Reallocating unit entitlements
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A number of Owners Corporations (OC's) are considering whether they should get their unit entitlements ‘reallocated’ to better reflect extensions to, almost always Class B units.
ACAT considered whether reallocation is necessary in the case Green and the Owners of Units Plan 199 (2015) and concluded that an OC should consider a reallocation of unit entitlements after extensions because:
The original unit entitlements were decided on the basis of the floor size of the units and attached parking spaces.
The size of units had been changed by the construction of extensions.
The unit entitlements should be proportional to the current value of each unit as determined by a Certified Practising Valuer.
If the unit entitlements are not amended to reflect the relative values of the units, then some unit owners would be subsidising other unit owners.
The fact that amendments to the unit entitlements involve a cost to all unit owners is not a factor that outweighs the long-term subsidy by some owners of others.
It should be noted that refurbishment of units does not warrant reallocation of unit entitlements. Unit entitlements are based on the footprint of the units not refurbishments carried out at the cost of individual owners.
It seems useful to unit owners to provide a layman’s survey of the processes required by the legislation at Part 10 of the Unit Titles Act.
Part 10 Amendment of units plans - Division 10.1 Amendment of schedule of unit entitlement
146 Unit entitlement authority—grant
(1) An owners corporation may apply to the planning and land authority for authority (a unit entitlement authority) for the amendment of the schedule of unit entitlement.
Note 1 A fee may be determined under s 179 for this section.
Note 2 If a form is approved under s 180 for an application, the form must be used.
(2) The planning and land authority may, by written notice to the owners corporation, grant a unit entitlement authority if satisfied on reasonable grounds that—
(a) the application is authorised by a special resolution of the owners corporation made within 3 months before the day the application is made; and
(b) the amendment is necessary to reflect accurately the current relative improved values of the units, or a change in those values that is anticipated after a particular event happens.
(3) The planning and land authority may grant a unit entitlement authority subject to the condition that it is to take effect only when a stated event happens.
(4) If the owners corporation applies for a unit entitlement authority that is to remain in force for longer than 3 months, the planning and land authority may, in authorising the unit entitlement amendment, if satisfied that an extended period is justified—
(a) allow the extended period applied for; or
(b) allow a shorter extended period.
147 Unit entitlement authorities—period of effect
(1) A unit entitlement authority remains in force for—
(a) 3 months after it is given, or after an event stated in the authority happens; or
(b) any extended period allowed under section 146 (4).
(2) A unit entitlement authority must state the period for which it is in force.
148 Unit entitlement authorities—registration
On the registration of a unit entitlement authority, the units plan is amended accordingly.
Note A unit entitlement authority may be registered with the registrar‑general under the Land Titles (Unit Titles) Act 1970 on lodgment by the owners corporation within the period of effect of the authority (see dict, def registered).
So the OC must have majority agreement to undertaking the reassessment of unit titles and having started the process must either carry it through to conclusion within 3 months or within another time period approved by ACTPLA or decide the reallocation recommended is so minor as to not warrant the fees involved and effectively end the project.
Any OC wanting to undertake a reallocation of unit entitlements should seek professional legal and surveying advice and detailed advice from The Office of Regulatory Services (now part of Access Canberra) and ACTPLA.
ACTPLA is the decision maker. So, the first step would be a call to ACTPLA to make an appointment with the relevant person to discuss with them in detail the actual processes you have to go through to lodge an application. ACTPLA is happy to do this because it saves so much time and trouble later on.
Then the OC would need to pass an ordinary resolution to hire possibly a surveyor to prove the extent of the building enlargements and a valuer to do the necessary reallocation of entitlements. (Given the way the Act is worded it could seem the best way to justify the application would be the valuer’s report detailing the need for realignment and the new entitlements. So that order of action might be advocated by ACTPLA.)
Any valuer’s assessment would need to be properly managed by the EC to ensure that the valuer understood the concerns of the owners corporation and properly answered those concerns. Ideally the resolutions of the annual or special general meeting would detail how the valuer would be commissioned and who will oversee the task to ensure the valuer understands the view of the owners corporation.
After the valuer’s report is received and accepted, the OC would need to pass a special resolution (75% vote in favour) to adopt the new valuation and agree to apply for it to be registered and consequently for unit entitlements to be permanently changed.
