Renewing a 99 year lease in the ACT: things unit holders will need to know

Property ‘ownership’ in the ACT is by grant of a Lease by the Territory Government. The first allotments of 99 year leases, issued by the Territory Government, are due for renewal within the next decade.

General process for renewal of further crown lease

In most instances, especially in respect to residential property, an owner simply needs to apply to Environment and Planning Directorate (ACT) (the “EPD”) for a grant of a further lease upon the expiry of the current lease together with payment of an administration fee,

This process is somewhat complicated in the case of unit title developments and unit title home ownership, as the grant of a further lease can only be made upon the surrender of all leases related to the land, requiring the unit owners and Owners Corporation to act together, in unison, to fulfil the relevant requirements. In practicality, the administrative process can often be extremely difficult.

What are the Changes?

Initial Updating of the Unit Titles Act 2001 (the “Act”) In December 2010, the Act was updated to allow an Owners Corporation to act for an owner of a units plan to assist with the arrangements to surrender the old Lease and processes for granting of a new Lease. However, the changes were worded in such a way that allowed the owner of a unit within a units plan to object to the renewal of the lease process, if the unit owner did not agree with the surrender.

The required processes were burdensome, especially in the instance of one unit owner not consenting to the processes of surrendering and granting of the new lease, in which case the entire process for all Unit Owners would be delayed and/or thwarted.

Recent Updating of the Unit Titles Act 2001 (the “Act”) In July 2015, more practically significant changes were made to the Act[4], which effectively allowed an Owners Corporation to apply, on behalf of the unit owners, for a further 99-year lease and “get the job done”. While over a year old, many strata managers are not aware of changes and require legal assistance with the process.

The changes withdrew the right of an individual unit owner to object to the process for renewal of the 99 year lease process, provided a general meeting with required notices was held in accordance with the Act, and if so, then only an ordinary resolution of the owners was required to authorise the Owners Corporation to act on behalf of individual owners in the process of obtaining the grant for the new lease. That is, the new provision no longer required the authority for the Owners Corporation to act in the interests of the owners, to be passed by an unopposed resolution (but again, this could only occur in the instance where meetings and notices were held in accordance with the Act).

The changes meant the framework for obtaining a further lease for a Units Plan was more workable and expedient. Owners Corporation can now effectively administer the process required for preparing surrender of the leases on behalf of all unit owners (and the Common Property) and also complete the Instrument for Granting Further Lease, as required on application to EPD for obtaining a further lease term.

What do the changes mean for unit titles owners?

The ACT government continues to progressively modernise its unit title (strata) laws.

In particular, the changes that have been recently enacted have greatly assisted unit title owners with sensible mechanisms required to renew their leases. This in turn assists with loan and mortgagee requirements for everyday operation of unit owner finances (i.e. banks will want the 99 year leases which form security of the loan to unit owners to be renewed in order to protect their interests under the loan agreements).

More generally speaking, the EPD will endeavour to make process required for home ‘ownership’ (including further grant of leases), as straightforward as possible for all lessees (owners) of land in the ACT. Ordinarily, the EPD notifies the lessees and/or owners corporations of the expiry of a lease, approximately 12 to 18 months before the lease is due to expire. On receipt of this notification, strata managers should contact lawyers to assist them with making the arrangements well ahead of the expiry.

Of course, like all areas of law, the ACT is yet to modernise all laws related to unit title home ownership and perhaps there is room for review of the administration and management of Unit Title Plans and Owners Corporation, like our neighbouring state NSW. If you are interested in this area of law, please refer to our eBrief on NSW Strata Reforms – Watch this space and we will provide further updates in coming months as the ACT embarks upon its own unit title restructuring.

For more information contact the Property Team:

Stephanie Lynch — Partner — Property Team
(02) 6279 4398
stephanie.lynch@mvlawyers.com.au

Germaine Orreill — Associate — Property Team
(02) 6279 4325
germaine.orreill@mvlawyers.com.au