If you are purchasing property in Australia, the increasing population and urban density means that you are increasingly more likely to be purchasing in a strata scheme. If you’re purchasing a unit within a strata plan, you may be swayed because the purchase includes a car space or a storage space which increases the appeal of your particular purchase. However, it’s important to understand that whilst a unit might be giving you a car space or a storage space, you may not be the legal owner of that space.
This is because in many instances, the car space or storage space is still located on the common property, but you might have what is referred to as an ‘exclusive use’ of the space. When purchasing there are different scenarios you may be faced with:
- Your purchased ‘lot’ (unit) may come with a car space which forms part of the total area of your lot but is located within a car park or some other congregation of other lots.
- Your purchase is for a ‘lot’ (unit) but the seller may also be selling a different ‘lot’ which is actually the car space and so you will be registered on the title to two different lots.
- Your purchase is for a ‘lot’ (unit), but the car space which has been advertised is located on common property. In this instance, you are relying on the by-laws of the owner’s corporation to state that your proposed purchased lot has the ‘exclusive use’ to that particular space.
Each of the scenarios above can be equally common and knowing the difference can be important.
Situation 1 – Ownership of One Lot
You may own the car space even though you only have rights to ownership of one lot. This is because the space is essentially an extension of your unit, and you have the same rights to ownership as if the car space was located within your unit. However, it complicates matters if you wished to sell the car space only, because this would require a subdivision of the lot to enable the car space to be separated from the unit. It can also be more expensive, because this situation increases the total surface area of your lot and therefore increases the proportion of your entitlement in the strata plan, which means higher strata levies for the owner.
Situation 2 – Ownership of Multiple Lots
When purchasing or owning, you may actually own more than one ‘lot’ in the strata plan, which means that the car space is completely separate from the unit. Because you are the registered owner of the lot, your overall entitlement in the strata plan is still higher, the same as the one lot situation above, meaning higher levies. However, owning the car or storage space on a separate title means that you have the flexibility to buy or sell that space in and of itself, which can alleviate those additional cost of levies, and can also be quite lucrative in today’s current property market.
Situation 3 – No Ownership One Lot
Finally, you may have a situation where the car parking spaces located on the strata plan all form part of the common property. This means that as an owner you do not have the proprietary right of ownership. However, you will likely have what is known as ‘exclusive use’ which is designated through the by-laws. This means that all the tenants recognise and observe that a particular designated space can only be used by the owner of a particular lot, and no other lot owners can use the space, even if it is unoccupied. This situation can strike fear into certain buyers when they discover that the car space they believed they were purchasing is actually owned collectively by the owner’s corporation and is instead designated for use to a lot owner.
However, this situation has plenty of benefits, especially in cost. Because you are not the registered owner, the car space will ordinarily not form part of the overall area ownership of your lot, which reduces the amount of your quarterly levies. As the space is located on common property, it is likely that the owner’s corporation is also responsible for the cost of repairs and maintenance of the spot, unless otherwise specified in the by-laws, which can further reduce costs, although limits your control over the space.
Therefore, it can be important to investigate with the agent or your solicitor or conveyancer whether the advertised car or storage space is actually part of the title, or whether you are simply buying into rights provided by the by-laws. If the space is part of exclusive use, then it is imperative that you obtain a copy of the by-laws of the strata plan to determine what rights you will have. You should also seek to obtain a strata report to determine whether the owner’s corporation has the capital to conduct any repairs if necessary.