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Q & A - Lot Entitlements

A recurring issue of contention and debate in Community Title properties is the differences that the Community Lots have in their entitlements and while the following is a real question from an existing client it is also representative of varying other questions that have been posed to the author by multiple properties throughout the suburbs of Adelaide.

I am the owner of Unit 7. Can I ask why my unit, is projected to pay fees 23% higher than the other units? I do not believe this is fair. My unit might be slightly bigger – but not 23% bigger. I will not agree to this.

The above was taken directly from a client email which was responded to as follows:

The levies for a Community Corporation are raised by lot entitlement values. The entitlements represent the percentage of ownership that each lot owner has in the property based on the unimproved capital value of the parcel of land (within a tolerance accepted by the legislation of plus or minus 10 percent).

To change the way that levies are raised or the lot entitlement values requires a Unanimous Resolution; that is one where all owners are notified with the text of the motion on the agenda with at least 14 days’ notice and at a meeting that establishes a quorum the motion is passed with no votes against it. It is very unusual to see Community Corporations make a change from lot entitlement basis for levy raising.

Client response:

So does this mean my property is valued 23% higher than the other units? I doubt that very much!!

There is never going to be a unanimous decision in favour of changing this. The other 5 units are never going to say yeah we will pay more. I just want to see how you calculate the 23% higher than the rest?

Body corporate managers response:

This doesn’t mean that your property is worth 23% more for resale, it means that at the time the plans were drawn a licensed valuer has valued the unimproved capital value of your parcel of land which is larger and has one immediate neighbour in the group at more than those in the middle which are smaller and have multiple neighbours.

Please refer to page 2 of the plan attached to see the lot entitlement sheet lodged at the Lands Title Office for your corporation and refer to sections 20 & 21 of the Community Titles Act 1996 for further information.

I assure you that we have not changed anything in how the levies have been determined. Lot entitlement values have been used for the basis of levy payment calculations for the lifetime of the corporation, please refer to the last minutes of the corporations meeting with your former manager (like many corporations, this one had chosen to leave their former manager and appoint Strata Management SA to help them) which shows the levy amounts agreed by the corporation noting lots 1 and 7 as higher than the middle lots inline with their lot entitlement values.

Please note that Section 20 of the Community Titles Act 1996 states:

(1) The lot entitlement of a community lot is a number assigned to the lot that bears in relation to the aggregate of the lot entitlements of all of the community lots defined on the community plan (within a tolerance of plus or minus 10 percent) the same proportion that the value of the lot bears to the aggregate value of those lots.

(2) The lot entitlement of a lot must be expressed as a whole number.

(3) The regulations may provide that the aggregate of the lot entitlements of all the community lots defined on a plan must be equal to a number fixed by the regulations.

(4) The unimproved value of the lots will be used to establish lot entitlements.

(5) In the case of a strata lot this will be taken to include the value of the part of the building containing or comprising the lot without taking into account the value of fixtures or other improvements.

Section 21 provides that these entitlements can be changed by a Unanimous Resolution:

(3) The corporation must provide evidence to the satisfaction of the Registrar-General that the application is made in pursuance of a unanimous resolution of the community corporation.

Recently a client in a property whose Community Lot had sea views and a more conventional/usable shape than the others demand that the entitlements be changed as that lot was paying a higher proportion of the levies and that owner was also given the relevant sections of the legislation and the opportunity to have a valuer attend and provide a schedule of entitlements that could be presented to a General Meeting of the corporation for owners to vote on this Unanimous Resolution.

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