NSW: Q&A Strata Unit Entitlements – How are they Calculated?

The following questions are from NSW lot owners enquiring about strata unit entitlements, how they are calculated and how they may affect the maintenance of the common property. How do unit entitlements affect voting and strata levies?

Table of Contents:

• QUESTION: If a lot owner encloses his balcony to create a room, would this require a resolution for a change in use from a balcony to a liveable space? Could the increase in lot size be a trigger for a reassessment of unit entitlements?
• QUESTION: The garages in our unit block have unit entitlements. Is this counted for voting and nomination of a committee member? If an owner is unfinancial for their garage lot, can they vote?
• QUESTION: Our strata plan has 3 blocks of 6 townhouses and one block of 9 apartments. The expenses of the townhouses are very different to those of the apartment block. Can we split the strata plan into two?
• QUESTION: In NSW, what is the process for changing the unit entitlements for lots in a strata scheme? Does the decision require a majority vote for any change to be approved?
• QUESTION: We are replacing all windows and doors in our building. If our lot has less windows and doors, surely we should pay a lower contribution towards the special levy?
• QUESTION: Some lot owners have requested a motion that the lot entitlements be updated. Can all costs incurred for the amending of the entitlements be payable by the owners requesting the amendments?
• QUESTION: I begrudge the extra expenses created by a large commercial lot in our mixed use development. They pay more levies due to their unit entitlement, but shouldn’t they have their own facilities?
• QUESTION: We are in a duplex. The other owner gives power to their Real Estate Agent who repels any action by us the owner to paint the property or have their tenants abide by Common Property Rules. Can they do that?
• QUESTION: One family owns 61% of our scheme and use their strata unit entitlements to block the committee and let the scheme run down. Would this situation be classed as dysfunctional?
• QUESTION: In our new building, NCAT has issued an order for changing strata unit entitlements to a more equitable allocation. We assumed our strata company would send the order onto Council, however, they stated this is not their responsibility.
• QUESTION: What are the rules of strata voting at the AGM concerning strata unit entitlements?
• QUESTION: Our strata seems to have taken proxy voting and strata unit entitlements to a new level. It now counts storage units (which have a separate unit number) as voting entities.

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Question: If a lot owner encloses his balcony to create a room, would this require a resolution for a change in use from a balcony to a liveable space? Could the increase in lot size be a trigger for a reassessment of unit entitlements?

Answer: Applications to change unit entitlements are complicated.

Enclosing a balcony will usually require a by-law because the work will usually change the external appearance of the lot. Additionally, drilling and/or fixing the enclosure into the balcony slab, balustrade, soffit, etc. is not considered minor renovations. Refer to Section 10 of the Strata Schemes Management Act 2015 for examples of minor renovations.

As a first step, you should review the registered by-laws for the scheme and consider whether there are any by-laws that authorise the enclosure or prohibit the enclosure. If there is no by-law authorising the enclosure, it will need to be removed (and the damage to the common property repaired) or a by-law will need to be resolved retrospectively to authorise the enclosure.

Amongst other things, a by-law would usually require the lot owner to have council approval for the enclosure. The council may also require the owners corporation to consent to the application for approval to install the enclosure. If council approval is required and has not been granted, the council may make a development control order requiring removal of the enclosure. The lot owner may apply for a building certificate instead of removing the enclosure. A building certificate may confirm whether the change in use to the balcony is approved, however, it will not resolve the issue that the owners corporation’s authorisation is required to install the enclosure.

Section 236(1)(c) of the Strata Schemes Management Act 2015 provides that the Tribunal may make an order reallocating unit entitlements if it considers the allocation of unit entitlements “became unreasonable because of a change in the permitted land use, being a change (for example, because of a rezoning) in the ways in which the whole or any part of the parcel could lawfully be used, whether with or without planning approval“.

To establish a claim under section 236(1)(c), the applicant will need to prove:

1. there has been a change in the permitted land use and
2. the change resulted in the unit entitlements becoming unreasonable.

