Changes to Strata Law (Termination of Schemes)

Key Points

• The termination process for strata schemes is going to change, under proposed amendments to the regulations of the Strata Titles Act 1985 (WA);
• These changes will affect the ability of owners to terminate a strata scheme;
• We recommend that you get advice on the new changes before undertaking a Termination Application with the State Administrative Tribunal.

Introduction Proposed changes to the regulations of the Strata Titles Act 1985 (WA) (Strata Act) are set to change the termination process for strata schemes to provide new safeguards for strata owners.Current LawAt the moment, there are three ways a strata scheme can be terminated:

1. All of the owners can vote to terminate the strata scheme (unanimous resolution).[1]
2. The District Court can terminate the strata scheme upon application of an owner or mortgagee of the strata scheme.[2]
3. An owner or mortgagee can apply to the District Court to terminate the strata by deeming that a resolution of the strata scheme was unanimous or reached without dissent, (provided that a special resolution was reached and the person apply to the Court was part of the majority who voted to terminate).[3]

Under the current laws the person applying to terminate the strata scheme (the Applicant) is not required to provide a termination proposal to other owners before launching a District Court action nor is there a requirement to vote on such an application. The current laws also fail to provide the Courts with any assistance on how it should assess a strata scheme termination application.

Proposed New Laws

As mentioned in a previous Pragma article Changes to Strata law later this month, the State Administrative Tribunal (SAT) will become a 'one stop shop' for all strata disputes. As part of this change, the SAT will also now be responsible for reviewing the termination process for strata schemes. This will allow for a more open and transparent process, as well provide additional assistance to more vulnerable owners responding to a termination resolution. Termination Process Under the proposed changes a new termination process will be put in place.

As part of this process, the Applicant will be required to obtain an a 'majority'[4] vote in favor of the termination and prepare a proposal for the SAT to review. The Applicant will not be able to proceed with the termination unless an order has been made by the Tribunal.

The SAT can only order that a scheme be terminated if it is satisfied:

• the termination process was correctly adhered to;
• every owner has been offered a reasonable price for their lot (apartment or unit); and
• the termination proposal is just and equitable.

Funding the Termination Application The Applicant will be required to cover the expenses associated with the Termination Process. This includes costs associated with preparing the termination proposal, planning applications and obtaining any valuations. If the strata company has to conduct any activities during the termination process, the strata company will be authorised to charge the Applicant any reasonable costs for this. In addition to this, the Strata Act regulations will also require the Applicant to cover any costs for other owners in a strata scheme. This includes costs for obtaining legal advice and expert evaluation reports of their property advice.

If you have any questions about the changes to the termination process for a strata scheme or have any other queries relating to proposed changes to the Strata Act, feel free to reach out to us at hello@pragma.law .

.[1]Strata Title Act 1985 (WA), s30.[2] Ibid, s31.[3] Ibid, s51.[4] The majority vote required before an Applicant can apply to the Tribunal is for schemes for five or more lots, the owners of at least 80% of lots vote in favour. For schemes with four or less owners, the resolution must be unanimous.