An Introduction to NSW Community Title: Updated for 2021
Updates of past papers, articles & presentations by me ...
Community title has existed in NSW since 1990. But the relatively small number of these developments (compared to strata buildings) combined with the uniqueness of each and their complexities mean that most strata stakeholders don’t really know much about them.
In one of my past [strata] lives I presented at seminars, conferences, and training events around the world on strata title topics. My presentations varied from legalistic dissertations to fun ‘hypothetical’ style panels. And, you may as well have access to them via this newsletter.
So, here’s a 2021 update of my paper for the Andreones Lawyers manager training sessions I used to run in the noughties.
It’s a semi-technical overview of community title fundamentals for anyone wanting to properly and better understand how they are structured and operate.
Francesco ...
Jan 21, 2021
AN INTRODUCTION TO NSW COMMUNITY TITLE [2021]
BY FRANCESCO ANDREONE
Introduction
This is a brief description of community title subdivisions in New South Wales.
1. Overview of community title
Community title is a means of subdividing land into conventional style land lots under separate ownership with shared ownership 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 dimension).
Community title also allows staged subdivision and multi-tiered structures which give almost infinite flexibility to developers at the initial and later stages.
Community title was introduced in 1990 under the following legislation so it is relatively new:
Community Land Management Act 1989 (CLMA), and
Creating a community title scheme involves the following main processes.
To establish a community title development, a community plan is required under section 5(1) CLDA.
A community plan must consist of at least two community development lots and only one community property lot. The community plan must include as separate sheets to the plan -
a location diagram,
a detail plan,
a community property plan, and
an initial schedule of unit entitlements.
(sections 5(2) and 5(3) CLDA)
When the community plan is registered a community association is formed automatically.
A Community Management Statement (CMS) must also be registered with the community plan (section 5(4) CLDA). The CMS must comply with Schedule 3 of the CLDA and becomes binding on registration (section 13 CLMA). The CMS is the main governance tool of a community association and sets out the rules of the association (in the form of by-laws), including various operational matters and the obligations and rights of the owners within the association.
There are statutory requirements for the content of a CMS.
A Community Development Contract (CDC) which complies with Schedule 2 of the CLDA can also be registered with the community plan (it is optional). The CDC must comply with the CLDA and becomes binding on registration and is another method of governing future development of the land.
2. The kinds of community title subdivisions
Single or multi-tier
The simplest form of development involves a single layer community scheme. That could be either a community scheme, precinct scheme, or neighbourhood scheme. It is rare to use precinct schemes on their own and since a neighbourhood scheme cannot be further subdivided this is not appropriate unless the development will only occur in one stage. Therefore, a typical single-stage community title scheme will 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.
Figure 1 - Single layer community title structure in 2 stages
The next simplest form of development is using a 2-tier structure with single-use components (whether done in stages or not). This involves an initial community plan subdivision followed by subsidiary neighbourhoods or strata plans for each stage or part of the development.
Figure 2 – Simple two-layer community title structure in up to 3 stages
The most complex form of development is 3-tier and can have internal layers within the tiers. Like the 2-tier structure, this involves an initial community plan subdivision followed by subsidiary precincts and then neighbourhoods or strata plans for each stage or part of the development.
Figure 3 – Simple three layer community title structure in up 3 stages
A 2-tier or 3-tier management structure can be used in staged development. Initially, a community plan is registered, creating a community association with “umbrella” control of community matters. This will include items such as architectural guidelines, landscaping, security, and road networks. The second tier of management is created on the registration of a neighbourhood plan or strata plan.
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 or 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 the desired relationship between the subsidiary schemes.
Strata corporations
Alternatively, a strata plan can be used to subdivide community or precinct land into a strata scheme. An owners corporation, which is a member of the community association, is created on registration of the plan and is vested with common property within the scheme.
3. Community association property
Community association property (community property) comprises any area, access way, 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 will be very difficult to change community property after registration of the community plan. Section 14 of the CLDA provides that a unanimous resolution of the community association is required to approve the conversion of a community development lot to community property. A certificate of approval from the local consent authority will also be required.
While it may be difficult to convert a development lot into community association property, it is not necessarily an insurmountable obstacle. As will be discussed in more detail later in this paper, it is possible to set up a regime under the contracts for sale of land to be into by prospective purchasers, whereby disclosure could be made by the developer in relation to the said issues and purchasers could be required to give powers of attorney to the developer or its nominee, which would effectively allow the developer to vote in relation to these issues at any relevant meeting of the community association.
This community property is the responsibility of the community association and unless specifically restricted is available for use by all lot owners in the community association.
