Proposed new Queensland laws to force “sale” of body corporate lots for redevelopment

In February 2023, the Queensland Government announced proposed changes to Body Corporate legislation which would “make it easier for units to be redeveloped”. 

The background is that, when looking to sell all units in a Body Corporate complex so that a developer can redevelop the site, it is common for there to be a small number of “hold outs” who will refuse to sell, whether at all or at a particular price.

Hold outs may not necessarily be acting out of greed or opportunism.  Often, people are particularly happy with a modest apartment due to its location, and could not afford to buy elsewhere in a similar location.  Some people might have a sentimental attachment to a building that they are in, and it might meet their needs perfectly. 

Further, there are a number of reasons why contracts usually proposed by developers for the assembly of a development site (ie for all of the units in a building) might not necessarily be attractive.  They generally contain terms which favour the developers.  Most will be subject to conditions such as the obtaining of satisfactory development approvals, which might not be achieved for a few years.  Then they would generally be conditional upon the settlement of all other lots, a condition which might fail for any number of reasons.   As a consequence, an offer to buy a unit by a developer – even if for a price premium – will often involve very unattractive terms, and lead to significant uncertainty such that the owner would be unable to plan for some years not knowing whether or not the contract would settle.  Furthermore, a price that was attractive at the time of the signing of the contract might be particularly unattractive one to three years later once all conditions are satisfied.  In addition, even if the contract is unconditional, many are entered into by special purpose vehicle companies with no assets meaning that if the contract fails and the buyer does not settle, the seller is left with no remedy.

Against those matters, the Queensland Government is proposing to amend the Body Corporate legislation to allow (indirectly) for owners to be compelled to “sell”. 

I’ve put the word “sell” in inverted commas because that is not what is proposed.  Instead, what would happen is that, if 75% of owners or more supported the termination of the scheme itself on the basis of an agreement that it is more financially viable for lot owners to terminate rather than to maintain or remediate the scheme, then the scheme is terminated which has the result that the freehold interests are lost, and the Body Corporate itself then is the owner of the entire site which it can sell.  This would have the result that (say) a scheme in which there had been 50 lots, all individually owned by different owners will have (post termination) 1 lot with those 50 owners all holding as tenants in common proportionate to their interest schedule lot entitlements.  If the owners could not agree on the sale, then an external trustee would have to be appointed to facilitate the sale, with the owners to eventually receive their share of the proceeds after expenses. 

The proposed amendments (which have not been published) would need to deal with transparency and allow for remedies to be available to allow for an independent assessment of what is or is not financially viable. 

The draft legislation is not yet available.

For advice in relation to community titles scheme and contracts generally, please contact Peter Muller at peterm@qbmlaw.com.au, Jessica Murray at jessicam@qbmlaw.com.au or Megan Hanneman at meganh@qbmlaw.com.au