Exclusive Use By-Laws in NSW: Essential Guide for Businesses

Setting up your business in a New South Wales (NSW) strata building can be a great move - you’re tapping into shared amenities, foot traffic and often a thriving mixed‑use community. But it also means you’ll be operating within a legal framework that governs what you can and can’t do on common property.

One of the most important tools for businesses in strata is an exclusive use by-law. It’s what lets a café secure an outdoor dining area, a clinic use a storage room, or a retailer protect access to a loading bay. Get it right, and your daily operations run smoothly. Get it wrong, and you could face restrictions, disputes or even enforcement action.

In this guide, we unpack what exclusive use by-laws are, why they matter for businesses, how they’re made and registered in NSW, and the risks to watch. We’ll also walk through practical steps to secure (or update) your rights and list the key documents that usually sit alongside a robust strata setup.

What Is an Exclusive Use By-Law in NSW?

In a strata scheme, areas like car parks, courtyards, foyers and service corridors are typically common property - owned collectively and managed by the owners corporation. An exclusive use by-law (known in the Strata Schemes Management Act 2015 (NSW) as a “common property rights by-law”) grants the owner or occupier of a specified lot exclusive use or a special privilege in relation to part of the common property.

In practical terms, it ring‑fences a defined area so only your lot can use it, subject to any conditions set out in the by-law. Think:

• A café with sole use of outdoor seating marked on a plan.
• A retailer with exclusive rights to a loading dock or storage cage.
• A professional suite with exclusive access to signage space in a lobby.

These by-laws are common in mixed‑use and retail strata schemes, but they also appear in office and medical buildings, and other schemes where businesses operate alongside residential lots.

Why Exclusive Use Matters for Businesses in Strata Buildings

Exclusive use by-laws aren’t just “nice to have” - they protect the space your operations rely on. Without one, your access to common property is shared and limited by the general by-laws of the scheme, which can easily create conflict or uncertainty.

• Operational certainty: Lock in critical areas like seating, displays, loading, storage or parking, so you can serve customers and staff consistently.
• Value protection: Exclusive rights can enhance the value of your premises or lease and support your business model (e.g. takeaway queuing zones or clinic waiting areas).
• Clear responsibilities: A well‑drafted by-law sets out who maintains, insures and cleans the area - reducing the chance of disagreements.
• Regulatory alignment: If your business needs outdoor dining, delivery access or specific signage to meet council approvals or brand requirements, formalising those rights is critical.

By contrast, relying on informal arrangements (“everyone understands that’s our space”) exposes you to risks like competing use, interference with deliveries, forced removal of fittings, or penalties for unauthorised use of common property.

How Exclusive Use By-Laws Are Made, Registered and Changed

Exclusive use by-laws must follow strict statutory requirements in NSW. Understanding the process (and the guardrails) will help you secure durable rights that withstand scrutiny and changeovers in ownership.

Approval Requirements

• Special resolution: The owners corporation must pass the by-law at a general meeting by special resolution (at least 75% support based on unit entitlements of votes cast).
• Written consent: Each lot owner who will receive the benefit must give written consent to the by-law. If you’re a tenant, your landlord (the lot owner) provides this consent.

Registration and Timing

• No effect until registered: The by-law has no legal effect until it’s registered with NSW Land Registry Services.
• 6‑month deadline: The resolution to make a by-law generally lapses if the by-law isn’t lodged for registration within 6 months of being passed. If you miss this window, you will usually need to pass a new resolution (or seek orders from the Tribunal).

What the By-Law Must Cover

To be enforceable and workable day‑to‑day, your by-law should clearly set out:

• Area identification: A precise description of the common property area, ideally with a plan or diagram attached.
• Benefited lot(s): The lot numbers that have the exclusive right or special privilege.
• Conditions of use: Hours, permitted uses, fit‑out requirements, cleaning standards, signage parameters and safety obligations.
• Maintenance and insurance: Who pays for repairs, upkeep, utilities and any necessary insurance - by-laws can impose these obligations on the benefiting owner, with consent.

