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Leases and Licences over Common Property

5 March 2018

A body corporate can lease or licence all or part(s) of the common property to an owner, occupier, or third party for their personal use under section 56 of the Unit Titles Act 2010 (“UTA”). The lease or licence of common property may be granted for any number of purposes, the most common being car parking, storage, signage, or outdoor seating.

The legal process for granting a lease or licence over the common property is set out in section 56 of the UTA. The same process applies whether the body corporate is granting a lease or a licence (or, in fact, selling all or part of the common property).

To grant a lease or licence over common property, the body corporate must first pass a special resolution (requiring a 75% majority). The body corporate must then complete the designated resolution process in sections 212-216 of the UTA.

The designated resolution process requires the body corporate to serve written notice of the resolution to grant a lease or licence on all owners and their registered interest holders (such as mortgagees and caveators). Every person served with a notice of designated resolution may then object to the resolution within 28 days. Once the objection period has lapsed and any objections have been resolved, the body corporate may enter into the lease or licence.

The body corporate must distribute any licence fee, rental, or other proceeds from the lease or licence of common property to unit owners in shares equivalent to their ownership interests, unless the body corporate resolves otherwise. An owner may elect to have their share of the proceeds credited to their unit to offset any current or future levies associated with that owner’s unit.

Before passing a resolution under section 56, the body corporate should be clear whether the common property is to be leased or licenced, and the differences between the two. The body corporate should also be aware that the Property Law Act 2007 applies to leases and licences and imposes obligations on both parties, especially in respect of cancellation.

As a reminder, a lease is a legal interest in land and transfers to successors in title. Assignments or subletting may also be possible depending on the terms of the lease. A lessee has a legal right to exclusive possession and may sue for nuisance or trespass.

And, a licence is a lesser right than a lease. A licence creates a personal right to occupy a property for a particular purpose. It does not give any right of exclusive possession. A licence typically does not automatically transfer to successors, but is between the named licensor and named licensee only.

From an administrative point of view, we recommend that leases and licences are recorded in writing and signed by the parties, and that copies held by the body corporate together with the original resolution and designated resolution certificate. Where the lease or licence relates to a specific part of the common property, we recommend that the area be shown on a plan attached to the lease or licence document to avoid confusion or future uncertainty about the extent of the leased or licenced area.

Glaister Ennor has recently worked with bodies corporate to establish common property leases to accommodate facilities for a building manager and car parking spaces for unit occupiers, and licences to occupy airspace.

Source: InBrief Autumn 2018, Agent Brief March 2017

InBrief Autumn 2018

Agent Brief March 2018

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