OC Lease vs Licence vs Exclusive Use: How Apartment Buyers Decode Common Property Rights

When you buy an apartment, unit, or townhouse in Victoria with a courtyard, balcony, garden, car park or storage cage, the listing rarely tells you how you actually hold that outdoor space. The plan of subdivision and the Owners Corporation certificate (both inside the Section 32) are where the answer lives — and the answer is one of four very different legal arrangements.

Three of those arrangements are forms of common property allocated to a single lot owner: licence, lease, and exclusive use designation. The differences are not academic. They determine whether the OC can take the space back, whether the right transfers automatically when you sell, whether you can register a mortgage over it, and how much premium the courtyard adds to the property’s value.

The four ways you can “have” an apartment courtyard

Before the comparison, here is the spectrum from strongest to weakest right:

1. On-title (part of your lot)— The courtyard is inside your lot boundary on the registered plan of subdivision. You own it the same way you own the inside of your apartment. Covered in our common property vs lot guide.
2. Common property with exclusive use designation— Marked on the plan of subdivision itself as “EU” or “exclusive use of Lot X.” The right runs with the lot permanently, registered with the plan under the Subdivision Act 1988 (Vic).
3. Common property leased to your lot— A formal lease granted by the OC under section 52 of the Owners Corporations Act 2006 (Vic). Can be registered on title (gives strongest tenure) or unregistered. Has a fixed term and rent.
4. Common property licensed to your lot— An informal permission under section 11 of the Owners Corporations Act 2006. Not registered on title. Generally weaker than a lease and easier for the OC to vary.

We covered the basic distinction between licence and ownership in our courtyard licence vs ownership guide. This article goes deeper: licence vs lease vs exclusive use vs on-title, head-to-head.

The decoder table: 4 grant types compared

This is the comparison every apartment buyer should run before they bid:

Licences in detail (OC Act 2006 s11)

A licence is the lightest form. The Owners Corporation passes a special resolution at a general meeting authorising the use of a defined common property area by a particular lot, on stated terms. The licence itself is a contract between the OC and the lot owner. It is not registered on title — meaning a future buyer searching the title alone will not see it.

Common licence terms include:

• Duration of 25, 50 or 99 years from the OC’s authorising resolution
• Nominal fee — “peppercorn” rent of $1 per year is standard
• Maintenance shifted to the licensee (you maintain the courtyard at your cost)
• Restrictions on permanent structures, drainage modifications, enclosures
• Termination on breach, or on OC needing the area for building works

The buyer-side risk: the OC can pass a new special resolution that varies the licence, and unless the original terms expressly bind future committees, the protection is weaker than a lease. Always read the original authorising resolution alongside the licence document.

Leases in detail (OC Act 2006 s52)

Section 52 of the Owners Corporations Act 2006 lets the OC lease common property to a lot owner. A lease is fundamentally stronger than a licence because:

• It is a registrable interest in land. Registration on the lot owner’s title under the Transfer of Land Act 1958 (Vic) gives the interest priority and survives a change of OC committee.
• Once granted, the OC cannot terminate it except for breach or at the end of the term. New OC resolutions cannot override an existing registered lease.
• A bank will (usually) accept a registered lease as part of the secured property when valuing the unit for mortgage purposes — meaning the courtyard contributes to your borrowing capacity.

Leases require a special resolution of the OC (75% in number and value) and a written lease document. Many newer Melbourne developments grant 99-year leases over courtyards as the default — it is the lawyer’s preferred pattern when the developer cannot or does not want to subdivide the area into a separate accessory lot.

Registered vs unregistered leases

Section 32 documents will show whether a lease is registered. A registered lease appears on the title search as a notation referring to a registered instrument (e.g. “Lease AC123456H to Lot 5”). An unregistered lease is contractual only — it binds the OC and lot owner but does not bind future OCs or third parties dealing with the OC. If you are paying a premium for a courtyard, you want a registered lease.

Exclusive use designations on the plan of subdivision

Some plans of subdivision designate a specific area of common property as “exclusive use of Lot X” (often abbreviated EU). This is recorded on the registered plan itself, not in a separate licence or lease. The right transfers automatically with the lot every time it changes hands.

In practice, exclusive use designations sit closer to on-title ownership than to a licence:

• The right is permanent — it cannot expire
• It transfers automatically on sale, no assignment needed
• To remove it, the OC must amend the plan of subdivision (unanimous resolution + Land Use Victoria registration)
• Banks treat it as part of the lot for mortgage purposes

The downside compared to on-title: the area is still legally common property, so the OC remains responsible for maintenance unless the plan or OC rules shift that obligation to the lot owner. Read the plan notation and the OC rules together to find the maintenance allocation.

How to identify which one you’re looking at — Section 32 detection guide

The Section 32 contains the four documents you need to cross-reference:

1. Title search— Look for registered instruments referencing leases (e.g. “Lease AC123456H”). If a lease appears here, the courtyard is leased.
2. Plan of subdivision— Find the lot in question. If the courtyard area is inside the lot’s boundary, it is on-title. If it is marked “EU” with your lot number, it is exclusive use common property. If it is just blank common property (no marking), it is licensed or leased separately.
3. Owners Corporation certificate (s151 of OC Act 2006) — Required to disclose any leases or licences over common property benefiting the lot. Look for the wording “Lease”, “Licence”, “Authorisation” or “Permission” in this document.
4. OC rules— Sometimes contain a record of the original authorising resolution. The rule may say “Lot 5 has the exclusive use of Courtyard B subject to…” — the wording “exclusive use” in OC rules without a corresponding marking on the plan is the weakest of all four arrangements (a contractual right, no registered interest).

Resale and pricing implications

The form of grant directly affects how much premium the outdoor space adds to the unit’s value. Indicative ranges in inner Melbourne:

• On-title courtyard: $20,000–$80,000+ premium over equivalent no-courtyard unit
• Exclusive use designation: 85–95% of on-title premium
• Registered 99-year lease: 60–85% of on-title premium (declining as term approaches expiry)
• Unregistered licence: 30–60% of on-title premium

Banks may discount valuations for non-on-title arrangements. If you are relying on the courtyard contributing to LVR (loan-to-value ratio), a registered lease or exclusive use designation gives you a much stronger valuation outcome than a licence.

Red flags by arrangement type

• Licence: short term (under 25 years), broad OC revocation rights, no obligation on the OC to renew, fee subject to unilateral OC review.
• Lease: unregistered status, term expiring within 30 years, rent review mechanism that allows the OC to set a market rent (could become unaffordable).
• Exclusive use:ambiguous plan markings (“EU?” or hand-amended notations), no corresponding mention in OC rules, conflicting OC certificate disclosure.
• On-title: drainage easement crossing the courtyard, retaining wall on the boundary that is structurally common property, maintenance obligations under OC rules that override your ownership.

Cross-reference the title search, plan of subdivision, OC certificate and OC rules together. If any of the four documents is missing or contradicts the others, that contradiction is itself a red flag worth raising with your conveyancer before you bid.

Ready to check your contract? Upload your Section 32 or Contract of Sale at precontractreview.com for a pre-contract check — typically in just a few minutes.