Allowing someone to use part of your strata scheme’s common property might seem like a simple administrative decision. However, the legal pathway an owners corporation takes can have significant implications.

As behavioural economist Barry Schwartz* observes, too much choice can lead to decision fatigue, confusion, and ultimately, poor outcomes. The same holds true for strata committees.

Choosing the wrong legal mechanism could expose the owners corporation to avoidable risks, restrict its future flexibility, or result in arrangements that are difficult to enforce – or worse, invalid.

JS Mueller & Co Strata Lawyers regularly advise strata schemes across NSW on the practical and legal considerations that arise when lot owners, tenants or third parties request exclusive or special use of common property.

One area that frequently causes confusion is determining which legal mechanism is the most appropriate: lease, licence or by-law.

Licence, Lease or By-law? Getting the Framework Right

Owners corporations have three main options to grant rights to use common property:

1. Licence Agreements
2. Lease Agreements
3. Common Property Rights By-laws

Choosing the Right Option is Not Always Straightforward

While a licence may often be the quickest and simplest path, there are circumstances where a lease or a common property rights by-law would be more appropriate.

For example, the following factors, among others, would be relevant:

• If the user needs exclusive possession of the area;
• If the arrangement is long-term or intended to support commercial investment;
• If the use is tied to ownership of a particular lot, rather than a tenancy; and
• The specific area in question and existing rights and obligations over that area.

Each option has pros and cons, and each can affect the rights of the owners corporation and other lot owners in different ways. These decisions are not merely procedural – they involve careful legal and strategic consideration.

How Can We Help Ensure Your Scheme is Compliant?

Our specialist team of strata lawyers can guide owners corporations through the process of granting rights to use common property by:

• Advising on the most appropriate legal mechanism based on the specific circumstances;
• Preparing well-drafted licence agreements, leases, or exclusive use by-laws;
• Assisting with motions, explanatory notes, and registration of leases or by-laws where needed;
• Ensuring insurance, indemnity, and compliance issues are properly addressed

Need Help Granting Use of Common Property?

If your owners corporation is considering granting rights over common property – whether to a lot owner or a tenant, we’ll help you consider the options to ensure you make the right choice for your strata scheme.

And when it comes time to formalise the arrangement, we can prepare the necessary legal documents to protect your interests and ensure compliance.

* https://www.ted.com/speakers/barry_schwartz