NSW: Exclusive use by-law, strata plan of subdivision, licence or lease – which is better? Part 2

This article is about the Exclusive Use By-Law, Strata Plan of Subdivision, Licence or Lease.

There are generally four ways for a lot owner to gain use of a common property space such as a parking space, courtyard or roof space. These are by way of:

1. an exclusive use by-law,
2. registering a strata plan of subdivision,
3. entering into a licence of the common property, or
4. entering into a lease of the common property,

We have dealt with the first two methods, obtaining an exclusive use by-law and subdividing the common property and lot property to create a new and extended lot, in our previous article here. In this article we will deal with the last two methods, entering into a licence or lease of the common property.

Lease

A lease will give you exclusive use of the common property space for the term of the lease. A lease is a proprietary interest and generally will remain with the lot, which means it can be transferred to a new owner.

Before a lease can be entered into between the Owners Corporation and yourself, a by-law motion will need to be passed by special resolution to authorise the Owners Corporation to enter into a lease agreement with you. This by-law should annex a standard lease agreement to be entered into between the Owners Corporation and yourself. The lease agreement will define the common property space and contain terms such as the term of the lease, the lease fee, what the common property space can be used for, your responsibilities in respect of the common property space, and how the lease agreement can be terminated.

Licence

A licence will give you the right to use and occupy the common property space for the term of the licence, however you will not have exclusive use of the common property space and cannot exclude others from accessing the common property space. A licence is personal to you, making it a contractual interest that generally cannot be transferred.

Similar to a lease, a by-law motion will need to be passed by special resolution to authorise the Owners Corporation to enter into a licence agreement with you. This by-law should annex a standard licence agreement to be entered into between the Owners Corporation and yourself. The licence agreement will define the common property space and contain terms such as the term of the licence, the licence fee, what the common property space can be used for, your responsibilities in respect of the common property space, and how the licence agreement can be terminated.

Note that if you intend to carry out work in the common property space under a lease or a licence, this must be authorised by the by-law.

Which option should you choose?

This will depend on your intended use of the common property space. Both options will allow you to use the common property space for a specified period however only a lease will give you exclusive use of the common property space. As such, if your intended use of the common property space requires you to have exclusive use of it, then a lease would be preferable. Conversely, if you only intend to use part of the common property space on more casual terms, then a licence would probably be preferable. We recommend obtaining legal advice for your specific situation.

Jasmin H.Singh & Allison Benson
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

This is general information and should not be considered to be legal advice. You should obtain legal advice specific to your individual situation.

This post appears in Strata News #509.

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Read next:

• NSW: Exclusive Use By-Law, Strata Plan of Subdivision, Licence or Lease – Which Is Better? Part 1
• NSW: Q&A Issuing and Enforcing a Notices to Comply with a By Law
• NSW: Q&A Is Strata Schemes Management Act 2015 for Residential Only?
• NSW: 2021 New Strata Legislation Will Soon Become Law

This article has been republished with permission from the author and first appeared on the Kerin Benson Lawyers website.

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