If some owners raise objections based either on self interest or irrelevant concerns to stop a special resolution passing, it is open to the EC or a group of owners to take the matter to the ACT Civil and Administrative Tribunal (ACAT) seeking orders that the unreasonable objections be struck down and the resolution agreeing to seek approval of the unit entitlement reallocation be passed. This is quite a common process for ACAT so you are not venturing into unchartered waters. The process is not difficult. You do not need to spend a fortune on legal costs and the EC could undertake much of the preparation itself.
The registration of the changes previously required the presentation and amendment of the original paper certificates of title. The process of retrieving them from banks holding mortgages over units sometimes proved so difficult that the whole project was abandoned. The ACT has now moved to electronic titles. So, this part of the process is greatly simplified.
Once ACTPLA has approved the reallocation of unit entitlements, the approved application would be forwarded to the Titles Office and the certificates of title would be amended without seeking the consent of the affected parties unless there were only a very small number of units.
The same end result can be achieved by a different method. If there is general agreement in an OC that there needs to be adjustments in levies to better reflect changes in the value of extended units, there is now another way under the Unit Titles (Management) Act to achieve the change.
78 General fund—contributions
(1) An owners corporation for a units plan may, from time to time, determine a contribution (a general fund contribution) required from its members for the corporation’s general fund.
(2) The general fund contribution payable for each unit is—
(a) the proportional share for the unit of the total general fund contribution; or
(b) a proportion of the total general fund contribution worked out in accordance with a method set out by special resolution.
(3) A resolution under subsection (2) (b)—
(a) must be fair, taking into account—
(i) the structure of the unit plan; and
(ii) the nature of the buildings that are part of the units or common property of the unit plan, including the features and character of the units and common property; and
(iii) the purposes for which units are used, including the likely impact of that use on the common property; and
(iv) the extent to which the change imposes a burden on a unit that is commensurate with the use of that unit; and
(b) may provide that only stated unit owners, or unit owners in a stated class, are required to pay a particular contribution, or a contribution of a particular kind.
(4) A resolution under subsection (2) (b) may only be amended or revoked by—
(a) a special resolution; or
(b) an order of the ACAT.
Note 1 A unit owner may apply to the ACAT for review of a special resolution under subsection (2) (b) about a method for working out general fund contributions (see s 127).
Note 2 A special resolution is taken to be an amendment to the rules of the owners corporation (see s 108 (5)).
89 Sinking fund—contributions
(1) An owners corporation for a units plan may determine a contribution (a sinking fund contribution) required from its members for the corporation’s sinking fund.
(2) The sinking fund contribution payable for each unit for a financial year is—
(a) the proportional share for the unit of the total sinking fund contribution for the financial year; or
(b) a proportion of the total sinking fund contribution worked out using a method set out by special resolution.
Note - Total sinking fund contribution, for a financial year—see s 82 (3) (b). Expected sinking fund expenditure—see s 83.
(3) A resolution under subsection (2) (b)—
(a) must be fair, taking into account—
(i) the structure of the unit plan; and
(ii) the nature of the buildings that are part of the units or common property of the unit plan, including the features and character of the units and common property; and
(iii) the purposes for which units are used, including the likely impact of that use on the common property; and
(iv) the extent to which the change imposes a burden on a unit that is commensurate with the use of that unit; and (b) may provide that only stated unit owners, or unit owners in a stated class, are required to pay a particular contribution, or a contribution of a particular kind.
(4) A resolution under subsection (2) (b) may only be amended or revoked by—
(a) a special resolution; or
(b) an order of the ACAT.
Note 1 A unit owner may apply to the ACAT for review of a special resolution under subsection (2) (b) about a method for working out sinking fund contributions (see s 127).
Note 2 A special resolution is taken to be an amendment to the rules of the owners corporation (see s 108 (5)).
So, a resolution, containing the methodology for varying the contributions, would have to be put to a General Meeting (GM) as a new Rule of the OC and pass with a special resolution.
If owners vote down the resolution on grounds of self interest or irrelevant considerations, the EC or interested owners could go to ACAT seeking orders that the votes against the resolution were unreasonable and that ACAT passes the resolution. As mentioned above this process is not unchartered waters and the interested parties could do most of the preparation.
Either of these routes seems to achieve the objective of ensuring that owners contribute financially to the OC in line with the value of their unit.