Australia: Businesses operating from a strata lot must comply with additional regulations

Businesses operating from a strata lot must comply with additional regulations

In brief - Development applications and alterations to common property require approval of owners corporation

If you run a business from a strata lot, you need to obey the strata scheme by-laws and seek consent from the owners corporation for any alterations which will have an impact on the common property.

More than local government regulations and the terms of your lease

Many businesses now occupy lots within strata schemes, either as owners or tenants.

When occupying a strata lot you will have to comply with levels of regulation which are in addition to the usual local government regulations and/or the terms of your lease.

These generally fall within two categories:

  • By-laws
  • Owners corporation consents required to make alterations to common property or conduct works which physically impact upon it

By-laws governing operation, management and control of strata lots and common property

By-laws regulate the day to day operation of a strata scheme and set out the rules about what can and cannot be done and how owners and occupiers must behave.

By-laws bind the owners corporation, owners, tenants and occupiers of lots.

By-laws may be made in relation to a range of matters affecting the operation, management and control of lots and common property in a strata scheme. In NSW, for example, the courts have interpreted the by-law making powers under of Strata Schemes Management Act 1996 NSW (Management Act) very broadly. (See White v Betalli [2007] NSWCA 243. For more information about strata legislation in the different states and territories, please see the website of Strata Community Australia.)

Importantly, by-laws can restrict the usage of any lot or parts of common property, so you should be very careful to ensure that your proposed business operation is not restricted in any way by the by-laws for the scheme.

Fitting out or making alterations to your business premises

It is not uncommon for business owners to want to do fit-out and other works to their premises so as to make them suitable for the operation of their business.

Such fit-out works ordinarily require development approval from the local council.

In a strata scheme, where the proposed fit-out works or alterations to the premises will have a physical impact on the common property, the consent of the owners corporation of the strata scheme is also required. The requirement is two-fold.

Owners corporation must consent to any proposed development application

First, the owners corporation must provide its consent to the making of any proposed development application, because the owners corporation is the owner of the common property in the scheme.

Development applications are required to be made by the owner of the land or with the consent of the owner of the land. (See Owners Strata Plan No 50411 v Cameron North Sydney Investments Pty Ltd [2003] NSWSCA 5

Generally, the boundaries of a lot stop at the inner surfaces of the walls, floors and ceilings of the premises. The actual structure of the premises is ordinarily common property.

So, where fit-out works or alterations will penetrate those walls, floors and ceilings (which is not unusual), the owners corporation must sign any application for development approval in relation to those works.

What if the owners corporation refuses to approve the lodgement of a development application?

If the owners corporation refuses to approve the lodgement of a development application, unfortunately, there is no simple mechanism to compel it to do so.

The Management Act sets out a regime to resolve disputes within a strata scheme. However, there is no provision within that regime to compel an owners corporation to exercise the function of an owner of land in relation to a development application.

To bring the signing of a development application by an owners corporation within the scope of the dispute resolution provisions of the Management Act, you must make it a function of a related application, such as an application for an exclusive use by-law, licence, lease or authority to alter the common property.

This leads us to the second element of owners corporation consent. It concerns making physical alterations to common property.

Special resolution required to authorise alterations to common property

Section 65A of the Management Act specifies that a special resolution of a general meeting of the owners corporation must be passed before an owner of a lot can take action which would add to, alter or erect a new structure on common property.

A consequential by-law is required where the obligation to maintain and repair those alterations or additions to common property is to be transferred to the owner of the lot.

Running your business from a strata lot - six points to remember

If you want to run your business from a lot in a strata scheme, remember that you have to comply with additional levels of regulation.

  • Know the rules, make sure you have a copy of the current by-laws for the scheme and comply with them.
  • Ensure that the use you propose for the premises is not prohibited by those by-laws, or if there are any rules in relation to that type of use, ensure you are compliant with them.
  • If you propose to make any alterations to the premises which will have a physical impact on the common property, you will need the owners corporation's consent to lodge your development application.
  • If development approval is granted, the second stage is to arrange for a special resolution at a general meeting to authorise the alterations to the common property.
  • If you are a tenant, these approvals will need to be arranged by your landlord (usually at your cost), so make sure your lease agreement makes provision for this.
  • Finally and probably most crucially, act quickly. If you don't make it a priority to get the relevant approvals from the owners corporation right from the start, it could cost you months in lost time.

Bob Miljevic
Property acquisition, development and sale
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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