You should obtain evidence that the enclosure of the balcony constitutes a change in the permitted land use. A starting point may be to discuss the issue with the council. For expert advice, it would be best to speak with a town planner or an unrestricted building surveyor. You will need expert advice to support an application to the Tribunal.

In relation to whether the unit entitlements have become unreasonable, applications to change unit entitlements are complicated, numerous factors must be considered, evidence needs to be obtained from a registered valuer and the evidence needs to address a number of specific legal questions. There are also discretionary issues to take into consideration. You should obtain legal advice from a solicitor who specialises in strata law.

Please note this response is based upon assumptions. It is a brief summary and does not cover all issues that need to be considered. You will need to obtain legal advice from a solicitor who specialises in strata law before taking action in relation to the matter.

Shane Williamson
Williamson Lawyers Pty Ltd
E: [email protected]
P: 0404 045 605

This post appears in the April 2023 edition of The NSW Strata Magazine.

Question: The garages in our unit block have unit entitlements. Is this counted for voting and nomination of a committee member? If an owner is unfinancial for their garage lot, can they vote?

Our block has 4 units. Lots 1 – 4 have a unit entitlement of 20. Lots 1 and 3 also own garages that form lots 5 and 6, each with a unit entitlement of 2.

Lot 3 was unfinancial at the time of the AGM for the garage lot (5) but financial for lot 3. Are lots 5 and 6 included for the purpose of voting and nomination of a committee member? In this example, is lot 3 financial or not?

Answer: Lots 5 and 6, whilst being utility lots, are still lots for voting and nomination of a committee member.

In this scenario, lots 5 and 6 are defined under section 4 of the Strata Schemes Management Act 2015 (NSW) (‘the Act’) as a “utility lot”.

These are separate lots on the title, and the law does not prevent those lots from having voting rights.

To clarify, Schedule 1, clause 14(1) of the Act states:

Simple majority vote to generally apply.

A motion put to a meeting, or an election of officers of the owners corporation or members of the strata committee is to be decided according to a majority in the number of the votes cast for and against the motion with each person having one vote for each lot in respect of which the person is entitled to vote.

In other words, there is no exclusion of utility lots from counting as lots entitled to vote.

If all lot owners were financial, the owner of those lots with apartment and utility lots actually have two votes (or the ability to nominate one person, per lot) – one for each lot.

A motion’s outcome is only based on unit entitlement:

• A special resolution is required (see section 5(2) of the Act); or
• A poll vote is demanded (see Schedule 1, clause 14(2) of the Act).

If the motion were to be decided by special resolution or poll, the combined unit entitlement for those lots matters (i.e. those with apartment and utility lots have 22 unit entitlements worth of voting power, whilst those with apartment lots only have 20 unit entitlements worth of voting power).

In summary, lots 5 and 6, whilst being utility lots, are still lots for the purpose of voting and nomination of a committee member.

Tim Sara
Strata Choice
E: [email protected]
P: 1300 322 213

This post appears in the March 2023 edition of The NSW Strata Magazine.

Question: Our strata plan has 3 blocks of 6 townhouses and one block of 9 apartments. The expenses of the townhouses are very different to those of the apartment block. Can we split the strata plan into two?

We own a townhouse in a strata plan in NSW. The Strata Plan includes 3 blocks of 6 townhouses and one block of 9 apartments. I am a member of the strata committee and we are finding that the needs and expenses of the townhouses are very different to those of the apartment block.

Is it possible to split the strata plan into two i.e. the 3 townhouse blocks in one and the apartment block in another? The buildings are all quite separate but share some common services and property although there are clear boundaries between each of the buildings.

Answer: It appears the problem you are experiencing arises from the allocation of the unit entitlements.

