An Introduction to NSW Community Title: 2023 Update
or, another strata title hybrid for larger or flatter developments ...
Community title has existed in NSW since 1990 but there are a relatively small number of these developments (compared to strata title buildings) and their peculiarities mean that most strata stakeholders don’t know much about them. You’ll see them in larger estate-style developments or what used to be called flat strata subdivisions for villas and some townhouses.
[14:00 mins estimated reading time & 2777 words]
Introduction
Since 1990, for larger, more complex and staged estate style developments, there’s been a new and innovative way of structuring, titling and managing those multi-owner complexes in New South Wales under community title laws.
Plus, since the introduction of community title laws, villas [and sometimes townhouses] can no longer be subdivided as strata title schemes and must be created under these new subdivisional systems laws.
As of today, there are 625 community and precinct schemes and 2,024 neighbourhood schemes in New South Wales.
So, they’re a slowly emerging and fascinating part of strata titles.
Here’s a 7 part overview of New South Wales community title.
1. AN OVERVIEW OF COMMUNITY TITLE
Community title in New South Wales is a means of subdividing land into conventional style land lots under separate individual ownership with shared ownership of community property and facilities administered by a separate legal entity that represents the owners. It is a hybrid between torrens title and strata title (without the vertical subdivisional dimension).
Community title also allows staged subdivisions over long periods and multi-tiered structures which give almost infinite flexibility to developers at the initial and later stages.
Community title was introduced in 1990 and reviewed and updated in 2021 and is currently found in the following legislation.
2. CREATING A COMMUNITY TITLE SCHEME
To establish a community title development, a community plan and Community Management Statement are required. A Community Development Contract is optional.
A community plan must have at least two community development lots but only one community property lot.
The community plan must also include as separate sheets to the plan:
a location diagram,
a detail plan,
a community property plan, and
an initial schedule of unit entitlements.
The community plan can also be layered so that there are cascading levels of subdivision; a subdivision inside another subdivision [like babushka dolls] which I cover in more detail below.
When the community plan is registered, a community association [which is a separate legal entity but not a corporation] is formed automatically.
A Community Management Statement is a set of rules and procedures [much like strata by-laws], that must comply with Schedule 3 of the Community Land Development Act 2021, and become binding on the community association, lot owners and residents on registration.
The Community Management Statement is the main governance tool of a community association, and sets out how the community association and its members interact, including various operational matters and the obligations and rights of the owners within the community title complex.
There are statutory requirements for the content of a Community Management Statement which I also cover in more detail below.
A Community Development Contract can also be registered with the community plan (but, it is optional). A Community Development Contract must comply with Schedule 2 of the Community Land Development Act 2021 and becomes binding on the community association, lot owners and residents on registration on registration. It is the method of governing future development of the community title complex as it focuses on what can and can’t be done in the future, how that should occur and the rights and obligations of developers, as well as the community association, lot owners and residents about development matters.
3. THE KINDS OF COMMUNITY TITLE SUBDIVISIONS
Single or multi-tier
The simplest form of development involves a single layer community title scheme.
That could be either a community association, precinct association, or neighbourhood association.
It is rare to use precinct subdivisions on their own and becuase a neighbourhood subdivision cannot be further subdivided, they are also not unsually appropriate unless the development will only occur in one stage.
Therefore, a typical single-stage community title scheme will typically be a community association that involves an initial community plan subdivision followed by sequential community plans of re-subdivision where one or more community development lots are further divided into community lots and further community association property.
A single layer community title structure in 2 stages
The next simplest form of community title development is using a 2-tier structure with single-use subdivisional component parts (whether done in stages or not). This involves an initial community plan subdivision followed by subsidiary neighbourhoods or strata plans for each final stage or part of the community title complex development.
A simple two-layer community title structure in up to 3 stages
The most complex form of community title development is 3-tier and can have internal layers within each subdivision tier. Like the 2-tier structure, this involves an initial community plan subdivision followed by subsidiary precinct subdivisions [as the seon layer] and then neighbourhood or strata plan subdivisions for each stage or part of the community title complex development.
A simple three-layer community title structure in up to 3 stages
A 2-tier or 3-tier subdivision plan and management structure can also be used to facilitate staged development.
Initially, a community plan is registered, creating a community association with ‘umbrella’ control of top-level community matters. This will typically include things like architectural guidelines, landscaping controls, road networks, utilities and security. It can also include fully shared community buildings and facilities. The second and third tiers of subdivision and management are then created on the registration of later precinct, neighbourhood or strata plans.
