Reallocating unit entitlements
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. Consequently 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 OC 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 OC, grant a unit entitlement authority if satisfied on reasonable grounds that:
(a) the application is authorised by a special resolution of the OC 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 OC 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 OC 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 discussion.
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 a surveyor to do the necessary study. (Given the way the Act is worded it could seem the best way to justify the application would be the surveyors report detailing the need for realignment and the new entitlements. So that order of action might be advocated by ACTPLA.)
Any survey would need to be properly managed by the EC to ensure that the surveyor 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 surveyor would be commissioned and who will oversee the task to ensure the surveyor understands the view of the owners corporation.
After the surveyor’s report is received and accepted, the OC would need to pass a special resolution 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.
It should be noted that in order to register changes to the schedule of unit entitlements the original certificates of title for the units affected by the amendment to the unit entitlements must be presented. Therefore titles would have to be obtained from lenders holding mortgages over units. In one case that came before ACAT this proved so difficult that the registration of a new schedule of unit entitlements was abandoned at the first instance.
So any OC interested in undertaking a reallocation should find out how many units are still under mortgage and whether the owners of the mortgaged units object to the process and might consequently delay the registration of the reallocation. It might be sensible to contact all the relevant lenders before the whole exercise commences to ascertain their positions and how long it would take them to produce the title documents and how they would require the final registration process be conducted with The Office of Regulatory Services.
If all that seems too logistically daunting and there is general agreement in your OC that there need to be adjustments in levies to better reflect values, there is another process under the Unit Titles (Management) Act by which an OC could achieve this.
78 General fund—contributions
(1) An OC 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 in an unopposed resolution.
(3) A resolution under subsection (2) (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:
(a) amended by unopposed resolution; and
(b) revoked by special resolution.
89 Sinking fund—contributions
(1) An OC 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 in an unopposed 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) may provide that only stated unit owners, or unit owners in a stated class, are required to pay a sinking fund contribution.
(4) A resolution under subsection (2) (b) may only be:
(a) amended by unopposed resolution; or
(b) revoked by special resolution.
So a resolution, containing the methodology for varying the contributions, would have to be put to the Annual General Meeting (AGM) and pass unopposed.
Again 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. This process is not difficult. You do not need to spend a fortune on legal costs 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.