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02/09/2013 at 8:39 am #9011
We have an empty lockable storeroom in our basement garage that is common property.
Can we, without paying for any expensive by-laws, allow residents and/ or owners to use the storeroom for an agreed monthly fee?
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02/09/2013 at 8:44 am #19315
Doctor – YES …. in NSW Owners Corporations can licence residents to use Common Property and impose conditions including a fee upon those availing themselves of that in accordance with the provisions of Sect.65B of the Strata Schemes Management Act (1996).
In order to do that your Owners Corporation (O/C) needs to place an appropriate Motion on the Agenda of a General Meeting, which in order to pass requires a favourable vote by ≥75% of those owners in attendance both personally and by proxy, and with that percentage being determined on the basis of the sum lot unit entitlement of those in favour ÷ the total lot unit entitlement of those in attendance.
Be cautious though, at least initially whilst your O/C assesses the appropriateness of the conditions imposed and how well residents abide by those, and with that in mind I’d strongly suggest that the Motion if approved covers a license of 12 months, with any continuance and/or altered conditions being considered at each Annual General Meeting.
02/09/2013 at 8:45 am #19316You are lucky that in NSW you ‘only’ need 75% to approve granting an exclusive use of common property. In the ACT one person can block something everyone else approves.
If the store room is big enough, an alternative that might work would be to set it up in such a way that any owner could use it if they wish to. Let’s say a survey could show that (say) 30% of owners might want to use the space at any particular time you could have that many spaces divided off, perhaps by just markers on floor. Perhaps you can just have an ordinary resolution at an AGM to use the space this way. You would still need a set of conditions for use, a process to review, a way for new people to come in and replace someone not really using the space. I would suggest there should not be fees for use of the common property.
If that is not practical then you should follow the formal procedure of granting exclusive use of the common property.
02/09/2013 at 8:47 am #19317Actually we don’t know where The Doctor is located, but my interpretation was that the query was about communal as opposed to exclusive use.
02/09/2013 at 2:17 pm #19325(In NSW) Section 65B only allows an OWNER to be granted license to use common property. This is an important distinction.
An owners corporation can LEASE an area of common property as per section 25 of the Strata Schemes (Freehold Development) Act 1973 pursuant to a special resolution being passed. A lease can be with an owner, a tenant, or an unrelated 3rd party (such as a Telco company wanting to place a tower on your roof). The lease can contain condition including termination and payment of rent.
A lease will also be registered on the common property title such as to disclose the arrangement.
It is also worth considering that any income an owners corporation receives from a third party such as a lease arrangement (not levy income) is treated as taxable income in the individual owners hands. Individual owners are required to disclose their portion of the lease income on the annual tax return statement despite the fact that the income is not being paid to them individually.
02/09/2013 at 6:04 pm #19333Thanks everyone for their input so far – quite an impressive response for my first ever posting
The Strata Plan is in NSW.
Licences and Leases will need drafting and negotiating and renewing. As with special by-laws I was hoping to avoid all that and have an informal arrangement. Are there any significant risks of going informal with this?
02/09/2013 at 6:16 pm #19334forgot to mention, we are looking at exclusive use of the room.
It is about the size and shape of 4 telephone booths in a line (for those who remember telephone booths).
02/09/2013 at 7:20 pm #19335Doc., apart from the significant matter of your Executive Committee and/or Owners Corporation being in breach of the NSW Strata Schemes Management Act, on the basis of the numbers of problems that I’ve read on FlatChat over the past 4 years it’s apparent that informal arrangements that rely upon peoples’ goodwill almost always end badly.
Such arrangements with Owners usually go pear-shaped when they sell, and with Tenants at the end of their Lease.
As was correctly observed by JGOWI (post #5), the provisions of Sect.65B only allow an O/C to grant a licence to Owners, and if the resident/s who are to be the beneficiaries of the storeroom are Owners, then a licence is the best way forward.
A Special Resolution that in addition to your suggested fee addresses matters such as the licence period, the maintenance of the area, and the safe custody of stored items (e.g covered by the O/C’s insurance?) is by no means a big deal, unless of course there’s significant opposition (i.e. ≥25%) – in which case it’s far better to let the matter end there as opposed to having some disgruntled non-beneficiary of the storeroom later seek the intervention of the Tribunal; where your O/C would certainly loose and could be fined!
Finally, an informal exclusive use arrangement is an even bigger minefield, as in addition to the problems already discussed, it has the additional challenges of accounting for the potential increase in the “value” of the Lot to which it (informally) applies where that’s not reflected in that Lot’s units of entitlement, or for the arrangement possibly transferring to a new Owner as an existing (but illegal) privilege.
So my advice is …. a licence only to Owner/s is legally compliant, its process is transparent and the most expedient way to go; so please do it right or don’t do it alt all!
02/09/2013 at 7:35 pm #19336No there isn’t really, because it is common property and no-one other than the owners collectively can decide how it is to be used, and the conditions attached to that use. If you are granting exclusive use to one or more parties then the other owners have a say in that, as it is their property.
If you didn’t put in a by-law there would have to be a licence or lease to set out the terms and conditions, and you would also have to determine what was done with the fees, which belong to the OC.
There are a number of risks, including liability for anything that happened as a result of items stored there, which would fall to the OC in the absence of provision to the contrary. That is why you need a formal agreement.
03/09/2013 at 10:38 am #19340If you want a bullet proof gold plated soloution the other posters are generally correct.
BUT I consider an informal arrangement perfectly acceptable so long as a majourity of the owners at a general meeting pass a motion approveing it and strict conditions are applied. The money should go into the Admin fund and it would be taxed at the company tax rate of 30%.
Even if one owner strongly objected he would have to win at CTTT to get the motion overturned and then the only penality might be you would have to stop the rental. It’s only if you ignored the CTTT ruling that you might be liable for a fine.
I’ve no idea what a licience is or how much they cost, but I suspect they would need to be drawn up by a lawyer costing mega bucks.
Don’t even consider Exclusive use motion as this is a permenent transfer of the room to the requester unless he pays the Strata market value for purchaseing the room.
03/09/2013 at 2:44 pm #19344KWP, unlike yourself the Doc. may not have a bullet-proof vest
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I know he’s loathe to go down the gold-plated and legally correct path, but a Motion on an General Meeting Agenda forms the basis of a License that doesn’t need to be full of legalese.
Anyway – after considering all points of view put here, it’s now the Doc’s decision.
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