VIC: Q&A What is a 99 year lease for owners corporation in Victoria?

Victorian Lot Owners are wondering about the process for buying or leasing common property. How does a 99 year lease work in Victoria?

Table of Contents:

• QUESTION: The OC is requesting I pay rent on the common property driveway. How much rent should l pay? Why should I pay rent now when I never have before?
• QUESTION: While the developer was the owner of all apartments and effectively the OC, the OC entered into a 99 year lease for $1 with the developer for parts of the common property, including the roof. Is there anything we can do to reverse the approval?
• QUESTION: For many years a unit in our scheme has had exclusive use of a fenced courtyard however, there are no records of the agreement. Can the owners corporation reinstate the courtyard back to common property?
• QUESTION: I cannot access my side courtyard as the upstairs tenants use the space outside the gate to park their cars. I’ve learnt the space has been leased by their lot. This arrangement was not disclosed during my purchase of the property. What are my rights?
• QUESTION: The owners corporation would not repair my unsafe patio. With their approval, I replaced the structure myself. Can the patio revert to my title?
• QUESTION: An owner would like to fence a small portion of common property as a safe area for their dog. Some owners have concerns. How do we handle this?
• QUESTION: In Victoria, we have a 99 year lease on the front lawn. We would like to erect a fence on this area. Can other lot owners object if we have exclusive use of the space?
• QUESTION: How are 99yr lease terms of common property fairly calculated to reflect the benefit of exclusive use to private lot owners? How do they work in relation to lot entitlement?
• QUESTION: In an owners corporation in Victoria, 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?
• 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?

Question: The OC is requesting I pay rent on the common property driveway. How much rent should l pay? Why should I pay rent now when I never have before?

The OC is requesting I pay rent on the common property driveway that leads to my carpark.

No other owner uses this area. The area has been fully enclosed for 9 years with no complaints and it leads to no other properties.

How much rent should l pay for this common ground driveway? Why should I have to pay rent now when I never have before?

Answer: As part of a lease or licence, the Owners Corporation has a right to seek rent. Usually that rent will be based on a market assessment or otherwise as agreed by the owners corporation.

A lot of apartment and unit owners have spaces which they have as their private garden or use for parking their car. However, in many cases, that space is actually common property and not within the person’s private lot. The question remains to be asked – What is the person’s legal right to occupy that space?

Owners Corporations may lease or licence common property to lot owners (or other third parties) in accordance with Section 14 of the Owners Corporations Act 2006.

But sometimes, leases or licences were never obtained or were obtained by a prior owner and never assigned.

A lot owner has no exclusive right to occupy exclusively any part of common property unless there is a valid and binding licence or lease of that space supported by a formal written lease/licence which has been approved by a valid resolution of the Owners Corporation.

Owners Corporations can only agree to lease or licence common property spaces through passing a special resolution, which means a committee does not have the power to grant a lease or licence.

Too often we see lot owners making claims to common property because the land was advertised as part of the sale of the private lot. However, this will not save the use. A lease or licence must be obtained.

In addition, the Model Rules prohibit any private lot owner using any part of common property as part of their private garden (unless a lease or licence has been granted).

As part of a lease or licence, the Owners Corporation has a right to seek rent. Usually that rent will be based on a market assessment or otherwise as agreed by the owners corporation.

If a lot owner does not have a valid lease/licence then they will need to give up any exclusive right, even if that use has been for many years.

Phillip Leaman
Tisher Liner FC Law
E: [email protected]
P: 03 8600 9370

This post appears in the November 2022 edition of The VIC Strata Magazine.

Question: While the developer was the owner of all apartments and effectively the OC, the OC entered into a 99-year lease for $1 with the developer for parts of the common property, including the roof. Is there anything we can do to reverse the approval?

I purchased off the plan in a new development. About a week before the settlement of initial apartments, while the developer was the owner of all apartments and thus was effectively the Owners Corporation (OC) the OC (who at this stage, was only the developer), for $1, entered into a 99-year lease with the developer covering a number of parts of the common property, including small segments, and the roof. 

The lease was approved at a special general meeting of the OC (ie the developer). 

The developer, under the agreement, can sub-lease, make improvements or additions, or create a separate title to the leased area without the approval of the OC. The OC is still responsible for any and all outgoings on the leased area. Purchasers, who became owners in the following weeks were not consulted. 

Surely this agreement is unjust/unconscionable under Australian consumer law. Can you please provide some information about this issue? Is there anything we can do to reverse the approval?

