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5.5 Shared ownership

15 Aug 2016 - 15:01 | Version 10 |

Contributed by AlisonO'Neill and current to 1 May 2016

Everyone lives communally. Even citizens who own freehold blocks in the suburbs or rural areas have to adapt their living patterns to those of the neighbourhood. In the NT, residents in most communities contribute to the amenities in those communities through rates and charges paid to municipal councils and other government organisations. Similarly, most people have neighbours and, therefore, associated and mutual obligations concerning fences, noise, dogs and so on (see Neighbours ).

Some people take the concept of communal living further by sharing the use and, sometimes, the ownership of facilities. This section deals with communal ownership as it pertains to:
  • living in houses as shared owners
  • units and strata title flats
  • retirement villages
  • living in caravans or mobile homes.

Briefly examined are the legal structures supporting these living arrangements, the rights and responsibilities between inhabitants and the ways disputes can be resolved.

Retirement villages and other forms of cooperatively owned, specific purpose housing are more widely used elsewhere in Australia. As there are few such developments in the NT, these types of communal living arrangements are not examined in depth.

The success of communal living depends, to a large degree, on trust and cooperation between participants, regardless of whether the shared space is a town or a block of flats. Legal structures, however, provide a set of rules that can be used to sort out problems if things go wrong.

Communal ownership arrangements should be structured in a way that addresses the following issues:
  • what happens to a resident's interest upon their death?
  • how are living areas allocated?
  • how are costs and profits determined?
  • how are communal rules and other decisions made?
  • how are people who break the rules dealt with?
  • how can residents deal with the property?

The more people involved in a communal living arrangement, the more complex its structure.

Types of ownership

When two or more people jointly purchase or otherwise obtain real estate property, their interest in the property is registered with the Land Titles Office (LTO) (see Buying and selling a house ). They can either own the property as joint tenants or tenants in common. A property can also be held by a trust.

Joint tenancy

Joint tenancy is a method of shared ownership that enables two or more people to be registered as the owners of a home. Each joint tenant has an interest in the whole of the property. When one joint tenant dies, they cannot pass on their share of the property (in a will) to another person. Instead, the surviving joint tenant(s) automatically inherit the deceased joint tenant's share of the property. This may cause a problem where joint tenants are no longer de facto partners, married or in a close familial relationship, and it may be preferable in many cases for owners of property to share ownership as tenants in common (see below).

If one joint tenant sells their interest or otherwise breaks the joint tenancy, the joint tenancy is severed to the extent that the new owner becomes a tenant in common with the remaining registered owner(s) (section 59 of the Land Title Act 2000 (NT)). If there are more than two joint tenant owners of the property, the joint tenancy of the other registered owners is not affected (see Section 59(4) of the Land Title Act 2000 (NT)).

If the parties to a joint tenancy are in dispute and it can not be resolved, they will have to take action in the Supreme Court. To avoid potential disputes, the method of shared ownership for most owners may be tenancies in common (see below).

Tenancy in common

Sharing property ownership as tenants in common is the most common method of holding property. It is similar to a joint tenancy except that a tenant in common interest is a fixed percentage. This means that neither tenant in common holds the property 100% (as in the case of joint tenants, see Joint tenancy above). For example, one tenant in common may own 30% of a house; the other 70%.

If a tenant in common dies, their interest in the property is passed on to their heirs and not automatically to the other joint tenant (as in the case of joint tenants, see Joint tenancy above). This means that a tenant in common's share of the property can form part of their will and be transferred to their heirs.

Tenancy in common is also commonly used for business enterprises or when people buy real estate as partners for profit-making ventures. To avoid legal difficulties, a tenancy in common agreement should be supported by other legal documents that spell out the rights of the various owners.

Trusts

One or more persons may, for the benefit of a group or people, hold the legal title to land on trust. These legal owners, called the trustees, are bound by rules set down in a trust deed, a legal document drawn up for the members of the trust (see Legal documents ). Some trust deeds permit the beneficiaries to transfer their interest to other people or their heirs.

Unit and strata titles

Shared ownership of buildings became common in the NT in the mid-1970s. Unit title is the main method used, although other legal methods for arranging separate ownership of flats in high rise buildings are available.

A few buildings are owned under company title, an arrangement where a company owns the building and ownership of shares in the company carries the right to control a particular flat or part of the building.

