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Leasing commercial space in a strata building can feel straightforward until you realise there's an entire owners corporation with decision-making authority over your fitout, your signage, and even basic repairs. I work with business owners who've signed leases assuming they're dealing with their landlord, only to discover that critical approvals and maintenance issues run through a separate body with its own meeting schedules and priorities.
The challenge isn't just understanding your lease - it's understanding how strata legislation affects what you can actually do with the premises and who's responsible when something needs fixing. Your landlord might be obligated to maintain the property under the lease, but if the issue involves common property - which includes most of the building's structure - the owners corporation controls the repair timeline and process.
This guide explains the practical considerations when leasing commercial property in a strata scheme in NSW. We'll look at how strata levies work, who approves your fitout and alterations, what happens when repairs cross into common property territory, and how to set up your lease to reduce conflicts down the track.
Understanding strata commercial leasing:
Invest time in understanding the strata scheme before you sign. Request copies of the by-laws, recent meeting minutes, financial statements showing current levies, and any records of special levies or disputes. Ask specific questions about approval processes for the fitout work you're planning. Ensure your lease clearly defines which outgoings you're responsible for and how strata levies are calculated and passed on. Work with a lawyer who understands both commercial leases and strata schemes to review the lease and strata documents together - this combined analysis often reveals issues that wouldn't be apparent from reviewing just one or the other.
When you lease commercial space in a strata building, you're entering into a lease for a specific lot within a larger scheme. The building itself - walls, roof, common areas, essential services - is owned collectively by all lot owners through the owners corporation. Your premises are just one lot within this shared structure.
This matters because your landlord doesn't have complete control over the building. The owners corporation governs common property and has authority over anything that affects the building's structure or shared facilities. Your lease might say the landlord is responsible for maintaining the premises, but if that maintenance involves common property, the owners corporation must approve and often carry out the work.
The distinction creates practical complications. If your air conditioning unit needs replacing and it's attached to or affects the building's structure, that likely requires owners corporation consent. If you want external signage for your business, you're asking for permission to use common property, which means owners corporation approval regardless of what your landlord has agreed to.
The line between common property and lot property determines who's responsible for what.
Common property typically includes:
Lot property typically includes:
The challenge is that many repairs and alterations cross this boundary. Drilling into a wall to mount equipment? That's affecting common property. Installing new electrical outlets? Might involve common property wiring. Replacing ceiling tiles? Could affect common property if they're part of the building's fire protection system.
This is why strata commercial leases need specific clauses addressing who handles what when work involves both lot and common property.
The owners corporation manages the strata scheme and has statutory obligations under the Strata Schemes Management Act 2015 (NSW). For tenants, the most relevant aspects are:
Approval authority: The owners corporation must approve alterations that affect common property or breach by-laws. This includes most fitout work, signage, and modifications to building services.
Maintenance responsibility: The owners corporation must properly maintain and repair common property. This sounds straightforward but becomes complicated when repairs are needed urgently and the owners corporation's decision-making process moves slowly.
By-law enforcement: The owners corporation enforces scheme by-laws, which can restrict noise, operating hours, waste management, vehicle access, and use of common areas. These restrictions might not be immediately apparent from your lease.
Levy collection: The owners corporation collects levies from lot owners to fund common property maintenance, building insurance, sinking fund contributions, and operational costs. Your landlord will typically pass these costs to you.
Strata levies are quarterly contributions from lot owners to fund the owners corporation's expenses. They're split into administrative fund levies (regular maintenance and operations) and sinking fund levies (major repairs and capital works).
For tenants, strata levies matter because commercial leases typically include them as recoverable outgoings. Your rent might be one amount, but your total occupancy cost includes your share of the building's strata levies.
The lease should specify:
Special levies are additional contributions levied when the sinking fund doesn't cover major repairs or improvements. These can be substantial - roof replacement, facade repairs, lift upgrades, building code compliance works.
This is where tenant-friendly leases differ significantly from landlord-friendly ones. Many landlord-prepared leases include special levies in recoverable outgoings, meaning you'd pay 100% of any special levy raised during your tenancy. From a tenant's perspective, this creates exposure to potentially significant costs for building works you have no control over.