Example: “Lot 12 has exclusive use of the patio area marked ‘A’ on the attached plan. Lot 12 must maintain the area in a clean and tidy condition at its cost and hold public liability insurance to a minimum of $20 million.”

Limits and Validity Checks

An exclusive use by-law can grant rights over a wide range of common property - parking, courtyards, rooftops, storage, driveways, designated signage spaces and more - but it cannot override other laws or go beyond the scheme’s powers. In particular:

• The by-law can’t authorise conduct that breaches planning, building or fire safety laws, or council approvals.
• It can’t be inconsistent with the Strata Schemes Management Act or the scheme’s other by-laws.
• NCAT (the NSW Civil and Administrative Tribunal) can invalidate a by-law that is harsh, unconscionable or oppressive.

These checks matter. A poorly drafted or overreaching by-law invites challenge and uncertainty, which is the last thing your business needs.

Changing or Repealing an Exclusive Use By-Law

Exclusive use rights aren’t meant to be taken away lightly. To amend or repeal a common property rights by-law:

• The owners corporation must pass a special resolution; and
• Each benefited lot owner must consent in writing to the change or repeal.

In other words, the owners corporation can’t unilaterally “revoke” your exclusive use by-law once granted and registered - your consent is required for any change that affects your rights. This makes getting the initial drafting right even more important.

Practical Steps To Secure Exclusive Use Rights For Your Lot

If you’re purchasing, leasing or already operating in a strata building and need exclusive use, take a structured approach.

1) Define Your Operational Needs

• Map the exact area you need (photos and a marked plan help).
• List why you need it (e.g. outdoor dining to meet council consent; secure loading to meet supplier safety requirements).
• Anticipate responsibilities you can accept (cleaning, maintenance, utilities, insurance).

2) Engage Early With the Strata Committee/Manager

• Raise your proposal early - especially if you’re negotiating a new lease or purchase.
• Share plans, proposed conditions, and how the arrangement benefits the scheme (improved amenity, reduced clutter, better safety or security).
• Be prepared to adjust details like hours, waste handling or noise controls.

3) Align Your Lease or Licence

If you’re a tenant, ensure your commercial lease is consistent with the proposed by-law - for example, by making the lease conditional on the by-law being passed and registered, and by allocating maintenance and insurance obligations clearly. Getting advice from a commercial lease lawyer at this stage can protect you from misalignment and costly renegotiations later.

4) Draft a Clear, Compliant By-Law

• Use a robust draft that addresses area boundaries, conditions, maintenance/insurance, signage and safety.
• Confirm any council or building approvals also required (a by-law won’t replace these).
• Secure written consent from the benefiting owner(s) (your landlord if you’re a tenant).

5) Pass and Register Within Time

• Have the owners corporation put the motion to a general meeting for a special resolution.
• Once passed, make sure the by-law is signed and lodged for registration within the six‑month window so it takes legal effect.

6) Implement and Keep Records

• Meet your ongoing obligations (cleaning, maintenance, insurance, hours of use).
• Keep records (photos of boundaries, maintenance logs, insurance certificates). These are invaluable if there’s ever a dispute.

Legal Risks, Compliance and Dispute Tips

Most issues can be avoided with careful drafting and communication. That said, here are the main risks and how to manage them.

Registration and Process Errors

If the by-law wasn’t validly passed or never registered, it generally has no effect. You may have been using space for years without a legal right. If you discover gaps, address them promptly - re‑run the process, or seek orders if needed.

Council and Safety Compliance

Using common property for business purposes (especially outdoor dining, signage or external displays) may require development consent, approval for structures and compliance with fire and access rules. A by-law doesn’t override these requirements. If customer‑facing statements or signage are involved, be mindful of the Australian Consumer Law - for example, your marketing must not mislead or deceive, consistent with section 18 principles discussed here: section 18 of the ACL.

