In May 2024 the Body Corporate and Community Management Act 1997 (BCCMA) was amended to introduce a new way for a scheme to be terminated based on economic reasons.

This article discusses further changes to the BCCMA that specifically addresses occupiers who are not owners.

Termination of a scheme

In May 2024 the BCCMA introduced a new way for a scheme to be terminated where:

1. all lots are used for a commercial purpose and it is not economically viable for the scheme to continue; or
2. it is not, or will not be within 5 years, economically viable for the body corporate for the scheme to carry out repairs and maintenance to any property or assets the body corporate must maintain in good or structurally sound condition.

The new method of termination was introduced on the basis that, in some cases, lot owners may be facing the prospect of having to pay very high contributions to meet the body corporate’s statutory obligation to maintain the scheme in a good and structurally sound condition.

In these circumstances, it may make more economic and financial sense to terminate the scheme for sale and redevelopment, rather than to continue spending significant amounts of money on an existing building.

The requirements for a body corporate to effect termination of a scheme for economic reasons are prescriptive and, in summary, require the body corporate to

1. seek independent expert reports to determine whether the scheme meets the threshold required to terminate under this section;
2. pass a resolution to prepare a termination plan;
3. prepare that termination plan;
4. pass another resolution to terminate the scheme in accordance with the termination plan; and
5. appoint facilitator to assist the body corporate to implement the termination plan.

The termination plan is required to address specific matters relevant to the termination of the scheme. Amongst those, the termination plan must deal with: [1]

1. the proposed day on which the owners of the lots are to provide vacant possession of their lots; and
2. how the interests of a lessee after termination would be compensated by the lessor on the sale of the scheme.

However, it did not properly address:

1. tenants under a rooming accommodation agreement;
2. the circumstances in which vacant possession was not provided on the day of settlement of the scheme; and
3. the requirements to notify the existing tenants in the scheme about the termination.

Amendments to the meaning of lessee

The recent changes broaden the applicability of the considerations to also now provide for lessees under a rooming accommodation agreement. Accordingly, a:

1. lease now includes a residential tenancy agreement or a rooming accommodation agreement under the Rental Tenancies and Rooming Accommodation Act 2008 (RTRAA), or a lease under the Retail Shop Leases Act 1994;
2. leasehold interest includes a resident’s interest in a rooming accommodation agreement under the RTRAA; and
3. lessee includes a resident in rooming accommodation under the RTRAA.

New section 81V (Termination of particular leases)

Section 81V previously provided that where a community titles scheme is being terminated for economic reasons, the leasehold interests end on the day the buyer of the scheme is given vacant possession of all lots included in the scheme.

The changes amended section 81V to change the day the leasehold interests end – to instead end on the day of settlement for the contract for the sale of the scheme. The purpose of this change was to ensure termination of a lease can occur if the lot is not vacated by a tenant on the settlement date.

The clause also makes the termination of a lease contingent on a notice having been given to each of the lessees (discussed below).

Notice to lessees

The changes clarified that the termination plan must specifically include the requirement for the appointed facilitator to give written notice to each lessee of a lot regarding the termination of the scheme (Notice). The Notice must:

1. be given to the lessees at least 2 months prior to the day of settlement for the contract (for the sale of the scheme); and
2. state:

(a) the day of settlement;

(b) that the lessee’s lease will terminate on the settlement day under section 81V of the BCCMA; and

(c) the day on which the owner of the lot is to provide vacant possession of the lot.

Applications to court about termination plan

The changes also make it clear that the District Court can deal with disputes and other matters associated with tenancy related issues arising in relation to the termination of community titles schemes.

In addition to the existing application for an order that each lot in the scheme be sold under the termination plan, a facilitator can now also apply for an order to:

1. terminate a lease of a lot or other scheme land on a day not earlier than the day of settlement of the contract for the sale of the community titles scheme; and
2. require an occupier or a lessee of a lot or other scheme land to vacate the lot or scheme land on the day stated in the application.[2]

This will ensure the facilitator has sufficient capacity to seek orders necessary to implement a termination plan, including in relation to ongoing leases or occupation of lots.

[1] Section 81B of the BCCM Act.

[2] Section 81N(6) of the BCCMA.

Written by Katya Prideaux

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