A well-drafted lease from a tenant's perspective will typically:
The key negotiation point is whether major building works should be your cost exposure as a tenant or the landlord's investment in maintaining their asset.
Before signing, confirm the current quarterly levy amount for the lot and how it's passed on to you. If special levies are included in your outgoings, ask whether any are currently in place or planned.
The main focus should be ensuring your lease clearly caps or excludes special levies rather than conducting extensive strata financial due diligence. Your landlord bears the investment risk in the building - your concern is knowing what your committed outgoings will be and that you're not exposed to unpredictable building costs.
Most commercial fitouts in strata buildings require approvals from both your landlord and the owners corporation. Your lease grants you the right to occupy the premises, but it doesn't automatically give you the right to alter common property or breach strata by-laws.
The typical approval path is:
This process takes longer than obtaining just landlord consent. Owners corporation approvals require committee consideration, formal resolutions, and sometimes general meeting votes for significant works.
Structural alterations: Any work affecting loadbearing walls, floor slabs, or building structure requires both landlord and owners corporation consent. The owners corporation typically requires engineering certification that the work won't compromise building integrity.
Building services modifications: Connecting to or modifying electrical, plumbing, HVAC or fire protection systems usually involves common property. Owners corporations often require licensed contractors and final certification that building services remain compliant.
Acoustic and fire protection: Many strata buildings have specific requirements for maintaining acoustic and fire separation between lots. Your fitout can't compromise these protections, which might limit your design options.
External signage: Any signage visible from outside your premises typically requires owners corporation approval as it affects common property or building appearance. By-laws often specify size, location, and design standards for signage.
Start the approval process early. If your business relies on specific fitout elements - commercial kitchen, retail shopfront, soundproofed meeting rooms - confirm feasibility with both landlord and owners corporation before committing to the lease.
Consider including conditions precedent in your lease that make it subject to obtaining necessary owners corporation approvals for your planned fitout. This protects you if the owners corporation refuses consent or imposes conditions that make your business model unviable.
Ensure your lease clearly states:
Commercial leases typically make the landlord responsible for maintaining the premises in good repair and keeping essential services operational. In strata buildings, this obligation becomes complicated when the repair involves common property.
If the air conditioning fails and the unit is located in common property, the owners corporation must arrange the repair. Your landlord might be liable to you under the lease for the disruption to your business, but they can't simply fix the problem without owners corporation involvement.
This creates practical issues:
When common property repairs make your premises unusable or substantially interfere with your business, you might have rights to rent abatement under your lease. However, enforcing this against your landlord can be complicated when they're not the ones delaying the repair.
Your lease should address:
The challenge is balancing your need for functional premises with the reality that strata repair processes simply take longer than single-owner building repairs.
If your business operations damage common property - water leak from your premises, forklift damage to common area floors, alterations that affect building structure - responsibility for repairs typically falls on your landlord as the lot owner, who will then seek to recover costs from you under the lease.
The lease should clearly state:
Every strata scheme has registered by-laws that govern use of lots and common property. These by-laws can impose restrictions beyond what's in your lease, and you're legally obligated to comply with them even though you're not a lot owner.
Common by-law restrictions affecting commercial tenants:
By-laws are binding even if your lease doesn't specifically reference them. A lease clause should require you to comply with by-laws and confirm you've received and reviewed a current copy.
Issues arise when by-laws restrict business operations in ways that weren't apparent during lease negotiations. A restaurant tenant might discover by-laws limiting cooking odours or extraction systems. A retail tenant might find restrictions on after-hours access for stock deliveries.
Before signing, request:
If your intended use conflicts with by-laws, explore whether the owners corporation would consider amendments. Some schemes are flexible if proposed changes don't affect other owners. Others are rigid, particularly in mixed-use buildings with residential and commercial lots.
The owners corporation can amend by-laws through special resolution at a general meeting. This means restrictions could be introduced or tightened after you've commenced your lease.