It appears the problem you are experiencing arises from the allocation of the unit entitlements. The unit entitlements are determined at the time of the registration of the strata plan and should be based upon the market values of the lots. You may have a situation where the townhouses have higher market value and accordingly higher unit entitlements whereas the apartments are smaller and have lower unit entitlements and pay lower strata levies but, due to the additional services they require, the apartments have higher maintenance costs.

There are two ways the unit entitlements can be changed. By the creation and registration of a strata plan of subdivision or by obtaining orders from the NSW Civil and Administrative Tribunal pursuant to section 236 of the Strata Schemes Management Act 2015. In either case you will likely face opposition from the apartment owners. A strata plan of subdivision which includes common property will require a special resolution (that is, not more than 25% of the value of the votes are against the resolution) which may make it difficult or impossible to implement. Obtaining an order pursuant to section 236 is also not easy as the application needs to be supported by a certificate from a valuer which will need to take into account the unit entitlements for all of the lots in the scheme.

My suggestion is that the strata committee start by making enquiries with a valuer who has experience issuing valuation certificates for the registration of strata plans and obtain preliminary advice in relation to whether there is the potential to adjust the unit entitlements. If the owners corporation receives advice from a valuer that the unit entitlements are unreasonable the owners corporation will need to obtain legal advice on how best to proceed.

Shane Williamson
Williamson Lawyers Pty Ltd
E: [email protected]
P: 0404 045 605

This post appears in the December 2022 edition of The NSW Strata Magazine.

Question: In NSW, what is the process for changing the unit entitlements for lots in a strata scheme? Does the decision require a majority vote for any change to be approved?

Answer: The NCAT has power to make an order to change unit entitlements.

In NSW, the NCAT has power to make an order to do so. Our article: What Are The Principles Applied By The Tribunal In The Re-Allocation Of Unit Entitlements? sets out the principles applied by NCAT.

If a lot owner or the owners corporation wants to make an application to NCAT for an order for unit entitlements, before doing so the steps (briefly) are:

1. Obtain a valuation from a registered valuer of all the lots based on market value (note different valuation dates may apply) and a prepare a revised schedule of unit entitlements based on their findings;
2. Consider if there are grounds to request an order that the original owner pay damages for differences in unit entitlements if orders are made to change them;
3. If the owners corporation is making the application then it obviously needs to pass the resolutions to engage the valuer and to support the NCAT application;
4. If a lot owner is making the application we recommend that they provide the valuation to the owners corporation with resolutions that the owners corporation make the NCAT application for orders;
5. Make the application. Note mediation is not required for these orders;
6. If NCAT makes the orders the owners corporation needs to register the orders with the NSW Land Registry Service.

Section 236 of the Strata Schemes Management Act 2015 applies.

If however you have a scheme that was the subject of a strata development contract then a revised schedule of unit entitlements based on market values of the lots can be lodged by the owners corporation with the NSW Land Registry Service up to two years after the completion of the development. Section 90 of the Strata Schemes Development Act 2015 covers this scenario.

Allison Benson
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

This post appears in the August 2022 edition of The NSW Strata Magazine.

Question: We are replacing all windows and doors in our building. If our lot has less windows and doors, surely we should pay a lower contribution towards the special levy?

There are 9 units in our complex. The building requires the replacement of all windows and door. Our unit is situated in the middle of the building and has less windows and doors than units on the edge of the building.

I contacted our Strata Manager to question whether our contribution towards the work would be less than other lots, but he simply referred me to the Strata Management Act of 2015: Section 79 (1), Section 83 (2) and Section 106.

I have read these and I refer to Section 83 (2) of the Strata Schemes Management Act 2015 where it states:

83: Levying of contributions

2. Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and Section 82) by the owners in shares proportional to the unit entitlements of their respective lots.

I may be reading this wrong, but I believe that as we only have 3 windows and 1 sliding door compared to the outside units having approximately 8 windows and 1 sliding door, shouldn’t our levy be less?

Answer: One in, all in. Levies can only be struck in accordance with unit entitlement, which determines your share of ownership in common property and how much you’ll pay to maintain it.