4. The community development contract (CDC)
Pursuant to Section 15 of the CLMA, a CDC is a binding contract between a developer and the community association(s).
Under the CDC the developer and the community association covenant with each other, subsidiary bodies, and lot owners (current and future) jointly and severally to do the things specified in the CDC.
A CDC is an optional document for community schemes but mandatory for neighbourhood schemes.
Requirements of a CDC
Section 26 of the CLDA provides that a CDC must comply with Schedule 2 of the CLDA. Schedule 2 provides that a CDC 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 constructions 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 CDC must also contain a warning that the scheme may be varied or not completed and that purchasers should gauge their rights and obligations by reference to the CMS.
Amendment of the CDC
Pursuant to section 16 of the CLMA a CDC may be amended on the following bases:
a proposed amendment that involves a change in the basic architectural or landscaping design of the development or in its essence or theme, must be approved by the consent authority and by unanimous resolution of each association and strata corporation that is a party to the CDC,
a proposed amendment to give effect to a change in the law or change in requirements of a consent authority must be approved by the consent authority and notified to each association that is a party to the CDC,
a proposed amendment that involves any other change in the development consent must be approved by the consent authority and by special resolution of each association and strata corporation that is a party to the CDC, and
a proposed amendment that does not involve a change in the development consent must be approved by the consent authority and passed by ordinary resolution of each association and strata corporation that is a party to the CDC.
Logically, the majority of intended amendments to the CDC would follow from the consent authority’s agreement to be responsible for one or more of the areas of land nominated as potential amenities in the CDC. Therefore, you can assume that the developer is able to automatically obtain the requisite approval from the consent authority to satisfy those criteria for amendment.
As the 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 to enable the amendment.
So, the very disclosures that improve stakeholder confidence in the development conspire to make the CDC an inflexible instrument.
5. Architectural and landscaping themes
As an essential element of community title development is the ability to create and impose controls over buildings and natural 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 that 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 CMS.
Do you want a separate planning committee to be established to control architectural and landscaping matters (rather than the community association) and what level of developer control do you want over that committee?
6. The Community Management Statement (CMS)
The CMS sets out the rules of the community scheme including how each association must be run and the obligations and rights of members within the association.
On registration of the CMS it becomes binding on:
the association created by the registration of the plan that accompanies it;
each subsidiary body to the association;
each proprietor, lessee, and occupier of a lot, and
the mortgagee or covenant chargee in possession of a lot.
The CLDA sets out the form that a CMS could take for a community scheme under Schedule 3. The matters that must be included in a CMS of a community scheme are prescribed and include (see schedule 3 part 2 CLDA):
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 and meetings of the executive committee;
voting on motions otherwise than at meetings of the executive committee; and
keeping of records of the executive committee.
The CMS is divided into the following four major parts.
Part 1-theme of development
The by-laws in this part relate to the control or preservation of the essence or theme of the development. By-laws in the section can include:
(a) any provision limiting occupancy under the scheme to persons of a particular description; and
(b) the architectural, building, or landscaping styles to be permitted; and
(c) the kind of materials that may be used in buildings and other structures; and
(d) any provision requiring that specified association property be used only for particular purposes; and
(e) any other kind of restriction.
Part 2 – restricted community property
Part 2 of the CMS sets out the details of restricted community property. It must include:
(a) a description of the property; and
(b) details of the lot owners, associations, strata corporations, or other persons having the benefit of its use; and
(c) the terms and conditions of its use; and
(d) particulars relating to access to the property and the provision and keeping of any key necessary; and
(e) particulars of the hours during which the property may be used; and
(f) provisions relating to the maintenance of the property; and
(g) matters relating to the determination, imposition, and collection of levies to be imposed.
Part 3 – mandatory matters
Part 3 of the CMS must contain by-laws regarding the following:
(a) Open access ways or private access ways – This by-law specifies the location, control, management use, and maintenance of any open access way or private access way that are part of the community property.
(b) Permitted uses of and special facilities on the community property – This by-law sets 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.
(c) Garbage – This by-law details where garbage is to be stored and its method of collection.
(d) Services – This by-law specifies the services which will be provided and maintained by the community association.
(e) Insurance - This by-law details the type of insurance taken out by the association in respect of the community property.
(f) Executive Committee – This by-law governs the operation of the executive committee.
(g) Fencing – This by-law governs fencing in the scheme.
Part 4 – Optional Matters
Schedule 3 sets out optional matters to be included in the CMS such as architectural and landscaping guidelines. These matters are not exhaustive and do not limit the matters that can be included in the management statement.
The measures in a CMS can be tailored to reflect the recognised or anticipated special characteristics of any given scheme (or part of a scheme).