Victorian Lot Owners are wondering about the process for buying or leasing common property. Alex Smale of The Knight and Dan Slattery of Strata Law Services explain each solution.
Question: There has been a proposal for ground floor units to take a 99 year lease on the common property at the rear of their units. Does this mean that part of the common property has been disposed of?
I own a unit in double storey apartment building in Melbourne.
I have owned the unit for the last 28 years. Subsequent to the conversion of the title to a Strata title, the common property at the front of the building was fenced in and leased to 2 units for 99 years. As a result, the 2 owners paid a premium price for their units.
Some owners on ground floor level have installed doors to get access to the rear common property. One owner has enclosed the area to create a courtyard and the gates are kept locked. Two owners have not enclosed their courtyards, but have put chairs and pot plants in these areas.
At last AGM the Owners Corporation decided that the ground floor units using the rear of the common property must agree to enter into a 99 year lease.
If they refuse they will have to remove all structures and personal belongings. A special resolution was passed by 75% majority vote.
Does the decision to create a permanent lease for the common property for the enjoyment of selected owners require a unanimous vote? In other words, the other owners are permanently giving up their rights for the use and enjoyment of these areas and should have a say in the decision making.
If the Owners Corporation licenses part of the common property to an owner by granting a 99 year lease, does this mean that part of the common property has been disposed of under Subdivision Act 1988?
Answer: Common property under lease or licence always remains part of the common property.
To allow a Lot owner to have a Lease over Common property you require a Special Resolution – where 75% of Lot owners (or where the supportive owners have at least 75% of the total of Lot Entitlements) to support the proposal for the Lease – not a Unanimous Resolution.
No, the common property under lease or licence always remains part of the common property. A lease or a licence has no impact on the Plan of Subdivision re the various private property and common property elements of the Plan.
This post appears in Strata News #305.
Question: In a Melbourne strata of three are all lot owners required to agree to sell the common front lawn area to the lot owner of the front unit? Are there other options?
I live in a Melbourne strata building with three lot owners. Are all three lot owners required to agree to sell the common front lawn area to the lot owner of the front unit or is this decided by a majority approval?
Answer: Selling any part of the common property to an owner requires a unanimous resolution.
Under section 32 of the Subdivision Act an unanimous resolution is required to alter a plan of subdivision. Selling any part of the common property to an owner, therefore, requires a unanimous resolution.
Another option you could consider is leasing the area to the owner. Under part 2, division 3 of the Owners Corporation Act, an Owners Corporation may lease or license any part of the common property to a lot owner or other person by Special Resolution rather than a unanimous one.
For a Special Resolution to pass as a final resolution, it requires agreement by owners or their proxies representing 75 per cent of lots or in the case of a ballot or poll, 75 per cent of lot entitlements.
Alternatively, a Special Resolution can pass as an interim Special Resolution if owners or proxies representing at least 50% of lots are in agreement and no more than 25% are against. For you to obtain a Special Resolution in your situation, therefore, you would, depending on lot entitlements, likely need two out of three owners to support the resolution and for the third owner to either abstain or vote in favour.
This post appears in Strata News #299.
Have a question about buying or leasing common property or something to add to the article? Leave a comment below.
This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.
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