A proposed bill would give strata corporations greater flexibility to take actions, and would also grant stratas the new power to acquire land and redevelop strata property.
Daniel Priestley, director of law firm Priestleys Ltd, whose areas of specialisation include strata law and practices, said strata law reform is overdue.
“The present Strata Titles Registration Law was originally enacted in the Cayman Islands in 1973 having been modelled from a New South Wales, Australia statute originally enacted in the 1950s when the system of strata titles was relatively new,” he said in an email. “In the circumstances, the legislation was unsophisticated and did not address a number of issues, some of which would appear obvious to the modern bystander and some of which may not. The increasing complexity of modern life has made clear for some time the need for reform of the strata titles regime in the Cayman Islands.”
Mr. Priestley’s opinion echoes that of several other local attorneys, who recommended that “the law was in need of a comprehensive overhaul”, according to a discussion paper published by the Law Reform Commission in April 2011.
“The Strata Titles Registration Law of the Cayman Islands is therefore years behind its original model and it is accepted that comprehensive reform is needed,” according to the paper.
Beginning in January 2009, the commission has been working to review and update the strata law. The discussion paper and first draft bill were made public in April 2011. However, the first bill was never officially brought before the Legislative Assembly for consideration.
The commission is reviewing and updating its first draft bill, and is putting together a second bill that will incorporate the provisions in the first bill and also cover all other areas of strata regulation not addressed in the first bill.
Commission Director Cheryl Neblett said this most recent bill is separate from the commission’s continuing work.
“[T]he bill is a government bill containing Cabinet proposals and is not a part of the Law Reform Commission’s work. As we are still fine-tuning our comprehensive legislation, I have no further comment to make,” Mrs. Neblett said via e-mail.
Not quite unanimous
Although the proposed bill is not comprehensive reform, Mr. Priestley said the measures it does contain are good ones.
“All of the changes proposed by the bill are welcome ones, which will increase the efficacy of operation of stratas and the marketability of strata lots as a form of property ownership, and perhaps also provide some useful stimulus to the property market in the Cayman Islands,” he said.
According to the current Strata Titles Registration Law, a unanimous vote is required for a strata corporation to make decisions regarding insurance, transferring property, amending corporate bye-laws, and granting/accepting easements or restrictive agreements.
“The original framers of the Strata Titles Registration Law may have believed that major decisions should require the unanimous consent of all proprietors on the basis that where a critical decision affecting the strata arises, the proprietors would come together to do that which is in everybody’s best interest and/or that significant changes in the rights and/or obligations of a proprietor should not be implemented without that proprietor’s consent,” Mr. Priestley said.
“Where a strata plan comprised only a relatively few number of proprietors and where the issues that arose rarely required a decision which would have a significant effect on a proprietor’s rights and/or obligations, as may have been the case in the 1950s until relatively recently, this would be a sensible approach.
“However, strata plans now routinely comprise a large number of proprietors and the issues arising from property ownership have become more and more complex. The increase in the number of proprietors in the typical strata plan now means that obtaining unanimous consent can be practically impossible as a single recalcitrant proprietor (whose motives may be less than altruistic) could effectively stymie the will of the majority, to the detriment of all. Also, the reality now is that stratas are routinely faced with major issues which must be addressed and, if they are not, this may serve to devalue the investment both in terms of monetary value and amenity,” he said.
Under the new bill, “unanimous resolutions” would be replaced by “special resolutions” or “super-majority resolutions”.
For stratas located in beach resort/residential, commercial, hotel/tourism or industrial zones, special resolutions require a two-thirds consensus and super-majority resolutions require a three-quarters consensus.
For stratas located outside those zones, special resolutions require a three-quarters consensus and super-majority resolutions require a nine-tenths consensus.
Stratas as buyers, developers
The current law allows stratas to sell or lease common property with a unanimous resolution, and the new bill would change that to a super-majority resolution. However, existing law does not explicitly give stratas a mechanism by which to acquire property, something the new bill addresses.
Mr. Priestley said this has become a pressing issue in connection to stratas on Crown land forming part of the 1950s Greenall lease, including The Ritz-Carlton, Grand Cayman, and a number of apartment complexes on Seven Mile Beach.
“There are other legitimate reasons why a strata may wish to acquire additional land, say for increasing the land it has available for parking. Hitherto, these issues have been addressed in a somewhat ad hoc fashion, sometimes without a statutory basis and have been possible in some cases only because of the latitude given by Lands and Survey Department in terms of the interpretation of the law,” he said.
The new bill allows stratas to acquire land, by transfer or lease, with a special resolution.
The legislation also makes it easier for stratas to redevelop their existing property, and provides guidelines on how to compensate proprietors
“The present Strata Titles Registration Law contemplates the redevelopment of a strata only where it has been destroyed and, as such, redevelopment for its own sake is not really addressed, particularly in terms of satisfying the interests of proprietors, some of whom perhaps do not wish to participate in a redevelopment,” Mr. Priestley said. “Up to now, solutions have had to be created, the most common one to bring in an outside developer to build a bigger strata and then transfer a new unit to each of the old proprietors and apply the proceeds of sale of surplus units to the cost of the redevelopment, including providing the developer with a profit, which has not always been successful.”
He said, “The lack of legislative regime dealing with redevelopment has undoubtedly made it more difficult for stratas to be redeveloped even as there are an increasing number of aging stratas in desperate need of redevelopment.”
The new bill “will undoubtedly make it much easier to redevelop and perhaps obviate the need to bring in an outside developer,” Mr. Priestley said.