We have seen a few examples recently of buyers not being aware of the truth about garden areas, balconies and the like which are exclusive use areas associated with their unit or townhouse. Areas such as these are often overlooked in the negotiation of the sale, or worse still, the buyer assumes that they are included or is given incorrect information by the real estate agent. They can have a big impact on the use and enjoyment of the property, and its value.
What is an exclusive use area?
An exclusive use area is a part of the common property of the community titles scheme which has been designated for the exclusive use of the owners and occupiers of a particular lot, through the by-laws of the scheme. The by-laws will usually specify which lot has the benefit of the area, for what purpose, and any conditions or other requirements which apply to the use. Examples of areas which are often the subject of exclusive use by-laws are:
- car parks;
- courtyards;
- gardens;
- balconies or patios; and
- roof top areas.
Such areas are not always exclusive use areas – often they will be “on title”, and form part of the legal, freehold title to the lot.
How do I know whether an area is an exclusive use area, part of the lot, or neither?
You cannot tell, either from a title search of the property or from a physical inspection of the property what areas are included on the title, what areas are exclusive use, and what are just general common property. It is not uncommon for an area of yard to be fenced off for a particular unit, or even for a deck to be built over it, but with the owner having no legal title or exclusive use of the area.
The only way to know what areas are included in the title to the lot, and what areas are exclusive use for the lot, is to obtain a copy of the registered survey plan and community management statement. The survey plan will show where the boundaries of the lot are. The plan may show that the lot is made up of several areas in different parts of the building – such as the residential unit on one level and a car park on another. The community management statement contains the by-laws for the scheme. If there are any exclusive use areas, they will be recorded here, in a by-law and on a plan showing the location and boundaries of the area.
Is exclusive use as good as the area being part of the lot?
No, not quite. An owner of a lot with an exclusive use area does have the right to stop others from using the area, and the exclusive use right cannot be taken off them without their written consent, so it is quite secure, but it is not the same as owning the area. Here are some of the advantages and disadvantages of exclusive use compared to legal title:
Advantages:
- Flexibility – provided the body corporate is co-operative, it is relatively easy to change the size or shape of an exclusive use area, or to transfer it to another owner or swap areas with another owner in the complex (particularly handy in the case of underground car parks).
- Easy to create – new exclusive use areas can be created and allocated without having to mess around with the title to the lot or pay stamp duty.
Disadvantages:
- You do not own it – The area is still common property and still owned by the body corporate, so you will normally need permission from the body corporate to make any substantial changes or improvements – such as installing a storage shed or swimming pool in a yard.
- You can only use it for the purpose for which it was granted – car parks can only be used as car parks and not for storage or building a shed. Private yards can only be used as yard, and not for adding another room to the villa.
- You still have to maintain it – ultimately your rights will depend on what the relevant by-law says, but in most cases the person who has the exclusive use of an area is also obliged to maintain it. That will include an obligation to maintain gardens, trees, walls, decks and pergolas etc in the area.
What can go wrong?
As mentioned above, exclusive use rights are quite secure, so the main area where things can go wrong is where the reality of them does not match up with a buyer’s (or owner’s) intentions and expectations. For example:
- Is a fenced off yard around a unit or townhouse actually exclusive use for that unit or townhouse?
- Is the car park being used by the seller the correct car park allocated to the unit? Sometimes car park numbers do not correctly correlate to the exclusive use allocations in the by-laws.
- Is that nice, big garden around the unit exclusive use for the unit, or can anyone use it? If it is exclusive use, are you prepared to maintain it (including any large trees), or do you expect the body corporate to do so?
- If you want to put a pool, shed or garage in the yard, can you do this, or will you need body corporate permission?
Not having exclusive use of an area which you thought would be included can adversely impact on your ability to use and enjoy the area, as well as the privacy of your lot, and ultimately its value. On the other hand, being saddled with the care and maintenance of an exclusive use area which you do not really need can be an unwanted burden.
There is nothing in the standard contract used for community title lots which identifies whether there are any exclusive use areas allocated to the lot, or the extent of them. At Miller Harris, we always do a search of the survey plan and community management statement to identify exclusive use areas. Some other lawyers do not. However, even if the searches are done, a lawyer is not going to know what you expect to be included unless you tell them, and it can be difficult to terminate a contract due to an unmet expectation with regard to exclusive use areas, except in very clear cases. It is better to check them out and get it right before the contract is signed.
What should buyers do?
The old principle of “buyer beware” applies, so:
- ask questions of the selling agent about what is included in the lot, and any exclusive use areas, when you inspect the property;
- be aware that agents do not always get it right, so ask to see the plan and community management statement, or better still, get your solicitor to check these out before you sign;
- if you have specific plans for the property, such as making extensions or additions to it, discuss these with your solicitor before you sign; and
- even if you have already signed a contract, tell your solicitor if you expect any exclusive use areas to be included with the lot, especially if they were important to your decision to buy the property.
If you are looking at purchasing a unit or townhouse and need advice about exclusive use areas please contact Nigel Hales, Accredited Property Law Specialist and partner at Miller Harris Lawyers on 4036 9700.