Key takeaways:

• Strata renewal is an important step for any NSW strata scheme looking to sell or redevelop.
• Renewals are now dealt with in the NSW Land & Environment Court, via a process set out in the applicable legislation and the Court’s Practice Note.
• Parties should be aware of what to expect when pursuing a renewal – particularly if the renewal does not have the full support of scheme members.

Under the Strata Schemes Development Act 2015 (SSD Act), if a NSW strata scheme (or members of one) propose to sell or redevelop their property, they must engage in a “strata renewal”. Part 10 of the SSD Act sets out the process for a strata renewal, including the preparation and consideration of a strata renewal proposal, general meetings to be conducted, the preparation of a strata renewal plan, and notice requirements.

Importantly, even once the requisite level of support (being the support of the owner or owners of at least 75% of the strata lots) is obtained for a strata renewal to either sell or redevelop a property, an order of the NSW Land and Environment Court (LEC) must be obtained to give effect to the renewal. This further step was introduced in 2016 to provide an additional layer of protection for lot owners within schemes.

Commencing proceedings

Applications for LEC orders are made under section 179 of the SSD Act and proceed through Class 3 of the LEC’s jurisdiction. For section 179 proceedings, there does not need to be a Respondent, but there can be if a person on whom the application is served successfully seeks to be joined to the proceedings (see below).

Section 179(1) specifies that certain information must be included in the application, including:

• a copy of the renewal plan;
• a copy of each notice of support for the renewal;
• the name(s) of any dissenting lot owner(s);
• if the renewal relates to a proposed collective sale of the scheme, a valuation report on the market value of the entire building and, if the purchaser is known, a declaration from that purchaser of any relationship between that purchaser and any lot owner; and
• if the renewal relates to a proposed redevelopment, similar information as for a collective sale, as well as certain, additional financial information.

Any objections?

Once an application is lodged in the LEC and served on the necessary recipients (see section 179(2) for the list of those recipients), any person on whom the application is served may file an objection to the application with 21 days. That objection should specify the basis of the objection and address the matters which must be considered by the LEC under s 182(1) in determining the renewal application. Any person who files an objection may then apply to be joined as a party (as a “Respondent”) to the proceedings. Whether or not an application is objected to or a Respondent is joined to the proceedings is likely to have a material bearing on the conduct of those proceedings – including in respect of time and cost.

First appearance before the Court

Approximately five weeks after an application is filed, the parties will appear before the LEC to seek orders for the future conduct of the proceedings – mostly in relation to when certain steps are required to be taken, or documents filed. This will include an indication from the parties as to whether the proceedings should be referred to mediation.

If the proceedings are referred to a mediation, this will typically necessitate a departure from the usual timetable, outlined below.

The first appearance before the LEC is also usually the point at which any application by an objector to be joined as a Respondent in the proceedings will be determined.

Setting out your case

If a Respondent has been joined to the proceedings, that Respondent will, usually a week after the first appearance before the LEC, need to file their “Statement of Facts and Contentions” (SOFAC) setting out their case and the orders that they consider should be made. The Applicant is then given the opportunity to prepare and file a SOFAC in Reply.

Following the parties’ SOFAC’s, evidence is filed by each party, and then written submissions outlining the parties’ positions for the hearing. The hearing will then be conducted, usually at least nine weeks after the parties’ first appearance.

Outcomes

Following the hearing, in accordance with section 182(1) of the SSD Act, the LEC must make orders giving effect to the strata renewal plan if it is satisfied of the matters specified in that section, including as to the appropriateness of:

• the relationships between relevant parties, including any prospective purchaser or redeveloper;
• the steps taken in obtaining the requisite level of support for the renewal;
• and the distribution of proceeds from any sale or redevelopment.

As at the date of drafting, very few LEC judgments have been delivered in respect of section 179 applications. However, this may change over time as the process becomes more established and familiar to both prospective Applicants and their legal representatives.

Factors to consider before commencing proceedings

It is important to note that specific timing and costs requirements apply to strata renewals, including in respect of:

• timing for provision of certain information throughout the strata renewal proposal and plan process, before proceedings are commenced;
• timing for service of a filed LEC application on the persons identified in s 179(2) once proceedings are commenced;
• when certain evidence is to be filed and served during proceedings;
• timing for registration of orders, if the Court ultimately makes orders giving effect to the strata renewal plan;
• costs arising out of breaches of the Court’s directions or Practice Note; and
• the payment of costs of the proceedings generally, in accordance with the SSD Act.

Advice from a legal practitioner is recommended in order to fully understand these requirements before commencing proceedings.

Beatty Hughes & Associates are experts in Land and Environment Court proceedings. Please contact our office if you would like to discuss this article or if you have an inquiry about a proposed renewal.