The Unit Title Act 1979 (NT) and the Unit Titles Schemes Act 2009 (NT) provides for a system of land titles whereby two or more landowners obtain individual freehold titles for their respective areas of the land. Each individual's area usually includes part of a building and, in many cases, a private garden area. A unit title covers the part of the land exclusively possessed. The Unit Title Act 1979 (NT) was enacted in 1974 and continues to apply to unit developments built prior to 2009. The Unit Titles Schemes Act 2009 (NT) was enacted in 2009 and has application to unit developments constructed thereafter. This dual legislation has proved confusing and unsatisfactory and moves are afoot to consolidate the two into a single legislative instrument towards the end of 2016.

There is no restriction on the type of building development that can be held as unit titles; the legislation covers strata properties, cluster properties and townhouses. It does not matter whether the use is residential or business - the same rules apply for all uses.

In addition, owners collectively have a communal title for any common property. Common property often includes driveways, boundary fences, visitor car parking areas, staircases, some walls and roofs, some garden areas and swimming pools.

Bodies corporate

In any development involving unit titles a body corporate is established. The body corporate is the owner of the common property and its membership is made up of all the unit owners. All unit owners in any given building are contractually bound to one another and to the body corporate to comply with certain rules. These rules are referred to as the articles of the corporation in the Unit Title Act 1979 (NT). In contrast, the Unit Titles Schemes Act 2009 (NT) has no default articles. Its rules are established by way of the power of the Body Corporate to make their own by-laws with a default set of by-laws provided by schedule 2 of the Unit Titles Schemes Act 2009 (NT).

Articles of the corporation - Unit Title Act 1979 (NT) only

The standard articles of the corporation are contained in schedule 1 of the Unit Titles Act 1975 (NT). In broad outline, these rules impose on unit owners restrictions and mutual obligations similar to those between tenant and landlord (see Renting ).

These standard rules include:
  • the right of inspection of an individual unit by the body corporate's authorised agent to ensure compliance with the legislation and the rules
  • the right of the body corporate to carry out repairs and maintenance
  • an obligation on each owner or occupier to keep the unit in a state of good repair
  • an obligation on each owner to inform the body corporate of certain things, such as a change of tenancy and any period when the unit is to be unoccupied for more than 30 days
  • a prohibition on using the common property in an unreasonable way
  • a prohibition on using the unit in such a way as to cause a nuisance, hazard or substantial annoyance to the occupier of another unit
  • a prohibition on making noise that may cause substantial annoyance
  • a prohibition on erecting new structures without the unanimous resolution of the corporation (see Resolutions )
  • a prohibition on the keeping of animals or birds without a special resolution of the body corporate.

This list only summarises some of the standard provisions. If a unit holder wishes to determine their legal position, they should first obtain a copy of the articles of their corporation.

Any of these standard articles can be changed by a special resolution (see Resolutions ) of the body corporate - see Section 78 of the Unit Titles Act 1975 (NT). The body corporate could, for example, pass a special resolution absolutely prohibiting dogs. A person who already has a dog when their body corporate passes this kind of resolution should seek legal advice. The articles cannot, however, be changed if the change conflicts with the provisions of the Unit Titles Act 1975 (NT) or restricts an owner's capacity to sell or pass on their property.

The change is not effective until a document detailing the change is lodged with the Registrar-General at the LTO - Section 78(2) of the Unit Titles Act 1975 (NT).

By-laws of the corporation (Unit Title Schemes Act 2009 (NT)) only

The default by-laws of the corporation are contained in schedule 2, section 95 of the Unit Title Schemes Act 2009 (NT). The default by-laws are not as comprehensive as the articles of the Unit Titles Act noted above but in the main they cover the same ground with the exception that there is no right of entry to individual units.

Amendments to by-laws has proved cumbersome and restrictive under the Unit Title Schemes Act 2009 (NT). This is because by-laws (other than the default by-laws) form part of the scheme statement. Not only must changes to the by-laws be registered with the Registrar- General, but a new scheme statement must also be created and lodged. In addition, section 63 of the Interpretation Act 1978 (NT) requires ministerial approval for changes to by-laws in any Act.

