Can You Control Property as a Tenant in Commercial Strata?

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Table of Contents

• Examples of Common Lease Provisions
• Common vs. Lot Property
• The Problem With Only Repairing the Problem
• Loss for the Tenant
• Key Takeaways

It can be both startling and frustrating for tenants to be told an issue can’t be fixed by their landlord because the property is strata titled. Many small business owners don’t receive guidance on how strata laws can affect their tenancy. However, these spaces face the same communal living requirements (and problems) as other strata schemes. Often the mechanics of commercial strata schemes are unknown to tenants until a problem arises. This article explores common issues that tenants of commercial strata buildings face.

Examples of Common Lease Provisions

It’s common for commercial leases for strata-titled premises to contain clauses in relation to property management and repairs. These clauses can state, for example, that:

• the landlord is responsible for structural elements including the walls, floor, ceiling and utilities to the premises;
• if the premises are a lot in a strata scheme, the lease cannot interfere with the owners corporation repairing or closing off portions of the common property (which includes most structural walls and communal utilities); and
• the landlord is responsible for damage caused to the common property by the tenant.

Many strata clauses in commercial leases don’t deal with the inevitable conflict that arises.

For example, if you experienced an issue with the copper wiring in your premises, this would be common property. Therefore, it would not be the landlord’s responsibility to repair it. Rather, the owners corporation would be responsible for any repairs and maintenance. However, before repairs could occur, the owners corporation would first need to vote on a solution. This can turn an already difficult situation into a financially detrimental one very quickly.

Common vs. Lot Property

In commercial strata, property is classified as either ‘common property’ or ‘lot property’. This distinction governs who owns and is responsible for property. The owners corporation is responsible for common property. An owner (the landlord) is responsible for the lot property.

Common property would normally include the structure of the property, including communal facilities, such as piping, that service more than one lot.

Lot property is normally the air space in the lot, being the space between the upper surface of the floor, lower surface of the ceiling, and inner surface of the walls. Internal walls or facilities will usually be lot property.

You, as the tenant, will generally be responsible for the internal surfaces of the lot (under the lease). This often includes aspects of a shop fit out.

The Problem With Only Repairing the Problem

In our copper wiring example, imagine the landlord jumped in and repaired the wiring without the authority of the owners corporation. Practically, the owners corporation probably wouldn’t mind; it means they don’t need to deal with the problem. However, it would be problematic if the landlord repaired the wiring and, in the process, impacted other common property. The landlord may become liable for ongoing maintenance to the affected common property due to the issues fixing the copper wiring caused. Landlords usually try to pass on these costs to tenants.

As a tenant, it’s important to understand that this tension between a landlord’s obligations and the owners corporation’s obligations affects you. In the hands of the owners corporation, the decision-making process will usually be remarkably slower.

Loss for the Tenant

In practice, these delays mean that, as a tenant, you will undoubtedly suffer loss if you are forced to wait for an adequate solution.

Depending on your lease, you may be able to sue your landlord for your loss as a breach of your right to ‘quiet enjoyment’. Your landlord may then have a claim against the owners corporation, but this is not always the case.

Key Takeaways

Strata laws are difficult to navigate. The distinction between common and lot property also causes headaches for tenants and landlords alike. Tenants and landlords in commercial, strata-titled premised should seek legal advice to minimise the issues set out in this article.

Please note that LegalVision can no longer assist with these matters. For any other legal questions or concerns, please contact our lawyers on 1300 544 755.