Neighbourhood associations
A neighbourhood plan subdivides a community development into neighbourhood property and neighbourhood lots, which can be separately used or sold.
A neighbourhood scheme is administered by a neighbourhood association, which is automatically a member of the community association.
An alternate and less problematic option, if appropriate, would be to subdivide the development lot into a subsidiary neighbourhood scheme or a strata scheme.
While the association property created will be neighbourhood association property or common property within a strata scheme, a neighbourhood management statement and by-laws of the strata scheme could address more complex and nuanced features of the desired relationship between the subsidiary schemes.
Strata corporations
Alternatively, a strata plan can be used to subdivide community or precinct land into a normal strata title scheme. A strata corporation, which is also a member of the community association, common property and lots are created on registration of the strata plan and the strata corporation is vested with common property within the scheme.
4. COMMUNITY ASSOCIATION PROPERTY
Community association property (community property) comprises any area, accessway, recreation facility, service, or utility on the community parcel that does not form part of any community development lot or other lot or land that has become subject to a subsidiary scheme.
All community property should be defined in the original community plan because it is very difficult to change community property after registration of the community plan. Section 14 of the Community Land Development Act 2021 requires a unanimous resolution of the community association to approve the conversion of a community development lot to community property which is practically difficult after later subsidiary associations or strata corporations are created.
A certificate of approval from the local consent authority is also required.
While it may be difficult to convert a community development lot into community association property, it is not necessarily an insurmountable obstacle. As I cover in more detail later in this article, it is possible to set up a regime under the contracts for sale of land with buyers, whereby disclosure of and agreement to the unanimous resolution could be agreed and secured by powers of attorney to the developer or its nominee. Effectively allowing the developer to vote on those these things at community association meetings.
This community property is the responsibility of the community association and unless specifically restricted is available for use by all subsidiary lot owners in the community association.
5. COMMUNITY DEVELOPMENT CONTRACT
A Community Development Contract is a biding registered agreement between a developer and the community associations, precinct associations, neighbourhood associations, strata corporations and lot owners in the community title complex under section 15 of the Community Land Development Act 2021.
Under the Community Development Contract, the developer and everyone else [including future owners] covenant with each other jointly and severally to do the things specified in the Community Development Contract.
A Community Development Contract is optional for community schemes but mandatory for neighbourhood schemes.
Requirements of a Community Development Contract
Section 26 of the Community Land Development Act 2021 provides that a Community Development Contract must comply with Schedule 2 of the Community Land Development Act 2021. Schedule 2 also provides that a Community Development Contract that requires the provision of amenities under the scheme include the following:
a description of the land to be developed under the scheme,
a description of the amenities proposed to be provided,
a description of the basic architectural design and landscaping under the scheme and any theme on which the scheme is based,
a simple pictorial representation of the anticipated appearance of the completed development,
any other matter prescribed by the regulations,
details of access and construction zones, working hours, and any related rights over association property, and
an undertaking by the developer not to cause unreasonable inconvenience to lot owners and to repair association property damaged by development activities.
The Community Development Contract must also contain a warning that the community scheme may be varied or not completed and that purchasers should gauge their rights and obligations by reference to the Community Management Statement.
Amendment of the Community Development Contract
A Community Development Contract, under section 16 of the Community Land Development Act 2021, can be amended as follows:
for a proposed amendment that involves a change in the basic architectural or landscaping design of the community development or its essence or theme, but that must be approved by the consent authority and by unanimous resolution of each subsidiary association and strata corporation that is a party to the Community Development Contract,
for a proposed amendment to give effect to a change in the law or change in requirements of a consent authority, but that must be approved by the consent authority and notified to each subsidiary association and strata corporation that is a party to the Community Development Contract,
for a proposed amendment that involves any other change in the development consent, but that must be approved by the consent authority and by special resolution of each subsidiary association and strata corporation that is a party to the Community Development Contract, and
for a proposed amendment that does not involve a change in the development consent, but that must be approved by the consent authority and passed by ordinary resolution of each subsidiary association and strata corporation that is a party to the Community Development Contract,
Logically, the majority of intended amendments to a Community Development Contract would follow from a consent authority’s agreement to be responsible for one or more of the areas of land nominated as potential amenities in the Community Development Contract. Therefore, it is safe to assume that the developer is able to automatically obtain the requisite approval from the consent authority to satisfy amendment criteria.
