Common property rights by-laws - what lot owners and Owners Corporations need to know

Not an uncommon scenario…

Imagine a lot owner who undertakes what is considered to be a routine bathroom renovation. The renovation includes, among other things, waterproofing and underfloor heating. A renovation application form is completed and submitted to the Strata Committee for review, the Committee approves it, the renovation is completed and no immediate issues are apparent.

Two years later, water ingress is identified in the lot below.

When questions are raised about who is responsible for the waterproofing to the slab, the lot owner is able to produce the renovation approval. What is missing, however, are special resolutions of the Owners Corporation accompanied by a common property rights by-law. As a result, it becomes unclear whether responsibility for repairs, insurance coverage and ongoing liability rests with the lot owner or the Owners Corporation.

In practice, issues of this nature often only come to light well after renovations are completed, at a time when rectification costs are higher and disputes are more difficult to resolve – or worse, when then lot owner is in the process of selling the lot, or after ownership has already changed hands. This is an unenviable situation for all involved.

Renovations in strata: when common property becomes an issue

Renovating within a strata scheme is rarely as simple as renovating a freestanding home. Even relatively straightforward works can raise legal issues where they affect common property or grant a lot owner exclusive or ongoing rights over areas they do not own.

A frequent question raised by both lot owners and Owners Corporations is whether a renovation requires a common property rights by-law in addition to approval to carry out the works. The answer is not always immediately apparent, but the distinction is an important one.

In our experience, identifying these issues early can reduce the risk of disputes, unexpected repair obligations and complications at the time of sale of the lot.

What is common property?

Broadly speaking, common property includes all parts of the land and building that are not included within an individual lot.

Most strata plans define lot boundaries by reference to the inner surfaces of walls, the upper surface of the floors, and the lower surface of the ceilings. As a result, common property will typically include elements such as:

• external walls, windows and doors;

• roofs, balconies and balustrades;

• pipes, wiring and drainage that service more than one lot; and

• floor substrates beneath surface finishes, such as concrete slabs.

A point that is often overlooked is that use does not determine ownership. In strata schemes, ownership is determined by the registered strata plan; not by how an area is used or which lot derives the benefit from it.

Who owns common property?

Common property is owned, managed and controlled by the Owners Corporation, for the benefit of all lot owners.

Individual lot owners do not have an inherent right to alter, occupy or exclusively use common property. Even where renovation works appear confined to one lot, any interference with the scheme’s common property requires proper authorisation under the Strata Schemes Management Act 2015 (NSW).

Why renovations often affect common property

Many renovations that appear “internal” in nature can, on closer examination, involve common property.

Common examples include:

• bathroom renovations affecting waterproofing membranes or slabs;

• kitchen renovations requiring plumbing or exhaust ducting through common walls;

• installing a pergola or vergola;

• enclosing balconies or altering balustrades; and

• installing new windows or external doors to external walls.

Where works result in a lot owner obtaining exclusive use of, or special privileges in respect of, common property, a common property rights by-law will be required.

What is a common property rights by-law?

A common property rights by-law allows an Owners Corporation to grant a lot owner exclusive use of, or special privileges in respect of, common property.

These by-laws are commonly used to regulate matters such as:

• exclusive use of balconies, courtyards or rooftop areas;

• ongoing rights to waterproof, penetrate or alter slabs and walls, such as altering a load-bearing wall, or renovating a bathroom; and

• installation and ongoing use of services that rely on common property structures, such as ventilation, exhaust ducting or plumbing that passes through common walls or floors.

A common property rights by-law can only be made, amended or repealed with the written consent of the lot owner receiving the benefit.

Once made and registered, the by-law operates with legal force and creates enforceable rights and obligations that bind the Owners Corporation and the benefiting lot owner, as well as any future owner of the lot. It is not a temporary approval, but a continuing legal arrangement that attaches to the lot.

Importantly, a common property rights by-law must also address who is responsible for the repair and maintenance of the affected common property. This is often the most significant issue from both a risk and cost perspective.

Where responsibility is not clearly allocated, Owners Corporations may remain responsible for maintaining common property that has been altered for the exclusive benefit of a single lot, potentially exposing the scheme to ongoing and unanticipated costs. Or alternatively, lot owners may find themselves exposed to disputes, uninsured loss, or demands to rectify defects where responsibility was assumed rather than clearly documented.

In practice, disputes commonly arise because renovations are approved without proper consideration of whether a common property rights by-law is required, or because maintenance obligations are not clearly addressed in the by-law itself. These issues often emerge years after the works are completed, when defects, damage or water ingress occur and the cost of rectification is significantly higher.

Clear and careful drafting at the outset can significantly reduce uncertainty, allocate risk appropriately, and help avoid disputes long after the renovation has been completed.

When legal advice should be obtained

Where proposed or completed works involve slabs, balconies, bathrooms, external walls, shared services, or the exclusive use of common property, it is prudent to obtain advice at an early stage.

Whether a common property rights by-law is required is not always apparent during the planning phase. In practice, however, addressing the issue early is generally far more cost-effective than attempting to resolve it after defects, disputes or sale-related issues have arisen.

How we can assist you

Our strata team advises both Owners Corporations and lot owners on renovation approvals and common property issues, including:

• whether proposed or completed works affect common property;

• whether a common property rights by-law is required in the circumstances;

• drafting and registering common property rights by-laws;

• advising on the allocation of maintenance and repair responsibilities; and

• assisting where disputes arise in connection with unauthorised or defective works.

For further information on how our team can assist, please visit our website.

Where a renovation is proposed or concerns later arise in relation to works that have already been carried out, obtaining advice at an early stage can assist in managing risk and avoiding unnecessary disputes.

To get in touch with our specialist strata team, feel free to reach out to Sharon Levy or Emma Swords. 

Authors: Sharon Levy, Emma Swords & Isabel Ko

 

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.