Unit entitlements – you’re not so entitled!

Key Points
  • Unit entitlements are the allocated share of the rights and responsibilities of a strata scheme;
  • If the unit entitlement allocation is unreasonable then NCAT can re-allocate

Unit entitlements are the allocated share of the rights and responsibilities of a strata scheme. They impact an owner’s contributions to the expenses of the strata scheme, rights over common property and voting rights.

The introduction of the Strata Schemes Management Act 2015 (NSW) (SSMA) reaffirmed the requirement that all strata schemes must have their unit entitlements recorded on the common property certificate of title. Unit entitlements are the allocated share of the rights and responsibilities of a strata scheme. They impact an owner’s contributions to the expenses of the strata scheme, rights over common property and voting rights.

This obviously exposes the members of a strata scheme to risk. What happens if the distribution of unit entitlements is unfair and unreasonable? Will a simple vote of the strata scheme’s owners corporation fix it or is it more complicated? Well…. It is the latter and for good reason.

An unreasonable distribution of unit entitlements may result in unit owners being over charged for levies and rates or having their voting power dissolved. For this reason, the method of assessing any changes to unit entitlements is a decision left to a tribunal to assess.  

The Strata Schemes Management Act 2015 provides that the New South Wales Civil and Administrative Tribunal (NCAT) may, upon an application, make an order re-allocating unit entitlements among the lots within the scheme.

To satisfy NCAT that the orders are required, the applicant will need to demonstrate that the unit entitlements were originally unreasonably allocated or became unreasonable due to changes in the permitted use of the land (i.e. zoning) or further redevelopment or configuration of the strata scheme. The application may be made by an owner of a lot, the owners corporation, a lessor (if they are in a leasehold strata scheme) or the local council.

Any application must be accompanied by a certificate of valuation provided by a qualified valuer in accordance with the Strata Scheme SSMA. If the application is opposed, the matter may proceed to a full hearing. The costs associated with this process must be considered carefully before initiating.

Upon a successful application, you will need to lodge the orders with the New South Wales Land Registry Services. Before making such application, you should ensure that you have a certificate of valuation in accordance with the SSMA and strong legal advice as to your prospects of success.

Post by Anne Sandeman and Kurt Gallacher

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