Maintenance, Damage and Insurance

By-laws often shift maintenance and repair obligations to the benefited lot owner. If you don’t meet those obligations, the owners corporation may seek to enforce the by-law and recover costs. Confirm what insurances you must hold (e.g. public liability) and keep them current.

Harsh/Unconscionable/ Oppressive By-Laws

NCAT can invalidate an exclusive use by-law if it’s harsh, unconscionable or oppressive. Excessive conditions, unfair cost shifting, or ill‑defined boundaries can invite challenge. Balance, clarity and proper consultation go a long way.

Changes in Ownership or Tenancy

Exclusive use rights attach to the benefited lot (not a particular tenant). If you sell or your landlord changes, the by-law still stands. To change or repeal it, a special resolution and the written consent of each benefited lot owner are required.

When a Licence (Not Exclusive Use) Makes Sense

Sometimes you don’t need exclusive rights - you just need permission to use space occasionally (e.g. short‑term pop‑up displays or shared breakout areas). In those cases, the scheme or building owner may use a property licence agreement rather than an exclusive use by-law. This can be quicker to implement but won’t give the same certainty as a registered by-law.

What Legal Documents Might You Need?

Every strata scheme is different, but these documents commonly appear in a well‑planned setup for businesses seeking exclusive use rights.

• Exclusive Use By-Law (Common Property Rights By-Law): The cornerstone document granting your lot exclusive use or special privileges, with clear conditions, maintenance and insurance obligations.
• Plan/Diagram: A marked plan showing the precise area. Ambiguity creates disputes - a simple plan avoids years of confusion.
• Lot Owner Consent: Written consent from the owner(s) of each benefited lot (essential for validity).
• Meeting Minutes and Special Resolution: Records from the general meeting where the by-law was passed (helpful to evidence validity).
• Registration Paperwork: Executed by-law and LRS forms to register within 6 months so the by-law takes effect.
• Commercial Lease or Agreement to Lease: Ensure the lease reflects the exclusive area, any conditions and who pays for maintenance and insurance. Getting support from a commercial lease lawyer helps align these moving parts.
• Operational Policies: For hospitality, health or retail, day‑to‑day documents (e.g. cleaning schedules, incident logs) show you’re complying with by‑law conditions and regulatory approvals.
• Privacy Policy: If you collect customer data in your exclusive area (e.g. bookings or Wi‑Fi sign‑ups), you’ll likely need a compliant Privacy Policy.
• Advertising and Consumer Law Compliance: Review your signage and customer claims against the ACL’s section 18 obligations to avoid misleading conduct.
• Brand Protection: If your signage features your brand, consider registering it as a trade mark using trade mark registration.
• Employment Agreements: If you have staff operating in the space, lock in roles, hours and policies with a tailored Employment Contract.

Not every business needs every document, but most will need a combination. The key is to make sure your by-law, lease and operational compliance work together so your business has the space - and certainty - it needs.

Key Takeaways

• Exclusive use by-laws in NSW give specific lots rights over common property, but they only take effect once validly passed by special resolution, consented to by each benefited owner and registered (generally within 6 months of passing).
• A clear by-law should precisely define the area, the benefited lot(s), conditions of use and who maintains and insures the space - ambiguity is a common source of disputes.
• By-laws can’t override other laws; you may still need council approvals, fire safety compliance and to adhere to the Australian Consumer Law for your signage and marketing.
• NCAT can invalidate a by-law that’s harsh, unconscionable or oppressive. Balanced terms and proper consultation help protect your position.
• Exclusive use by-laws can’t be changed or repealed without both a special resolution and the written consent of each benefited lot owner, so invest in getting the drafting right from day one.
• Align your by-law with your lease or licence, operational policies, data and brand protection (e.g. Privacy Policy, trade mark registration) to create a solid and enforceable framework.

If you would like a consultation on exclusive use by-laws for your business in NSW, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.