Strata within Strata . approval needed from mortgagees of other units ?

We have a house split into four units in Hobart . It's on one title within a Strata plan involving the unit block next door . We need unanimous approval from the other owners , but it's also been raised as to whether we would need approval from any mortgage holders on the other units.

We will be seeking legal advice but was wondering if anyone has come across a similar situation.

Cliff

 

So just to clarify, the house is one strata lot within a bigger strata complex? And you're trying to create more strata lots within your one lot?

 

Our four units are one title on the larger strata plan and we want to split them into four titles on the larger strata plan .

Cliff

 

It will require a DA which may trigger a compliance order for the entire block, a strata survey and consent (to the DA). If the SP is to be cancelled and a new SP issued, then the mortgagees will be involved, if it doesn't affect the title of the other lots, then it would fly under the radar (as would a sale which doesn't affect other lots).

@lixas4 (is in Victoria) or @bmc (NSW) may chirp in from a strata survey point of view.

 

You should definitely rely on the advice from the lawyer - in my experience however any change to the title for the other existing lots requires the consent of both the lot owner and any mortgagees. it can be a lot of signatures to gather, and the banks are often not easy to deal with for those kinds of issues.

 

When choosing your lawyer/conveyancer make sure they have experience with this type of subdivision (a subdivision of land affected by an owners corporation/body corporate). They can get quite messy. I was at a conference at the vic titles office a few months ago and the guy that looks at this type of subs said only 50% are lodged correctly. He said he pretty much calls the applicant most times to suss out whether they are lodging it correctly and to ensure the titles will issue correctly. Not sure what they are like in tassy. My suggestion would be to talk to your surveyor and get a recommendation from them.

 

We've touched base with a surveyor who does this type of work and will get a recommendation from them .

One thing that has been raised is that we will probably need to give some sort of incentive to get the other owners on board , probably in terms of increasing our percentage in line with floor space , hence decreasing the other owners percentage of strata fees . Another thought would be looking to see if there's any work that needs to be done on the block and offering to pay for that .

If the percentage of ownership stayed the same , as a general principle would we still need to get approval from the mortgagee's ?

Cliff

 

Changing lot entitlements will require mortgagee's approval - you are taking away a % of their security,

The subdivision may trigger BCA compliance eg sound insulation/fire separation, hydrant/hose reel/egress lighting issues, (depending on the age of the structure), parking requirements may also increase.

See point 1

 

Scott

We were under the assumption we would need to improve fire separation , but have been told in Tasmania that's not the case . If it's already recognized as a unit by council ( which it is ) it doesn't need additional separation .

So by diluting the % ownership of the other units , even though the owners might consider that ok , as it decreases their strata fees, the banks won't like it as they own less of the overall property .

My personal thoughts are it's unlikely to be an issue with the owners as , unlike sydney where you have the potential of someone wanting the whole block to redevelop , i think that's unlikely in that part of Hobart , at least in my life time .

How do people normally pitch this sort of deal to the BC in order to get it approved ?

We had previously thought of trying to subdivide our part off from the rest , but I assume that would have a similar set of issues .

Cliff

 

Fire separation isn't the only consideration.

That may be easier If the two separate blocks would be permissible in isolation. However, that too will require new strata plans to be lodged which would be reviewed by the mortgages. Alternatively, you might seek advice on reconsolidating the lots and create two stratum (separate strata-subdivisible lots) then seek to subdivide with two separate strata plans - a few different hurdles to jump but achieves a different redevelopment outcome as you would be separate except for any shared services/facilities/cross-easements etc.

 

I'd be careful on how you put such a proposal forward as it could well be perceived that, as said, that you both reducing their interest and also their voting power. Which you are in return for slightly lower fees.

If I were the owner corp, I would look for what the impact is on them. More lots means more strata management fees, more wear and tear possibly on common property, more cars, more visitors, more people to convince of change, more maintenance of common property (depending on the strata plan and laws in tassie, you may be creating more common property inside the building dividing up the units) and the risk that the strata is left carrying the can.

It would even be reasonable that the owners corporation receive the increase invalue since they actually own the property. This might not be an entirely bad thing as you would receive your rightful % as an owner but it would dilute your profits.

 

@Sea Change
unusual setup.
Was this originally set up as a staged strata development.? do you have a DA.?
yes you will need the consent of all owners within the strata scheme.
yes will need to have a licensed Valuer reconfigure the Unit Entitlement allocation.
yes all mortagees will need to sign the (strata) administration forms
yes you will need a Surveyor to measure the new house you propose to subdivide and it will be a subdivision of SP1234## (and possible common property) into the new SP with the 4 new lots.
find a good Surveyor and a Strata Certifier.
regards,
Surveyor

 

Our property was the original house and the units would have been built in the back yard ( Corner block ) , looks around a 60's unit block . House could be for 1800's ?

Cliff

 

It's like inception but just with stratas

 

The rules around subdivisions are state based. And it looks like there are differences. In vic there is an option to subdivide land that is subject to an owners corp without having to get unaninimous resolution (or mortgagee consent) from the other members of the owners corp. If your new lots are wholly contained within your lot, there is no change to common property and the entitlement/liability %'s do not change, then it is allowed.

For example, lets say seachange owns lot 1 of a 5 lot sub with common property, and each lot has 20 entitlements/liabilities. If seachange was to further subdivide lot 1 into lot 1a,b,c,d (a 4 lot sub), while not affecting common property, and keeping lot 2-5 with lot entitlement/liability at 20, while splitting lot 1's entitlement/liability of 20 between the new lots, ie lot 1a,b,c,d each having 5 entitlement/liability each. Then this would not require unanimous resolution or mortgage consent.