Levies can only be struck in accordance with unit entitlement, being the relative value of your lot versus all other lots within the scheme as at the date of registration. From the definitions under the Strata Schemes Management Act:

“unit entitlement” of a lot in a strata scheme means the unit entitlement of the lot shown on the schedule of unit entitlement for the strata scheme.

Unit entitlements are shown on the certificate of title and the strata plan and are set at registration. Unless unit entitlement is varied for whatever reason (which is a long and difficult process which needs to be mutual consent or a tribunal/court order), owners contribute a fixed percentage for repairs in a scheme, no matter where the repairs are and whether their lot is benefitted in a particular way.

One in, all in.

The following information can be found on The NSW Government Website: Buying a strata property

Know your unit entitlement to be sure.

‘Unit entitlement’ determines your share of ownership in common property and how much you’ll pay to maintain it. It also affects your voting power in decisions the owners corporation makes.

The strata plan will show the unit entitlement for each lot.

Andrew Terrell
Bright & Duggan
E: [email protected]
P: 02 9902 7100

This post appears in the June 2022 edition of The NSW Strata Magazine.

Question: Some lot owners have requested a motion that the lot entitlements be updated. Can all costs incurred for the amending of the entitlements be payable by the owners requesting the amendments?

We are holding a special meeting this week and some of the lot owners have requested a motion that the lot entitlements be updated. I have informed our strata manager that I will want to move a motion amending the motion that has been put forward to the effect that all costs incurred for the amending of the entitlements be payable by the owners requesting the amendments.

I have been informed that if the motion is approved by special resolution by the correct majority, the Owners Corporation are liable to pay for the costs. Is this correct? 

Answer: You cannot make the select “applicant” lot owners the only liable parties. In certain circumstances, costs can be sought from the original owner.

An application for reallocation of unit entitlements is made pursuant to Section 236 of the Strata Schemes Management Act, 2015 (NSW) and may be made (among others) by an owner, owners or owners corporation.

Such an application does not require a special resolution – only an ordinary (majority) resolution is required.

We suspect the reason why there is a group applying for a re-allocation through the Owners Corporation as the applicant, is that all the other lots owners and owners corporation may be affected by any re-allocation – therefore, the Owners Corporation and all constituent owners should be the applicants.

If the Owners Corporation is the applicant, it automatically bears the costs of the application, the valuation and other legal and other experts’ costs, in which case, you cannot make the select “applicant” lot owners the only liable parties. In certain circumstances, costs can be sought from the original owner.

So while we disagree that a special resolution is required, we do agree that the Owners Corporation will bear all the costs, such costs to be borne by each and every owner in proportion to their unit entitlements.

Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440

This post appears in Strata News #570.

Question: I begrudge the extra expenses created by a large commercial lot in our mixed use development. They pay more levies due to their unit entitlement, but shouldn’t they have their own facilities?

I cannot understand how a profit making commercial lot, though paying a little more in levies, can make claims on the strata.

We have the added cost of outside lights left on from dusk till dawn, constant use of our common area toilet, removal of their excess rubbish along with our own. Sure a 60 seat restaurant should pay for their own facilities.

Windows got broken in commercial lots and they made a claim on our insurance. Surely commercial premises should have their own insurance?

Answer: Lots pay their levy contributions in accordance with unit entitlements. From the contributions of all lot owners the owners corporation has funds to pay for repairs and maintenance of the common property.

Lots pay their levy contributions in accordance with unit entitlements. From the contributions of all lot owners the owners corporation has funds to pay for repairs and maintenance of the common property. This will include electricity for lighting the common property areas, rubbish collection from the common property areas or cleaning of common property toilets.

The only way to make a lot responsible for repairing or maintaining common property is through a by-law either under s108 of the Strata Schemes Management Act (if they were to add to the common property) or more commonly through a common property rights by-law granting the lot exclusive use of specific areas.

