The regulatory requirements of operating from a strata lot

Many businesses now occupy lots within strata schemes, either as owners or tenants. If yours is one of such businesses, you need to be aware of the additional regulation requirements, argues legal expert Bob Miljevic.

Many businesses now occupy lots within strata schemes, either as owners or tenants. If yours is one of such businesses, you need to be aware of the additional regulation requirements, argues legal expert Bob Miljevic.

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 are generally either by-laws or owners corporation consents required to make alterations to common property or conduct works which physically impact upon it. 

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 matters affecting the operation, management and control of lots and common property in a strata scheme. 

In NSW, for example, courts have interpreted the by-law making powers under of Strata Schemes Management Act 1996 NSW very broadly. Importantly, by-laws can restrict the usage of any lot or parts of common property, so you should be careful to ensure that your proposed business operation is not restricted in any way by the by-laws for the scheme. 

Restrictions on making changes to common property
It is not uncommon for business owners to want to do fit-out and other works to their premises to make them suitable for the operation of their business. Such fit-out works ordinarily require development approval from 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 is also required. 

This requirement is two-fold. First, the owners corporation must provide its consent to the making of any proposed development application, because an application can only be made by the owner of the land or with the consent of the owner of the land and the owners corporation is the owner of the common property in the scheme. 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. 

The second element of owners corporation consent concerns making physical alterations to common property. Section 65A of the Strata Schemes 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.

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. Keep these pertinent points in mind:

  • 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 for your proposed works.
  • 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 is a member of the legal team at CBP Lawyers.

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