Community Schemes Reforms Research

Did you know that there are approximately 350 community schemes and 900 neighbourhood schemes in New South Wales?

So what are these schemes and how do they differ from strata? Strata schemes generally apply to properties such as apartments, units, townhouses, commercial offices, factory units, retirement villages and even caravan parks whilst community schemes apply to properties that have at least two lots and that share a common area, such as a driveway, private road, high security and extensive recreational facilities such as golf courses or community club.

Although distinctly different to a strata scheme there are a number of parallels that exist between strata schemes and community schemes being the sharing of common property and the rights and liabilities associated with same.

There are two main legislations regulating community schemes. These include:

1. the Community Land Development Act 1989 which regulates the development and subdivision of the shared property; and
   
   
2. the Community Land Management Act 1989, which is responsible for the community schemes management, including the regulation surrounding by-laws and the subsidiary schemes (for community schemes, the subsidiary schemes include a precinct scheme, neighbourhood scheme and strata schemes).

In 2019, the NSW Government introduced significant reforms, which were made in order to modernise the existing community scheme laws, structuralise governance arrangements and provide more consumer satisfaction.

Some of these reforms include:

1. the change to the “initial period” for community and precinct schemes. Until this reform came in place, a community and precinct scheme “initial period” expired when a subsidiary scheme had ended its initial period by subdividing at least one third of the total entitlements. This was a complex process as NCAT would have to make an order for the initial period to end for community or precinct schemes when they were not subdivided by a subsidiary scheme. This meant that some community schemes initial period had the potential to operate indefinitely. Now the law provides that the initial period will expire once an occupation certificate has been issued under the Environmental Planning and Assessment Act 1979 which is a requirement in order for a developer to receive development consent;

1. Alike Strata Schemes, in order to minimise potential conflicts of interests, the reform now provides that any owner who is trying to attain a managing agent position, will be unable to vote or cast a proxy vote to attain this position;

1. in order to avoid long-term utility contracts (besides electrical embedded network arrangements applicable to the registered proprietors) from being entered into by developers in a neighbourhood scheme arrangement, the reforms now provide that these contracts will now expire on the earlier of:  first annual general meeting of the association has been conducted (where a utility contract has already been entered into) or three years from the commencement date of the agreement; and

1. managing agents cannot obtain more than three quotations relating to insurance of the buildings or schemes.

Other key reforms provide the following

• NCAT now have jurisdiction to enforce a debt order as previously associations had to utilise court in order to enforce a debt order.
• Consent authority definition has been updated and the consent approval process now needs to meet the Environmental Planning and Assessment Act 1979.
• Developer definition has been added to include the “original owner” in order to ensure that the original owner carries out their obligations under a development contract.
• A Supreme Court Order is no longer required where the land is resumed below the surface of land within subsidiary schemes
•  Social media, video and teleconferencing methods may now be used when attending meetings.
• Voting and secret ballots may be conducted through Postal or electronic forms
• There are further limitations on the use of priority votes and number of proxies able to be held by any person.
• A non-owners who merely has a financial interest in the scheme (for example, managing agents and letting agents) is unable to become a member within the strata, neighbourhood, precinct or community committees.
• Developers are now restricted to vote on building defects matters.
• There must be realistic levy limit set between the initial period and for the first year after the initial period ends
• Better ways to control parking with schemes
• By-Laws penalties have been increased and have stronger enforcement powers.
• Penalties may be paid directly to scheme associates

If you require any further clarification regarding the above, please do not hesitate to contact our office.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.