Answer: Each case will depend on its merits and the circumstances but the Owners Corporation effectively handing over the common property rooftop to a developer for $1 may be a breach of the obligations under Section 68.

Whether or not a lease is valid will depend on the circumstances in each case and whether the lease was in the best interests of the Owners Corporation.

Developers also have obligations under the Owners Corporations Act 2006 Section 68 provides that an initial owner of land affected by an owners corporation must act honestly and in good faith and with due care and diligence in the interests of the owners corporation in exercising any rights under the Act.

Sometimes developers disclose such arrangements in contracts of sale and it may be difficult for a purchaser to complain about it after the fact. Each case will depend on its merits and the circumstances but the Owners Corporation effectively handing over the common property rooftop to a developer for $1 may be a breach of the obligations under Section 68.

The Owners Corporation should engage lawyers to obtain legal advice to ascertain what rights they have to challenge the lease (or at least get in a position to negotiate a better financial result for the Owners Corporation).

Phillip Leaman
Tisher Liner FC Law
E: [email protected]
P: 03 8600 9370

This post appears in the September 2022 edition of The VIC Strata Magazine.

Question: For many years a unit in our scheme has had exclusive use of a fenced courtyard however, there are no records of the agreement. Can the owners corporation reinstate the courtyard back to common property?

For many years a ground floor unit in our scheme has had exclusive use of a fenced courtyard however no one can produce a lease or licence agreement to validate this. The owner does not have a copy and the owners corporation claim their files were destroyed in a flood many years ago and they can’t confirm if there was ever a lease or licence agreement.

What happens if the document is lost or destroyed and there is no way of determining what the conditions of the lease or licence agreement were? Can the owners corporation reinstate the courtyard back to common property?

Answer: The onus of proof is on the person using the common courtyard.

The onus of proof is on the person using the common courtyard. They must prove that the owners corporation resolved by special resolution to grant a licence/lease for the common courtyard.

In the absence of such proof, in our view, the owners corporation could take back the area once it successfully obtains an order in VCAT that no lease was granted to the person exclusively using the courtyard.

Rochelle Castro
RC & Co Lawyers
E: [email protected]
P: 1300 072 626

This post appears in the July 2022 edition of The VIC Strata Magazine.

Question: I cannot access my side courtyard as the upstairs tenants use the space outside the gate to park their cars. I’ve learnt the space has been leased by their lot. This arrangement was not disclosed during my purchase of the property. What are my rights?

I purchased a strata apartment with a side courtyard on title. This courtyard can only be accessed through a gate leading from, what appeared in my contract and plans of subdivision, common property. The tenants in the upstairs apartment have started parking in the tiny parcel of common property outside my gate, fully blocking access to my courtyard.

I asked the strata manager to confirm this space is common property. They informed me the space had been leased to the upstairs unit on a 99 year lease. This was never disclosed to me at purchase.

Given I own this side courtyard but can no longer actually access the space and also that I was never informed of the 99 year lease during the purchase process, what are my rights or options? Not being able to use my courtyard significantly reduces my apartment’s value.

Answer: Obtain written confirmation of the reduced value of your property and seek compensation from the owners corporation.

We recommend that you first obtain a real estate agent’s valuation on the reduction of the value of your apartment now that you cannot access your apartment. Once you obtain a written confirmation of the reduced value of your property, seek compensation from the owners corporation (if they failed to disclose it in the owners corporation certificate).

Rochelle Castro
RC & Co Lawyers
E: [email protected]
P: 1300 072 626

This post appears in Strata News #580.

Question: The owners corporation would not repair my unsafe patio. With their approval, I replaced the structure myself. Can the patio revert to my title?

I have a raised patio outside my apartment. The structure was unsafe, however, the owners corporation refused to repair the patio.

Sick of waiting for them to take action, I built a deck at my cost with their approval. I’m happy with the outcome but can’t help but feel the outcome is also at their benefit. They did not have to pay for repairs and they are no longer required to maintain the patio.

Can the patio revert to my title? It’s solely for my use, it only leads to my apartment and can’t really be used in any other way.

Answer: You can seek a licence or lease from the Owners Corporation.

We agree that getting an Owners Corporation to comply with their statutory obligation to repair and maintain common property can be difficult.

If there is an area that you exclusively occupy, you can always seek a licence or lease from the Owners Corporation. This must be approved by way of a special resolution of the Owners Corporation and should be documented properly to give you rights for the area. Any document should be properly prepared by a lawyer and a lease can be as good as title if you have a long term (such as 99 years).