However, as the community title development progresses, the developer will have diminishing control over the community association and each subsidiary association. As a result, the developer may be unable to secure the required consent from the community associations and the subsidiary associations and strata corporations for the amendment.
So, perversely, the very disclosures that improve stakeholder confidence in the community title development conspire to make the Community Development Contract an inflexible instrument.
6. ARCHITECTURAL AND LANDSCAPING THEMES
An essential element of community title development is the ability to create and impose controls over buildings and nature that can bind any and/or all of the lots in the community by using architectural and landscaping themes.
This is an unusual but powerful control and although the detail of these matters is beyond the scope of this paper, the key issues include:
How tight and what kind of controls do you want to impose on architectural and landscaping matters?
What are the details of those controls and/or who will provide them?
Detailed guidelines need to form part of the Community Management Statement.
Should a separate planning committee be established to control architectural and landscaping matters (rather than the community association) and what level of developer control should there be over that planning committee?
7. COMMUNITY MANAGEMENT STATEMENT
The Community Management Statement sets out the rules of the community scheme including how each subsidiary association and strata corporation must be run plus the obligations and rights of all lot owner members within the association.
The Community Management Statement is binding on:
the association created by the registration of the plan that accompanies it,
each subsidiary body to the association,
each owner, lessee, and occupier of a lot, and
the mortgagee or covenant chargee in possession of a lot.
Schedule 3 of the Community Land Development Act 2021 sets out the form that a Community Management Statement should take for a community title scheme.
The matters that must be included in a Community Management Statement of a community title scheme are prescribed (see Schedule 3 Part 2 Community Land Development Act 2021) and cover the following matters:
the control, management, use, and maintenance of access ways and community property,
the storage and collection of garbage,
the maintenance of services;
the insurance of the community property,
the executive committee,
executive committee meetings,
voting on motions outside meetings of the executive committee, and
keeping executive committee records.
The Community Management Statement is divided into the following four major parts.
Part 1: Theme of development
The by-laws in this part of the Community Management Statement relate to the control or preservation of the essence or theme of the community title development.
By-laws in the section can cover:
any provision limiting occupancy under the scheme to persons of a particular description; and
the architectural, building, or landscaping styles to be permitted; and
the kind of materials that may be used in buildings and other structures; and
any provision requiring that specified association property be used only for particular purposes; and
any other kind of restriction.
Part 2: Restricted community property
Part 2 of the Community Management Statement covers the details of restricted community property.
By-laws in the section must include:
a description of the affected property,
details of the lot owners, associations, strata corporations, or other persons having the benefit of its use,
the terms and conditions of its use,
matters relating to access and keys,
details of the hours during which the property may be used,
provisions relating to the maintenance, and
the determination, imposition, and collection of levies for the affected property.
Part 3: Mandatory matters
Part 3 of the Community Management Statement must contain by-laws regarding the following things.
Open access ways or private access ways: These by-laws specify the location, control, management use, and maintenance of any open access way or private access way that is part of the community property.
Permitted uses of and special facilities on the community property: These by-laws set out the rules relating to the control, use, and maintenance of the community property, including provisions relating to the permitted hours of use, persons entitled to use, and any other restrictions on the use of any special facilities provided on the community property.
Garbage: These by-laws detail where garbage is to be stored and its method of collection.
Services: These by-laws specify the services which will be provided and maintained by the community association.
Insurance: These by-laws detail the type of insurance taken out by the association in respect of the community property.
Executive Committee: These by-laws govern the operation of the executive committee.
Fencing: These by-laws govern fencing in the community title scheme.
Part 4: Optional Matters
Part 4 of the Community Management Statement contains all extra and optional matters.
Schedule 3 of the Community Land Development Act 2021 sets out optional matters that can be included in the Community Management Statement such as architectural and landscaping guidelines. The list of optional matters in Schedule 3 are not exhaustive and do not limit what can be included in the Community Management Statement provided they relate to the management and operation of the community title scheme.
The by-laws for optional matters in a Community Management Statement can be tailored to reflect the recognised or anticipated special characteristics of any given community title scheme (or part of that scheme).
CONCLUSIONS
If you haven’t encountered a community title scheme or one of its subsidiaries in New South Wales that’s not surprising since they only represent between 1% and 2% of medium and high-density real estate in the state. So, they’re pretty rare for now.
But, they’re also unique, complex and interesting kinds of medium and high-density development. So, they are fascinating.
Nevertheless, I’m sure they’ll become increasingly common and familiar to strata citizens in the future.
November 21, 2023
Francesco ...