group for the preceding two years on this very topic, their voice appears disregarded and ignored,” Mr Murray said.

“Unit Owners were not even invited to participate in the October 2022 Housing Summit where such a reform decision was seemingly made.

“More likely, the multi-billion-dollar property development industry led by Urban Development Industry of Australia (UDIA) sees a commercial opportunity to have the body corporate law changed to favour its agenda.”

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