Question: Can a commercial strata warehouse’s by-laws restrict a lot owner from operating a business in a specific industry or from leasing their lot to a business in that industry?
Can a commercial strata warehouse owners corporation stop a lot owner renting their lot to a mechanic, repairer/panel beater, or stop the lot owner from operating as a mechanic himself? Can strata by-laws specify what types of industry they can reject, even within a designated industry zoning warehouse?
Answer: In addition to taking into account the zoning of the area, the Tribunal would likely need to consider evidence in relation to any other restrictions.
Based upon the information provided, a by-law that specifically prohibits a certain type of business, if the business is within the permissible zoning use, may be ruled to be invalid by the NSW Civil and Administrative Tribunal pursuant to Sections 139 and 150 of the Strata Schemes Management Act 2015.
Section 139 provides that “A by-law must not be harsh, unconscionable or oppressive.”
Section 150 provides that “The Tribunal may, on the application of a person entitled to vote on the motion to make a by-law or the lessor of a leasehold strata scheme, make an order declaring a by-law to be invalid if the Tribunal considers that an owners corporation did not have the power to make the by-law or that the by-law is harsh, unconscionable or oppressive.”
In addition to taking into account the zoning of the area, the Tribunal would also likely need to consider evidence in relation to any other restrictions on the use of the property which may be specified in the development consent conditions and whether the business activity adversely affects how other lot owners use and enjoy their lots and the common property.
However, you should consider all of the current by-laws. There may be by-laws that place some limitations on your business activity. For example, by-laws may prohibit the parking of motor vehicles on the common property, and if you do not have your own parking spaces available, this could present a problem. Another example may relate to waste and hazardous materials. Will the motor vehicle parts and panels be stored on the common property? If so, this could be an issue.
Alternatively, your problems may not arise from a new by-law prohibiting use but may instead arise in relation to any by-law you need approved to set up the workshop. You may need the owners corporation’s approval if you need equipment installed. If you are establishing a new business from scratch, you may need council approval, which may need the owners corporation’s approval. If the owners corporation is aware that you require its approval to establish or operate the business, it may be easier for the owners corporation to justify withholding its approval than it would be to justify creating a new by-law.
You should also keep in mind that the owners corporation makes its decisions by passing resolutions at general meetings. The approvals you require may need to be made by special resolution. Of the value of the votes cast, you need to ensure not more than 20% of the votes are against you. Discussing your requirements with the other lot owners before preparing any by-laws may be in your best interest. This may assist you in preparing any by-laws and obtaining the votes you require if/when your requested motions are considered at the general meeting.
As a side issue, I also make you aware of Section 82 of the Strata Schemes Management Act 2015, which provides that “If the use to which a lot in a strata scheme is put causes an insurance premium for the strata scheme to be greater than it would be if it were not put to that use, so much of a contribution payable by the owner of the lot as is attributable to insurance premiums may, with the consent of the owner, be increased to reflect the extra amount of the premium.” This may be something you need to consider.
Considering all of the above, I recommend obtaining legal advice from a legal practitioner specialising in strata law. A legal practitioner can advise on risks and strategies based on the planning laws, the by-laws and other factors I have not considered. Although my response to your question has raised some potential issues, with good legal advice and representation, you should be able to navigate these issues.
This post appears in the June 2025 edition of The NSW Strata Magazine.
Shane Williamson
Williamson Lawyers Pty Ltd
E: shane@williamsonlawyers.com.au
P: 0404 045 605
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