It would be worth checking your scheme’s by-laws to see if they grant exclusive use rights to the commercial lots and if so, on what basis. Generally, when an exclusive use right is granted it is on the condition that the lot owner benefiting from it pays for repairs and maintenance of this area.

Allison Benson
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

This post appears in Strata News #467.

Question: We are in a duplex. The other owner gives power to their Real Estate Agent who repels any action by us the owner to paint the property or have their tenants abide by Common Property Rules. Can they do that?

We have resided in our duplex since 2004. We did not have a registered set of By-Laws attached to our property. We as owners have had cooperative owners in the past until now. The current owner gives power to their Real Estate Agent who repels any action by us the owner to paint the property or have their tenants abide by Common Property Rules. Can they do that?

Shouldn’t the Owner be directly accountable for their property and inform the Real Estate what has to be done? The real Estate Protect their Tenant and Income to the Owner. When informed about repairs she informed us she had a pension and couldn’t afford them we would like to paint our 17 year old Duplex.

Answer: The by-laws for the scheme apply to all lot owners and occupants.

It sounds like you are in a difficult situation. I am going to assume you are in NSW however the Act and QLD have similar provisions in their legislation.

The short answer is that the by-laws for the scheme (which is what I believe you have called the common property rules) apply to all lot owners and occupants. They should be complied with and there are mechanisms under the Strata Schemes Management Act 2015 to enforce them.

In NSW, you can apply for mediation of the issues and if this fails apply to NCAT for works orders or orders requiring compliance. If you have an Owners Corporation meeting and your lot has 51% of the unit entitlements for the scheme then you could also have the Owners Corporation pass motions to take this action. As you are a two-lot scheme you will need to ensure that you have at least 51% of the unit entitlements before requesting your strata manager organise a meeting.

If you have sufficient voting power you could also have the Owners Corporation pass a resolution to issue a notice to comply with the by-laws. You should seek advice about your particular situation before you apply to NCAT to make sure that:

1. you have evidence to support your claim and
2. the orders you are seeking are within the power of the NCAT to make and are worded appropriately.

Allison Benson
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

This post appears in Strata News #415.

Question: One family owns 61% of our scheme and use their strata unit entitlements to block the committee and let the scheme run down. Would this situation be classed as dysfunctional?

Are voting blocks in NSW strata schemes unlawful or otherwise unacceptable?

We have one family who has bought up 61%. They use their strata unit entitlements to not let anyone else on the committee.

They run the scheme down both materially and by not adhering to by-laws and got us prosecuted for not implementing a new fire order.

Would NCAT find such a voting block dysfunctional?

Answer: If the 61% family prevents the Owners Corporation from complying with its statutory obligations, then this would be a strong argument for the compulsory appointment of a strata manager.

Yes, if the 61% family prevents the Owners Corporation from complying with its statutory obligations, then this would be a strong argument for the compulsory appointment of a strata manager. Obviously, you would bear the onus of proof and need to demonstrate the full extent of the dysfunction and have statutory declarations and other strong evidence to support your application.

Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440

This post appears in Strata News #198.

Question: In our new building, NCAT has issued an order for changing strata unit entitlements to a more equitable allocation. We assumed our strata company would send the order onto Council, however, they stated this is not their responsibility.

We are in a newly built apartment block which contains 5 apartments. The block was owner built with the builder retaining the penthouse. The remaining 4 apartments are of varying sizes.

Last December, after all of the owners agreed to approach Fair Trading, NCAT issued an order for changing strata unit entitlements to a more equitable allocation.

NCAT sent the paperwork to the Strata management company and we all assumed the strata company would send this onto Council so our water rates could be adjusted. In recent conversations with the Strata manager, she has indicated that this is not the company’s responsibility, even though the company, not the owners’, received the papers. Is this correct?

Answer: Once an order has been granted by NCAT, the owners corporation needs to lodge a form with Lands Registry Services.

