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Posted 18 September 2017
Category: Strata
Mixed Use Developments are increasingly popular with both the residential and commercial sectors in the current Sydney property market. Essentially they involve a combination of various types of uses in the one building or complex.
A key to mixed use development is that there are Shared Facilities in the development that are used by two or more of the lots that make up the mixed use scheme such as, car parking, loading docks, fire stairs, façades, entrances and exits, plazas or piazzas, lifts, electrical plant and infrastructure, air conditioning plant and infrastructure, water, fire safety systems and gardens.
Mixed Use Development described as Stratum Subdivisions are themselves not regulated by the strata legislation (as are individual strata schemes within the mixed use development) and, in fact, are not collectively regulated at all. Each scheme operates under a contract arrangement known as a Building Management Statement (BMS).
Every lot in a mixed used development, (residential strata scheme or otherwise) is required to comply with the provisions of the BMS. Schedule 8Aof the Conveyancing Act 1919 sets out matters that must be included in a BMS when the development is registered. Note that, when a strata scheme is included in the mixed development, the BMS becomes known as a Strata Management Statement (SMS).
The SMS is usually drawn up and registered when the strata plan is registered on the instructions of the developer/owner and presented to subsequent residential strata schemes as a fait accompli. It is a contractual agreement that does not have any requirement to balance the rights of the various types of lot owners in the scheme (and there is no legislation to say it must). However, there are new legislation provisions that a SMS must provide for the fair allocation of the costs of shared expenses relating to parts of the building and must include details of the method used to apportion those costs of shared expenses (see Schedule 4 of the Strata Schemes Development Act 2015).
The SMS establishes the Building Management Committee (BMC) and its office holders which govern the scheme in accordance with the SMS. The SMS provides details of the management structure for the complex, meeting procedures, voting and finances.
However, the very nature of a mixed use complex indicates a plethora of interests, including the residential owners/tenants, the commercial landlords (often the original developers), the commercial tenants, local authorities, customers and visitors generally. The potential for conflicts between these often competing needs and interests is very real.
Strata Managers are usually called upon to manage both the strata schemes within the mix use development and the overriding Building Management Committee for the whole complex. This effectively means that the strata managing agents have two clients in the same development. Please note that the BMC is not a legal entity and therefore cannot contract directly with third parties.
The potential for conflicts of interests, communication issues and management problems is very real and needs careful skilled consideration.
Set out below are some practical tips for residential lot owners and executive committees.
Top Ten Tips for Mixed Use Residential Owners: |
1. Be Alert but not alarmed!
o Strata legislation and the registered by-laws for your strata plan, AND o the provisions of the SMS which override the individual strata by-laws.
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2. Inform yourself BEFORE you make your purchase
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3. Identify various components of the mixed use complex
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4. Familiarise yourself with your rights and obligations and those of other lot owners
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5. Communicate, communicate and then communicate some more!
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6. Don’t be bullied by overbearing committee members of strata schemes or BMC or Strata Managers
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7. Always follow the procedural steps carefilly
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8. Accept the things you cannot change…. but
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9. Don’t be afraid to ask for assistance
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10. Forewarned is forearmed
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Please contact Bannermans Lawyers for further advice on enquiries@bannermans.com.au |
***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.