Common property can offer a significant opportunity for owners corporations. Leasing out spaces can be an effective way to generate additional income, activate dead spaces, and support a thriving strata community.
But leasing these spaces needs to be done properly; it’s not as simple as offering the space to someone and letting them use it as they see fit. Several considerations need to be factored in, and there are processes that need to be followed.
Below, we break down how to lease common property in Victoria effectively to ensure you and your strata community reap the benefits.
What is common property?
Common property is any part of a plan of subdivision that doesn’t belong to an individual lot. This includes spaces such as shared driveways and car parks, gardens and patios, gazebos and BBQ areas, or spare storage spaces.
Because it doesn’t sit within a private lot, common property is the responsibility of the owners corporation as a whole, not any one owner. This includes everything from maintenance to insurance, day-to-day upkeep to decisions about how it’s used and managed collectively on behalf of everyone who owns a share of it.
What counts as leasing common property in Victoria?
Leasing common property means granting someone, whether that’s a lot owner or an outside party, formal rights to use it, usually in exchange for rent. Leases can be for a relatively short amount of time, such as a few months, or they can be considerably longer, such as a 99-year lease.
Leasing officially is different from letting someone park in a spare bay for a short amount of time. A proper lease changes who’s responsible for the space and how it can be used. Leasing common property affects everyone who owns a share of it, which is why specific processes and rules must be followed.
Under section 14 of the Owners Corporations Act 2006, an owners corporation may lease or license the whole or any part of the common property to a lot owner or other person, but only by special resolution. A special resolution requires 75% of the total lot entitlements to vote in favour of the lease going ahead.
A step-by-step approach to leasing common property effectively
By following the right steps to leasing your common property, you can ensure an easy, effective process that meets all the necessary requirements. Here’s a step-by-step look at what that involves:
Step one: Decide between a lease and a licence.
A lease grants exclusive possession of the space for a set term, similar to a residential tenancy, while a licence grants permission to use the space, with the owners corporation retaining more control. The choice should be made before the special resolution is put to owners.
Step Two: Draft the agreement.
The lease should be prepared in advance of being put to a vote, so all parties know exactly what terms will apply if the resolution succeeds. This should include how the space will be used and its exclusivity, length of the lease and any changes that might be made to the space as part of the lease. This avoids owners voting on a vague idea and gives them a clear, finished document to consider before they vote.
Step Three: Consider access and insurance.
Committees should weigh up access, insurance, security, and the impact on other owners before approving anything. It may also be useful to include terms that let the owners corporation retain oversight of any works, so there’s a clear process if changes to the space are proposed down the track.
Step Four: Allow lot owners to vote.
Provide lot owners with the draft agreement ahead of the vote so they have plenty of time to review the specifics. Set a time and date to meet to discuss the lease agreement, respond to any questions, and vote. If 75% of lot owners agree to the lease, it can proceed.
Get help with leasing common property.
This is a brief overview and guide to leasing common property. In our experience, leasing common property is typically a straightforward and relatively easy process to implement; however there can be situations where further support and advice are needed.
If you’re considering leasing common property, don’t leave it to guesswork. The AboveOCM team are available to offer expert guidance and help you work through this process effectively and efficiently.
Contact us today to find out more.