Once an order has been granted by NCAT, the owners corporation needs to lodge a form with Lands Registry Services. Once lands have made the amendment and update certificate of title and strata plan will reflect the amended UE.

• Order for reallocation
• Procedure for changes to UE
• Forms for reallocation post order from NCAT

I would imagine you not in Sydney and this is in a regional area where councils supply water to the scheme and it’s not individually metered (whereby the cost is accorded to owners via their unit entitlement).

The owners corporation needs to ensure that the relevant forms have been lodged with lands and once an updated CT/plan has been received, then ensure these are issued to council (with a request for bills to be adjusted based on the date of amendment).

The owners corporation can instruct their strata managing agent to do that, provided it’s a delegation available in their agreement with the owners.

Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440

This post appears in Strata News #197.

Question: What are the rules of strata voting at the AGM concerning strata unit entitlements?

My concern is around the rules of strata voting at the AGM concerning strata unit entitlements.

I live in an old strata heritage block of 6 units with 3 garages built in the 1930’s. It would be interesting to hear if other owners of older units built in the 30, 40, and 50’s have similar problems.

The 3 garages are separate lots on title with the units. I believe that when the units were initially sold, the new owners had first option to buy the garage lots. I also believe the present owners can sell their garage lots to others owners within the unit complex.

I think giving strata owners of garages an extra vote at meetings should be cancelled out.

On reading the Strata Schemes Management ACT 2015 – Sect 4 I found it very interesting:

No mention of Garages being a “lot” — What is mentioned is Utility Lot — meaning a Utility lot is designed to be a primarily used for storage or accommodation of boats, MOTOR VEHICLES or goods, and not for human occupation as a residence, office, shop or like.

The 3 owners of the 3 garages use their extra voting power to block maintenance for the units. I strongly object to allowing Utility lots being given an extra vote at meetings. I am hoping that the new Strata Laws will address this by giving everyone just one vote at all meetings.

Answer: The one lot / one vote rules continue to apply under the new legislation.

The one lot / one vote (special resolutions and demand for poll excepted) rules continue to apply under the new legislation.

Ultimately, if owners are abusing their voting rights to prevent the Owners Corporation from complying with its statutory duties, the disgruntled owners could make an application for a compulsory appointment to ensure repairs and maintenance were properly undertaken.

Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440

This post appears in Strata News #97.

Question: Our strata seems to have taken proxy voting and strata unit entitlements to a new level. It now counts storage units (which have a separate unit number) as voting entities.

Our strata seems to have taken proxy voting to a new level. It now counts storage units (which have a separate unit number) as voting entities.

Our building has six lock-up storage units which were bought by unit owners. Five of them are registered as having 19 unit entitlement each, the sixth (the largest) has 40. The unit entitlements for the apartments range from 1727 (smallest) to 3746 for the largest.

Can these storage spaces have legal votes at a meeting equal to the vote of an apartment owner? If not, what section or regulation covers this?

Answer: We suggest you request a poll vote as the lower unit entitlements allocated to the storage lots may equal less than one vote per unit.

Our reply is based on the details provided.

We note that the storage lots are on separate titles, with a unit entitlement allocated to each storage lot. As such each owner has a voting entitlement for each lot they own, so if they own a unit and a storage cage, as they are two separate titles with two unit entitlement allocations they have two votes each if voted by a simple show of hands.

Most decisions can be made by a simple majority vote but sometimes a special resolution or unanimous resolution is needed. Even when only a simple majority vote is needed a poll can be called.

When a poll is demanded by an owner at a meeting, votes will have a different value and are worked out by counting the unit entitlements, as opposed to calculating a vote by show of hands wherein one lot equals one vote.

We suggest you request a poll vote as the lower strata unit entitlements allocated to the storage lots may equal less than one vote per unit.

In summary, the storage lots will have an equal vote to the apartment owners if voted by show of hands, if voted by poll, the votes will have a different value and will be calculated on the unit entitlement subject to each registered lot.

Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

Have a question or something to add to the article? Leave a comment below.

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