Alternatively, you can seek to acquire the relevant land by amending the plan of subdivision but this requires a unanimous approval and is a much harder and costly exercise.

Phillip Leaman
Tisher Liner FC Law
E: [email protected]
P: 03 8600 9370

This post appears in the March 2022 edition of The VIC Strata Magazine.

Question: An owner would like to fence a small portion of common property as a safe area for their dog. Some owners have concerns. How do we handle this?

We have a small piece of common land next to one of the units in our complex. A new owner would like to fence this common property as a safe area for his dog. Some owners are a bit worried about a few aspects of this arrangement, for example things like adverse possession. How are we best to move forward?

Answer: You could consider leasing the suggested area to that owner and specify the intended use of the said area within the lease.

Common property cannot be acquired through adverse possession.

Having said that, you do need to determine the following before handing over some common property:

• Do all owners agree with sacrificing some of the common area for someone’s personal benefit?
• Would fencing off this land affect the general enjoyment of other residents living within the property?
• Would the new owner agree to “return the common property” if requested by the owners corporation?
• Is there a possibility the enclosed area may be used for other purposes?

A number of things would need to be clarified with the owner prior to giving consent.

The risk of adverse possession (not being possible) may be the least of your concerns.

A cleaner and more “legal” approach would be to seek legal instruction and consider leasing the suggested area to that owner and specify the intended use of the said area within the lease.

There will be a cost involved but the OC can sleep soundly knowing it has provided the owner with clear and strict guidelines as to the specific use of the area and that going beyond the lease agreement can result in legal action.

Below is the section within the Owners Corporations Act 2006 that permits an OC to grant an owner a portion of common property.

Section 14 — Powers relating to property:

Leasing or licensing of the common property:

By special resolution, an owners corporation may lease or license the whole or any part of the common property to a lot owner or other person.

Guy Garreffa
StrataPoint
E: [email protected]
P: (03) 8726 9962

Please note that the information contained in this article is not legal advice and should not be relied upon as such. You should obtain legal advice or instructions before you take any action or otherwise rely upon the contents of this article.

This post appears in the March 2021 edition of The VIC Strata Magazine.

Question: In Victoria, we have a 99 year lease on the front lawn. We would like to erect a fence on this area. Can other lot owners object if we have exclusive use of the space?

We are unit 1 of 3 in a Victorian strata block. We have a 99 year lease on the front lawn. We would like to erect a fence that will be and a continuation of the existing front boundary fence down the side driveway.

One lot owner is not in favour. What are the best steps for a resolution? Can they refuse if we have exclusive use of the area?

Answer: What you can do with a leased area depends on the “authorised use”.

What you can do with a leased area depends on the “authorised use”. If the terms of the lease is silent on whether you could instal a fence, I suggest that you request for the lease to be amended and signed by the parties to permit you to erect the fence. Alternatively, you could obtain legal advice to review the terms of the lease and determine if it does actually already permit you to erect the fence.

Rochelle Castro
RC & Co Lawyers
E: [email protected]
P: 1300 072 626

This post appears in Strata News #542.

Question: How are 99yr lease terms of common property fairly calculated to reflect the benefit of exclusive use to private lot owners? How do they work in relation to lot entitlement?

Answer: It is difficult to assess what is the appropriate value that an Owners Corporation should put as the rent or payment for a 99 year lease as each circumstance will be different.

In Victoria, a 99 year lease can be as valuable as having the land registered in your name. The value will depend on the area to be leased and the value that the area adds to the person leasing it.

It is difficult to assess what is the appropriate value that an Owners Corporation should put as the rent or payment for a 99 year lease as each circumstance will be different and there is no legal requirement that it be for a particular sum. As common property does not attract lot liability, the only payments the Owners Corporation will receive from a 99 year lease are those set out in the lease document. This could include rent, outgoings or other contributions. It is important that such leases are appropriately drafted, that the Owners Corporation obtains expert advice (including legal and potentially valuation advice) and ensures that the appropriate resolution is passed authorising the lease.

Phillip Leaman
Tisher Liner FC Law
E: [email protected]
P: 03 8600 9370

This post appears in Strata News #534.

Question: In an owners corporation in Victoria, 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, Victoria.

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 the 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 the 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 a 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 in Victoria 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.

Dan Slattery
Legal & Mediation Services
Phone 0412 102 978
E: [email protected]

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.

Alex Smale
Owners Corporation Manager
The Knight
Email

This post appears in Strata News #299.

Have a question about buying or leasing common property and the 99 year lease in Victoria or something to add to the article? Leave a comment below.

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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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