Mahoneys: Leasing or Licencing Common Property

By May 10, 2021Legal Issues

If the common property is going to be used in a way that is substantial, permanent or could interfere with another person’s use of the common property, some form of use right is required over that part of the common (The Lookout [2000] QBCCMCmr 653 and Fountain View [2004] QBCCMCmr 543 have held that).

Our previous instalments discussed a number of ways in which use rights can be created, including where common property can be allocated, sold, granted and swapped with owners. One other option is to lease or licence the common property.

The option of leasing and licencing is generally more flexible than exclusive use or sale as it:

  1. is for a temporary period of time;
  2. does not always need a resolution without dissent; and
  3. can be granted to third parties who do not own or occupy a lot in the scheme.

Different between a lease and licence

There is really only a technical legal distinction between a lease and a licence where a lease provides a stronger property right than that of a licence.

However, for present purposes the body corporate legislation treats them the same.

Approval threshold

Depending on the term of the lease or licence and the regulation module that the scheme is regulated by, a different type of resolution is required to approve entry into the lease or licence.

This is best summarised in the below table:

Term / Module Standard Accommodation Commercial
Less than 3 years Special resolution Special resolution Special resolution
Between 3-10 years Resolution without dissent Special resolution Special resolution
More than 10 years Resolution without dissent Resolution without dissent Resolution without dissent

 

Terms of a lease or licence

The terms of a lease or licence can vary widely and reflect any commercial arrangement that can be negotiated between the parties.

The basis provisions of any lease or licence would generally include the following:

  1. The length of the licence.
  2. The area that is subject to the lease or licence.
  3. What the licenced area can be used for.
  4. How much must be paid to the body corporate for the lease or licence.
  5. Any insurance obligations of the parties.
  6. How the parties can terminate and assign the lease or licence.

Any lease or licence by the body corporate must:

  1. not create an arrangement where the body corporate is operating a business;
  2. not interfere with access to a lot or existing exclusive use area;
  3. not be over an occupation authority given to a body corporate contractor;
  4. not relate to utility infrastructure; and
  5. comply with any council requirements.

A lease or licence can be a useful way of giving rights over common property without the need for a resolution without dissent.

Author: Todd Garsden, Mahoneys
E: tgarsden@mahoneys.com.au
P: 07 3007 3753

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