What happens to Strata Title Apmts when they get too old?

[Kevmeister]

In the lifetime of an apartment complex (single-storey, low-rise, high-rise, whatever) I presume there comes a time when the building reaches an age where demolition is the only practical alternative. Perhaps this is because the features of the apartment become too antiquated, maintenance costs are getting too high, the place has become a slum, or whatever.

I say "I presume" because this seems to be the ordinary course of events for commercial buildings.

One would assume that people still own these apartments so what would happen in a situation like this? Because we are talking Strata Title, what specific rights does an owner have or not have in regards to this eventuality?

I mean, the thing that has always bothered me with apartments is that LAND has the value, not the dwelling (well, initially, it does), and with an apartment you essentially own some walls and the volume of air it contains. Do you "own" a proportion of the land?

If you don't own the land, or only a very small percentage of it, shouldn't this suggest that $ growth for apartments should be less than for houses, because there is not the land underpinning the investment?

 

[Kristine..]

Hi Kevmeister

An excellent question!

In NSW, there was some discussion recently regarding the right for a developer to compulsorily acquire outstanding interests in strata titled property ie when a development becomes obsolete or even dangerous, and most of the owners are in favour of selling to a developer, but a minority can't agree, the developer can apply to the courts for a compulsory acquisition order to enable the demolition of the buildings and redevelopment of the site.

Compulsory acquisition is always at sworn valuation.

In Victoria, to the best of my knowledge, there is no such provision, in which case a developer could approach all the owners (keeping in mind that the developer could be an existing owner) but if there is not unanimity, then there is no opportunity to redevelop the site.

Yes, everything has it's viable lifespan, and although generally speaking a building should be good for more than 50 - 100 years, there will always be some which don't last the distance. and some which now are approaching the end of their time.

When the original plan is registered with the Titles Office the Survey will have registered a Unit Allocation Table. This allocated Units of Benefit and Units of Liability to each owner.

In other words, the land is 100%.

Each sub-unit will have allocated Units to a grand total.

eg in a development of three units,

the front unit may have 3 bedrooms, double garage, front garden and a street frontage, say, 50 Units of Benefit / Liability

the middle unit may have 2 bedrooms and not much of an outlook, small courtyard, single garare, driveway passing, say, 20 Units of Benefit / Liability

the rear unit may have 3 bedrooms, single garage at end of driveway, rear service yard and side courtyard, say, 30 Units of Benefit / Liability.

Total: 100 Units of Benefit / Liability.

In a multi storey apartment development, the same rules apply, so each owner ownes an undivided share of the land, common areas eg lift wells, foyers, service areas, foundations, roof, corridors, swimming pool etc

Each owner has an allocated Benefit / Liability

When / If the time comes to redevelop, no owner can do this independently of the others as they all structurally or economically rely on each other.

We will see more redevelopment over the next 20 years as blocks of apartments built post war become obsolete. This can also mean that they are structurally sound, but so unfashionable that there is no longer any saleable or rental market for them, or that they no longer meet new building requirements such as fire regs, or that structurally they are failing.

It will be interesting to see how legislation meets the challenge of the change!

Cheers

Kristine