In brief - Councils have the discretion to remove or amend restrictions on use of utility lots
If utility lots have their use restricted to use by an owner or occupier of lots within the same strata scheme, the owners or registered mortgagees of such utility lots can apply to the local council to release the lot from that restriction.
Utility lots can be restricted to owners or occupiers of lots within the same strata scheme
"Utility lots" are lots designed to be used primarily for storage or accommodation of boats, motor vehicles or goods and not for human occupation as a residence, office, shop or the like.
Such standalone car spaces and storage spaces are valuable real estate in any development, particularly those located in the city centre and on the city fringe.
Property developers should be aware that problems can arise in large developments which comprise more than one strata scheme or stratum lot because registration of a strata plan can be qualified by a restriction pursuant to section 39 of the Strata Schemes (Freehold Development) Act 1973 (Act) under which the use of car space and storage lots are restricted to use by an owner or occupier of lots within the same strata scheme.
Section 39 of the Strata Schemes (Freehold Development) Act 1973
Section 39 of the Act provides that where the registration of a strata plan submitted to local council for the issue of a strata certificate would result in the creation of one or more utility lots, the local council may qualify the strata certificate in respect of that strata plan by attaching a condition restricting the use of the utility lots to use by an owner or occupier of a lot or proposed lot the subject of the strata scheme concerned.
The intention of such a restriction is to ensure that utility lots are not used for occupation by individuals and that they are only used by owners and occupiers of residential lots within the strata scheme.
Restrictions on use of utility lots noted on strata certificate
If the issue of a strata certificate would result in the creation of one or more utility lots and the relevant development consent contains a condition restricting the use of those utility lots to use by a proprietor or occupier of a lot or proposed lot, accredited certifiers must note the restriction on the strata certificate.
The restriction is noted on the strata certificate on the administration sheet lodged with the strata plan at Land and Property Information and notations appear on each utility lot title.
High demand for car spaces and storage spaces at odds with restrictions on their use
Owners of utility lots can be confronted with the situation where buyers in other strata schemes or stratum lots within the building are willing to pay top dollar for utility lots but receive advice from their legal advisors that they cannot legally use the lots under the terms of the restriction noted on title. In some cases lots have been retained by owners for years after the development is complete.
The current restrictions can be seen to overregulate the use of such utility lots and limit the efficient and effective use of the lots by owners of new residential buildings, particularly mixed use developments and large scale developments that include multiple strata schemes or which will include multiple strata schemes in the future.
Councils have the discretion to remove or amend the restriction on use of utility lots
Under section 39(4) of the Act, the local council may release the lot from the restriction upon application made by the owner or a registered mortgagee of a utility lot which is the subject of such a restriction.
Councils therefore have discretion to remove or amend the terms of the restriction on use. We have recently had success in making applications to councils to:
• remove section 39 restrictions on use altogether; and/or
• modify the terms of registered restrictions to ensure that the intention of the section 39 restriction is retained, but that the terms of the restriction are broadened to allow owners and occupiers in other schemes or in other stratum lots within the community scheme, the development or the building to use the utility lots.
Property developers advised to request that restrictions on use of utility lots be amended or removed
Property developers should be mindful of conditions of consent requiring registration of section 39 restrictions on use. It would be wise before or at the time of determination of the consent to request that section 39 restriction terms be amended or that such conditions be removed from the consents altogether.
Having the ability to sell or lease utility lots to a wider audience will potentially increase both the price and the demand for these utility lots in your development.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2023.