Introduction to Exclusive Use and Special Privilege By-Laws
Exclusive use or special privilege by-laws are contractual and not proprietary rights (see Northwind Pty Limited v The Proprietors Strata Plan No. 3143 (1981) 2 NSWLR 809). As these rights are not proprietary rights, you should be aware of the limitations available to owners of these rights, e.g. if the owners corporation wanted to retain rights to a common property courtyard area for the purposes of granting a lease to a commercial lot owner, it is not possible to grant a lease over an exclusive use area.
Nature of Exclusive Use and Special Privilege By-Laws
Exclusive use by-laws and special privilege by-laws are made under sections 51 and 52 of the Strata Schemes Management Act 1996 (“SSMA”). These by-laws can give a lot owner or group of lot owners (but not occupiers) special rights over common property. Those rights can be in the nature of privileges that simply allow things to be done to or on common property that would or might otherwise be in breach of the SSMA or the by-laws for the strata scheme or actually give a right to exclusively use parts of the common property to the exclusion of the strata scheme, other lot owners or lot occupiers. There are not many restrictions on these by-laws. These by-laws will continue after changes to the ownership of lots.
It is essential that these by-laws:
- identify the lots concerned to specify who receives rights and obligations;
- identify the common property over which the rights exist to ensure certainty of effect;
- specify whether the owners corporation will be responsible for the maintenance of, and keeping in a state of good and serviceable repair, the common property that is the subject of the by-law or whether that obligation is transferred to the lot owner/s concerned in the by-law to avoid doubt about that responsibility;
- include appropriate conditions about the exercise of the rights to facilitate orderly implementation and management; and
- in appropriate cases (e.g. exclusive use by-laws granting exclusive use to a roof space), include appropriate conditions about the lot owner/s obligation to pay compensation to the owners corporation for the grant of the rights.
These by-laws must also have the written consent from the owners of the lots concerned. Since the NSW Supreme Court case of Young & 1 Ors v The Owners SP3529 & 2 Ors [2001] NSWSC1135 (11 December 2001), there is some doubt about who must give that consent and more detailed consideration and advice is often required when making this kind of by-law and, in some cases, all lot owners must give written consent to make these kind of by-law.
Restrictions on Making Exclusive Use and Special Privilege By-Laws
Owners corporations and lot owners should be aware of the following restrictions on making exclusive use and special privilege by-laws:
- an exclusive use or special privilege by-law cannot be made in the initial period of the strata scheme (section 50 of the SSMA but note the exception in section 56 (now repealed) in relation to parking motor vehicles on common property if the local council has given written approval to the making of the by-law);
- any such by-law may only be made, amended or repealed with the written consent of the owner or owners of the lot or lots concerned and in the case of a leasehold strata scheme, the lessor of the scheme (section 52(1)(a) of the SSMA);
- any such a by-law may only be made, amended or repealed by the owners corporation in general meeting by way of a special resolution;
- by-laws that would have effect of avoiding a provision of the SSMA (section 245 of the SSMA); and
- by-laws that conflict with any other Act or law (section 43(4) of the SSMA).
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