The duties of the body corporate

The main duties of the body corporate are to:
  • control, manage and administer common property - Section 34 (a) of the Unit Titles Act 1975 (NT) and Section 27 of the Unit Title Schemes Act 2009 (NT)
  • keep common property in a state of good repair - Section 34(b) of the Unit Titles Act 1975 (NT) and Section 27 of the Unit Title Schemes Act 2009 (NT)
  • calculate levies payable by all the unit holders to pay both common expenses and additional expenses - Section 36 of the Unit Titles Act 1975 (NT) and Section 94 of the Unit Title Schemes Act 2009 (NT)
  • enforce the articles or by-laws of the corporation
  • take any necessary collective action, including paying some government services and arranging insurance.

The body corporate acts through a committee. A committee may be elected at an annual meeting or composed of all members, in which case all decisions must be unanimous. Where there are three units or less, all owners are members of the committee.

The body corporate is obliged to hold a meeting at least once a year and must follow certain rules set out in Sections 58 - 75 of the Unit Titles Act 1975 (NT). See also Schedule 1 of the Unit Titles (Management Modules) Regulations 2009 (NT).

Body corporate managers

Under Unit Titles Act 1975 (NT) and the Unit Title Schemes Act 2009 (NT), the committee of the body corporate may appoint agents and servants, such as a real estate agent or a caretaker, to carry out duties and functions on its behalf. Such agents and servants must, if they are paid, be licensed under the Agents Licensing Act 1979 (NT).

A body corporate that has problems with its body corporate manager can complain to the Agents Licensing Board. The Board has the power to investigate alleged breaches of the Agents Licensing Act 1979 (NT)mor the rules of conduct governing agents in the NT. For more information contact the Agents Licensing Board (see Contact points).

Resolutions

In 2009 a common set of terminology for decision making was introduced into both the Unit Titles Act 1975 (NT) and the Unit Title Schemes Act 2009 (NT). The resolution required will vary depending on the nature of the decision required and is specified in each Act. The resolutions are:

  • Unanimous resolution - all units (owners) must vote in favour of a decision - Section 7(4) Unit Titles Act 1975 (NT) and Section 79(4) of the Unit Title Schemes Act 2009 (NT).
  • Resolution without dissent - there must be no vote against the proposed decision - Section 7(5) of the Unit Titles Act 1975 (NT) and Section 79(5) of the Unit Title Schemes Act 2009 (NT)
  • Majority resolution - the votes in favour of a decision must be at least 50% of the units - Section 7(6) of the Unit Titles Act 1975 (NT) and Section 79(6) of the Unit Title Schemes Act 2009 (NT)

  • Ordinary resolution - the votes in favour of the decision are greater than the votes against a decision - Section 7(7) of the Unit Titles Act 1975 (NT) and Section 79(7) of the Unit Title Schemes Act 2009 (NT) (unless the management module provides otherwise)

  • Special resolution - the votes in favour of a decision must be at least 66.67% of all units and the votes against must not be more than 25% - Section 7(8) of the Unit Titles Act 1975 (NT) and Section 79(8) of the Unit Title Schemes Act 2009 (NT).

Common expenses

The cost of some government services, such as water, sewerage and electricity to the common property, are shared by unit holders. Bills are sent to the body corporate which pays for them out of a levy from unit holders.

Electricity charges for the individual units are metered separately and, together with council rates, paid for by individual owners. No council rates are payable on common property - Section 108 of the Unit Titles Act 1975 (NT) and Section 106 of the Unit Title Schemes Act 2009 (NT).

The body corporate must make sure the building is insured for:
  • fire, earthquake and other acts of nature
  • riots and other civil disturbances
  • malicious damage
  • bursting and overflowing water pipes.

The body corporate must also insure itself from claims arising from death, accidents and property damage occurring on the common property (see Insurance ). The body corporate can excuse itself from insuring against some or all of these risks through a unanimous resolution (see Resolutions ) under the Unit Titles Act 1975 (NT) but there is no such equivalent provision in the Unit Title Schemes Act 2009 (NT). These provisions do not stop either the body corporate or the individual owner from taking out other insurance - Sections 89-89 of the Unit Titles Act 1975 (NT).

To ensure that expenses are met, the body corporate has a duty to set the levy payable by all members. This total amount is apportioned according to unit entitlement (see Unit entitlements ) but can be changed by a special resolution of the body corporate.

