Understanding S5(2) SSMA Resolutions of Owners Corporations

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Forums Meetings Understanding S5(2) SSMA Resolutions of Owners Corporations

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  • #231036
    Murphy Brown
    Member

    I am having trouble understanding S5(2) of the SSMA.

    “For the purposes of determining a special resolution the value of a vote in respect of a lot is equal to the unit entitlement of the lot. However, if the total unit entitlement of lots of the original owner is not less than half of the aggregate unit entitlement, the value of the vote in respect of those lots is taken to be reduced by two-thirds (ignoring any fraction).”

    Could anyone explain what the second part, about the original owner and the reduction by two-thirds means?

    #231063
    SydneyChair
    Member

    The “original owner” is, for most purposes, the property developer who built or renovated a building then strata-titled it.

    This section is designed to prevent developers having disproportionate voting power in a building. I know of at least one situation (under the old Act) where the builder/developer retained enough apartments (renting them out) to vote down any motion to either investigate building defects or raise levies to cover such investigation or repair. Once the statutory building warranty had lapsed, he sold the balance, leaving the building with a very large repair bill.

    So the Act dilutes their voting power by two thirds if they still hold a majority of unit entitlements (e.g. if they hold 60% they can only vote as if they have 20%).

    Hope that’s clear and I haven’t overlooked anything.

    [edit] On thinking about this, I note that it only needs 25% opposed to vote down a special resolution, so an original owner can still effectively block these with only 25% of the unit entitlements.

    [second edit] I stand corrected by Amanda, below! More than 25%.

    #231073
    Murphy Brown
    Member

    Thank you SydneyChair.  That makes a lot of sense.  I haven’t seen that situation so without that experience it didn’t occur to me that an owner may sell off only a small proportion of the strata while trying to retain power of the whole.  Life gets more complicated by the day, and some more devious with it.  Thanks again for explaining this.

    #231427
    Amanda Farmer
    Expert

    Hi Murphy Brown and SydneyChair,

    SydneyChair is spot on, save to bear in mind that a special resolution fails only if more than 25% of the UE votes against. So 25% voting against? It still passes.

     

    Amanda.

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