Selling Common Property

Our previous instalment discussed a number of ways in which car parks in a scheme can be created and swapped. One of those options was the sale of common property by transferring it or granting exclusive use over it. Another option was for the common property to be leased or licenced.

This article delves a little deeper into the sale option – and would apply to any part of the common property, not just a car park.

Our next instalment will deal with the lease or licence option.

In selling common property, there are two ways for the sale to be given effect to.

1. converting the common property into a new lot in the scheme and then transferring the new lot to the buyer; or
2. allocating the common property as exclusive use and attaching the exclusive use allocation to an existing lot in the scheme which is already owned by the buyer.

The Body Corporate can sell common property (through a transfer or exclusive use grant) if authorised by resolution without dissent, which is when no owner votes against the motion.

Transfer of common property

If the common property is being transferred there are a number of considerations that need to be dealt with before the transfer is finalised. This includes:

1. Obtaining planning approval from the local council to the sale;
2. Having a surveyor prepare the necessary survey plans which will effectively subdivide the common property into a new lot, where the new lot may then be amalgamated into an existing lot in the scheme;
3. Preparing a new community management statement (CMS) to describe the changes to the common property and the new lot that has been created;
4. The transfer of the new lot (similar to the conveyance of any lot in the scheme) except that the seller is the body corporate;
5. Payment of any applicable stamp duty; and
6. Preparation of certificates under the body corporate’s seal to satisfy the titles office that the body corporate:
   • is not carrying on a business as part of the sale; and
   • has properly authorised the sale.

In relative terms, this is a much more complicated process to undertake when compared with exclusive use.

Exclusive use

An exclusive use grant is a by-law included in the CMS which provides rights over a particular area of common property for that lot occupier’s use and enjoyment. An exclusive use by-law must attach to a lot in the scheme and is a right similar to ownership of the property (but is still ultimately owned by the body corporate).

Unless the exclusive use by-law provides otherwise, the owner of the lot that is allocated the exclusive use grant is responsible for the maintenance and operating costs for the exclusive use area.

If the common property is being sold by granting exclusive use:

1. an exclusive use plan needs to be prepared by a surveyor; and
2. a new CMS then needs to be lodged to reflect the exclusive use grant and exclusive use plan.

This process avoids the majority of the steps involved with transferring the common property and is a much simpler option.

Importance of market value consideration

A body corporate has a statutory obligation to act reasonably. Accordingly, if the refusal to the motion proposing exclusive use or the transfer is unreasonable, an adjudicator in the Commissioner’s Office can make an order that the body corporate has approved the motion.

Such orders were given in Frisco Spring Hill – [2015] QBCCMCmr 407 where the adjudicator relevantly provided:

“There is no evidence that any owner or occupier will be deprived a right to use common property by the requested grant of exclusive use over the common property ceiling cavity or the improvements to Lot 201 and common property. There is also no indication that any owner or occupier’s use and enjoyment of their lots or other common property will be adversely affected by the proposal. The applicants will be responsible for all costs associated with implementing the proposal, and the ongoing maintenance of the improvements and the exclusive use area. Moreover, the Body Corporate will be generously compensated for the acquisition of rights to the ceiling cavity which is inaccessible to anyone else. I have be unable to discern any genuine disadvantage to owners, occupiers or the Body Corporate from the proposal.

Based on the evidence presented, and for the reasons outlined, I am satisfied that Motion 9 was not passed at the AGM on 29 January 2015 because of opposition that was unreasonable in the circumstances. In failing to pass Motion 9, the Body Corporate failed to comply with its statutory obligation to act reasonably. Accordingly, I will deem Motion 9 to have passed.”

Generally, it would be reasonable for an owner to cause the body corporate to dissent to a motion proposing a transfer or exclusive use grant if market compensation is not paid to the body corporate for the value of the affected common property.

The only real way to justify what would amount to market value compensation is obtaining a valuation report from a registered valuer and circulating the report with the proposed resolution without dissent.

There could be other genuine reasons that would justify dissent – such as the common property is regularly used by other lot owners or the proposed use of the area will obstruct a view of the ocean.

Accordingly, it is important that any approach to a body corporate seeking a sale of common property is done in contemplation of these issues.

This article was contributed by Todd Garsden, Partner – Mahoneys Lawyers