Unit entitlements

To register a unit title development, individual unit entitlements must be determined. In brief, when a proposed development is lodged, a valuer calculates the expected 'improved capital value' of the development once unit titling is complete. This value is then given a number, for example, '55'. Each unit is then given a number representing its proportional value of the total development. To continue the previous example, a unit one eleventh of the total value would have a unit entitlement of '5'.

Units do not need to have equal values. Larger units and those that have better gardens, facilities or views will usually have a larger unit entitlement.

Unit entitlement is significant when voting on special resolutions (see Resolutions ) or if a development is destroyed. Unit entitlement can also have some bearing on the calculation of municipal rates and charges.

Generally speaking, unit entitlements can not be altered, except by court order or through re-subdivision of land. This is so even if respective values change quite dramatically, for example, if a view becomes built out.

Resolving disputes

Communal living involving co-ownership and mutual rights and obligations can sometimes lead to disputes. Disputes commonly occur over the failure of members to comply with the articles or the failure of the body corporate to enforce them. For example, a member may, in contravention of the articles, install an air conditioner in a way that spoils the aesthetics of a property. However, the body corporate may not wish to take action because it does not consider the cost to be justified.

A complainant who is unable to resolve their dispute by following internal complaint procedures can take the other party, whether they are other unit owner(s), the body corporate or the committee of the body corporate, to the Local Court. The court can hear any dispute about the obligations of parties under Section 106 of the Unit Titles Act 1975 (NT) and Sections 84-86 of the Unit Title Schemes Act 2009 (NT). The court may attempt to settle the matter by mediation (see Alternative dispute resolution ). Alternatively, or if the mediation fails, the court can:
  • order one or both parties to do or stop doing a particular action
  • alter the articles of the corporation
  • vary a decision of the body corporate committee
  • order a party to pay money to the other party
  • make any other court order.

If the dispute does not come under the provisions of the Unit Titles Act 1975 (NT) and the Unit Title Schemes Act 2009 (NT), for example, if it is based on personality differences or is in fact a dispute between a unit owner and a tenant of another unit, the complainant will have to try other avenues of dispute resolution (see Renting and Common problems in neighbourhoods).

Retirement villages

Retirement villages are commercial facilities that have been purpose built and legally structured to suit the needs of retired people who want a place of their own and to be close to communal facilities designed to meet their needs.

Usually, a commercial operator owns the land and buildings and residents have one or other of the following kinds of tenure:
  • a loan and licence scheme where the resident lends a sum of money interest-free to the owner. In return for this 'premium', the owner grants the resident a licence to live in the village. The resident's rights are then set out in a contract, similar to a long term tenancy agreement, between the resident and the owner. This type of arrangement is not registered on the title
  • a share holding linked to a lease
  • a title similar to that provided under the unit titles (see Unit and strata titles ).

The Retirement Villages Act 1995 (NT) provides protection for residents from harsh and unreasonable treatment, recognises the right of residents to participate in decisions relevant to their accommodation, and specifies the legal and financial information that should be provided to residents. The legislation also outlines the processes by which disputes should be resolved. For further information contact the Council on the Ageing (NT) (see Contact points ).

As retirement villages can be structured in quite complex ways, anyone considering 'purchasing' a property in a retirement village should consult a lawyer.

Caravans and mobile homes

A significant number of Territorians live permanently in caravan parks. It is important to distinguish between those residents who lease their caravans and those who own them.

While the Residential Tenancies Act 1999 (NT) covers tenants of premises in general, including caravans and houseboats, importantly, it does not apply to occupiers of caravans or mobile homes that are situated in caravan parks - Section 6 of the Residential Tenancies Act 1999 (NT) (see Renting ).

Although the owner of a caravan or mobile home cannot be evicted from the caravan or mobile home itself, they can be evicted from the land by the park or land owner. In the NT there is little that caravan owners can do to stop this from happening. For this reason, anyone wanting to set up permanent residence in a caravan park should enter into an appropriate agreement with the owner of the land and seek legal advice.

An agreement should at least cover the following issues:
  • does the mobile home owner get an interest in the land and, if so, does it prevail over any interest held by the landowner's creditor?
  • under what circumstances can the landowner evict the resident?
  • under what circumstances can the mobile home owner transfer the home and is consent to transfer required from the land owner?
  • what fees can be charged by the land owner?

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