Community Title v Strata Title in NSW

21 January 20

Community Title –v– Strata Title in NSW

Unlike in Queensland where the Body Corporate and Community Management Act 1997 covers every form of strata/community subdivision and management, NSW has long separated its community title legislation from it strata title legislation.

According to government data, there were 937 community schemes, 63 precinct schemes and 1,754 neighbourhood schemes in NSW as at June 2019.


Differences between Community and Strata Titled Land


The main difference between community and strata titled land is the way in which the boundaries of the scheme land are defined.

Strata titles apply to structures like apartment blocks, townhouses and duplexes where the units are defined by structural aspects (such as height and depth of walls and ceilings).

A community title can incorporate several buildings and a great deal of land and therefore lot entitlement and boundaries relate to surveyed land measurements. Community schemes range from rural settings where they can be used for sustainable eco developments, with shared dams and communal farmland, to large residential communities with private roads, high security and extensive recreational facilities such as tennis courts, parklands, marinas and golf courses.
 
  • Other benefits of shared ownership of common areas in community titles complexes can include:-
  • Standardised building and landscaping which may add value to the properties;
  • Country club membership, including gyms, tennis courts and swimming pools;
  • Security patrols;
  • Walking trails and bike paths, and
  • Community activities and events

Community Schemes in NSW are governed by two Acts:

  1. The Community Land Development Act 1989, which facilitates the subdivision and development of land with shared property, setting the requirements for registration of plans, changes to the subdivision and dealing with lots; and
  2. The Community Land Management Act 1989, which provides for the management of community schemes and their subsidiary schemes, including management of funds and accounts, association and committee meetings, maintenance of common property, insurance, the management statement (including by-laws) and dispute resolution.

Types of Community Schemes

There are many similarities between strata and community schemes. However, community schemes have an added level of flexibility, with a tiered management structure based on three main types of schemes enabled by the legislation:
 
  1. “Community” scheme
  2. "Precinct” scheme;
  3. “Neighbourhood” scheme.
Strata schemes are often developed as subsidiary schemes within community lands, where the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015 apply alongside the community schemes laws.


New Community Legislation on the Way


The NSW Government has recently released drafts of the changes it proposes to make to the existing community scheme legislation. The changes proposed, if passed, will completely rewrite the existing community schemes legislation and will align the legislation with the major reforms that were introduced to strata schemes in 2015.


Consistency in strata and community scheme law reforms


In 2015, the NSW Government delivered major reforms to modernise and streamline the strata schemes laws with the commencement of the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015.

With the changes to the strata laws now established and in use, the NSW government has decided that it is now time to align the community schemes legislation with the strata schemes legislation. The government believes that consistency between the two forms of legislation will reduce unnecessary duplication and make it easier for owners and industry professionals to understand their rights and obligations.


Some key new reforms


Some of the key changes proposed include:-
 
  1. Redefining the “initial period” for community and precinct schemes to ensure that it expires at an appropriate time, rather than potentially continuing indefinitely;
  2. New restrictions on owners who are appointed as managing agents to better deal with potential conflicts of interest;
  3. Preventing developers from locking in neighbourhood associations into long-term contracts for the supply of utilities.
 
Agreements for the supply of utilities to neighbourhood schemes will automatically expire at either the first annual general meeting (AGM) of the association, if the agreement was executed before the meeting, or in any other case, three years after the date on which it commenced. It will be mandatory to include a motion for such utilities on the agenda of the AGM.

The intention of this reform is to prevent developers of neighbourhood schemes “locking in” owners to long term supply contracts for neighbourhood association property. It is the government’s intention that this reform will help to ensure that neighbourhood associations are able to fully consider utility contracts and ensure the contract is in the association’s interests before adopting it. Surprisingly this reform is not intended to extend to electrical embedded network agreements that apply to residents.


Building Management Agreements


In 2003 strata scheme legislation introduced a 10 year term cap on all Caretaking/Building Management Agreements. Prior to that date there was no term cap for strata schemes or community schemes. Since that reform to strata schemes, I have been waiting on the NSW government to introduce a similar term cap on Caretaking/Building Management Agreements entered into by community schemes (especially given that when a Community Management Statement allows it, a community scheme can contract to provide Caretaking/Building Management services to subsidiary strata schemes).

To date, this “loophole” has not been closed but let’s wait and see what the new legislation brings! 
 
Article Written by Col Myers of Small Myers Hughes Lawyers
Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.  

Additional Documents

Click here to download: 2020_02_Feb___Community_Title__v__Strata_Title_in_NSW.pdf

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