While it may not be common, some strata property owners may have come across the concept of "exclusive use rights." This unique arrangement allows an individual lot owner to have exclusive access to a designated part of the common property, even though the ownership of that area remains with the Owners Corporation.
Imagine, for example, a ground-floor apartment with a small garden directly connected to the lot. While the garden is technically part of the common property, it might only be accessible through that apartment. In such cases, the lot owner could be granted exclusive use rights to the garden, allowing them to enjoy it as their own private space.
What Are Exclusive Use Rights?
In a strata scheme, common property typically includes areas like gardens, driveways, and recreational spaces shared by all owners. However, in certain situations, an individual owner may be granted the exclusive right to use a specific section of the common property. This is known as an "exclusive use right." Despite this exclusive access, the actual ownership of the area remains with the Owners Corporation, which represents all the owners in the strata scheme.
How Does Exclusive Use Work?
When exclusive use rights are granted, they allow the owner of a particular lot to use a designated part of the common property as if it were part of their lot. For instance, in the case of our garden example, the lot owner would be the only person with access to that garden, even though it is technically common property. This arrangement often comes with an expectation that the owner will pay a fee or provide some form of compensation to the Owners Corporation, particularly if the area is of significant value.
The Legal Process for Granting Exclusive Use Rights
Granting exclusive use rights is not a decision to be taken lightly. It involves a series of legal steps to ensure that the arrangement is valid, fair, and enforceable. Here's how the process typically works:
Drafting a Common Property Rights By-Law: The process begins with the drafting of a by-law by a solicitor. This by-law outlines the terms of the exclusive use right, including which part of the common property is being allocated, any conditions attached to its use, and any compensation to be paid to the Owners Corporation.
Approval at a General Meeting: The proposed by-law must then be presented at a general meeting of the Owners Corporation. All owners in the strata scheme will have the opportunity to discuss and vote on the by-law. For it to pass, the by-law typically requires a special resolution, which means it needs the approval of at least 75% of those who vote.
Conflict of Interest Declarations: It's important that any lot owner, proxy, or company nominee who has a conflict of interest declares it before the vote. They cannot vote on the resolution if they stand to gain personally or have a direct interest in the outcome.
Written Acceptance: If the by-law is approved, each lot owner receiving the exclusive use rights must provide written acceptance of the terms.
Registration: To ensure the by-law is legally binding, it must be registered with the NSW Land Registry Services within six months of the resolution. If registration is not completed within this timeframe, the by-law will not take effect.
Challenge Period: Even after registration, there is a two-year period during which the by-law can be challenged. Challenges may arise if there are allegations of non-compliance with legal requirements or if there is evidence of fraud or deceit.
Potential Challenges and Risks
While the process may appear straightforward, it's not without risks. A by-law can be declared invalid if it violates existing laws or if fraudulent activity is discovered. These disputes can become particularly complex if the ownership of the lot in question changes hands. New owners might be unfairly affected by decisions made before they purchased the property.
Exclusive use rights offer significant benefits, allowing lot owners to enjoy private access to valuable common property areas like gardens, parking spaces, or terraces. However, these rights come with responsibilities and legal obligations that must be carefully managed.
At Compass Strata, our goal is to help our clients navigate the complexities of strata living with confidence. If you’re considering applying for exclusive use rights or have questions about your current arrangements, don’t hesitate to contact us. We're here to ensure you make the most of your strata property.