Your lease should address:
Consider a medical practice signing a lease for a ground floor strata lot. The business needed to install soundproofing, modify the existing bathroom for accessibility compliance, and replace the front door with an automatic entry system for patients with mobility issues.
The landlord reviewed the plans and provided consent within the agreed timeframe. However, when the plans went to the owners corporation, the building manager flagged concerns about the automatic door affecting building security and the bathroom modifications potentially impacting the building's plumbing system.
The owners corporation required additional engineering reports on the plumbing changes and wanted the automatic door specification amended to integrate with the building's security system. This pushed the approval timeline from an expected 3 weeks to nearly 3 months, delaying the practice's opening and causing it to miss its planned start date.
The situation illustrated several strata leasing realities. The landlord had acted appropriately and efficiently, but couldn't override the owners corporation's requirements. The fitout plans that seemed straightforward involved common property elements that triggered additional scrutiny. The approval timeline that worked for a single-owner building didn't account for strata committee meeting schedules and formal resolution processes.
In this case, the lease hadn't included any condition precedent for owners corporation approval or provisions for delayed commencement dates due to approval delays. The tenant bore the cost of the delay and the additional reports required by the owners corporation.
This type of situation is why early engagement with the owners corporation - before signing the lease - helps identify potential approval issues and realistic timelines.
Before signing a strata commercial lease:
Ensure your lease addresses:
Watch for these issues before committing:
This is urgent if:
Leasing commercial space in a strata building involves considerations that don't exist in single-owner properties. Let's work through your specific situation together - whether you're reviewing a proposed lease, negotiating with a landlord and owners corporation, or addressing issues that have emerged after signing.
I help business owners and commercial tenants understand what they're committing to in strata commercial leases, negotiate terms that reduce your exposure to strata-specific risks, and resolve disputes when they arise.
Strata levies are calculated based on your lot's unit entitlement, which is determined by factors like lot size, value, or use. As a tenant, you'll typically pay the proportionate share of levies that the landlord passes on to you as outgoings under the lease. Your lease should specify whether you pay based on the lot's unit entitlement percentage or a floor area calculation. Always review the strata scheme's levy history to understand what you'll actually be paying beyond base rent.
You need approval from both. Your lease governs what alterations require landlord consent, but any work affecting common property or potentially breaching by-laws also requires owners corporation approval. Common property includes building structure, shared services, and external elements. In practice, this means most commercial fitouts need dual approval, which takes longer than single-landlord approval processes. Start the approval process early and confirm requirements with both parties before committing to contractors.
If a repair involves common property, the owners corporation is legally responsible for carrying out the work under the Strata Schemes Management Act. However, your lease likely makes your landlord responsible for maintaining the premises. This creates a situation where your landlord has the obligation to you, but must work through the owners corporation to fulfil it. Repairs can take longer as they require committee approval and the owners corporation's selected contractors. Your lease should address rent abatement if common property repairs make your premises unusable.
Yes. By-laws are legally binding on all lot owners and occupiers, including tenants. They can restrict operating hours, noise levels, waste management, vehicle access, and even certain business types. Review the current by-laws before signing your lease to confirm your intended use is permitted. Ask about any proposed by-law amendments and whether there's a history of by-law enforcement in the building. Your lease should require the landlord to provide you with current by-laws and any amendments during the lease term.
Typical timeframes range from 4-8 weeks, but can extend to 3+ months if the owners corporation requires additional information, engineering reports, or if your proposal needs general meeting approval rather than committee approval. The timing depends on the committee meeting schedule, complexity of your works, and whether you've provided complete information upfront. Plan your business timeline accordingly and consider including approval timeframes as conditions in your lease.
Beyond base rent, budget for strata levies (both administrative and sinking fund contributions), potential special levies for major building works, your share of outgoings like utilities and building insurance, and any specific costs related to obtaining owners corporation approvals for your fitout. Request the strata scheme's financial statements and levy history to understand typical quarterly levy amounts and whether any special levies are planned. Also factor in potentially longer and more expensive fitout approval processes compared to non-strata properties.
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