Community Land Management Legislation Changes
Released at the backend of 2021, the Community Land Management Act 2021 has commenced, overriding the previous Community Land Management Act 1989.
With no major amendments to the Act for the last 30 plus years, the new Act is a significant step, to align the Strata Schemes Management Act and Community Management Act to operate in a similar fashion.
The Community Land Management Act 2021 changes the ways community land schemes operate. It brings the law into line with strata scheme law. This page outlines the key changes.
On this page:
Meetings and voting
Committees and office bearers
Tenants in neighbourhood schemes
Managing agents
Finances
Management statements and by-laws
Managing, repairing and maintaining association property
Facilities managers
Initial period definition
Resolving disputes
Meetings and voting
Community land schemes can now meet and vote electronically
The Community Land Management Act 2021 (2021 Act) modernises the community land laws to allow associations to authorise by resolution meeting and voting electronically (teleconference, video-conference, email or other electronic means).
In response to the COVID-19 pandemic, the NSW Government had temporary powers to grant associations the ability to meet and vote electronically. These measures were only a temporary measure until the new Act was passed.
With the new law, associations can now pass a resolution to authorise the use of electronic voting and keep in place the practices it was able to trial during the pandemic.
New restrictions on proxy farming or harvesting
The 2021 Act imposes limits on the number of proxies people can hold. The total number of proxies that can be held depends on the number of lots within the scheme:
20 lots or less – only one proxy can be held
more than 20 lots – a number that is not more than 5% of the total number of lots (for example, if a scheme has 100 lots the maximum that can be held is 5 proxies).
These limits do not prevent a person who owns more than one lot from appointing a single person to hold all their proxies.
Committees and office bearers
Executive committee name change
The 2021 Act changed the name of the ‘executive committee’ to ‘association committee’.
Committees can also be called by the kind of scheme that is, for example, ‘community committee’, ‘precinct committee’, or ‘neighbourhood committee’.
Changing the name away from ‘executive’ reflects that the purpose of the committee is to administer the scheme and is not to be considered some form of executive body that rules accordingly.
Clearly defined office holder roles
The 2021 Act clearly provides for the functions of each of the officeholders of the association. This helps to outline what each role does and who is responsible for what.
The chairperson presides at meetings of the association and the association committee.
They also make determinations as to quorum and other procedural matters at the association and committee meetings.
The secretary is responsible for preparing and distributing minutes, maintaining the association roll, enabling the inspection of association documents, convening meetings of the committee and association, and answering communications to the association.
The treasurer is responsible for managing the accounts of the association, notifying members of contributions levied, preparing association information certificates, keeping accounting records, and preparing the financial statement.
Tenants in neighbourhood schemes
Tenant representatives can be elected in neighbourhood schemes
In neighbourhood associations where at least half of the lots are tenanted, the tenants can nominate a tenant representative on the committee.
The tenant representative is entitled to:
receive a copy of the agenda
attend and speak at committee meetings but can still be asked to leave the meeting if financial issues are to be discussed.
The tenant representative does not have a vote and is not counted for determining a meeting quorum.
Tenants and meetings of the neighbourhood association Tenants can attend neighbourhood association meetings but are not allowed to address the meeting unless authorised to do so by resolution.
Tenants do not have the same rights to attend or elect a representative for community or precinct schemes.
Managing agents
New restrictions on the duration of contracts and on terms of appointment
A managing agent’s maximum term of appointment is 3 years, with renewals allowed. The association committee can extend the appointment of the managing agent for successive blocks of up to 3 months after their term has expired, but not past the next annual general meeting (AGM). This allows the association time to seek a new managing agent if they wish.
If an agent is appointed for the maximum allowed period of 3 years, then their contract automatically includes an option for them to extend their appointment for a further 3 months. The agent must advise the association in writing that they will do this, but this is overruled if the association has given the agent 3 months’ notice that it will not be reappointing them.
If the association decides to terminate the appointment of a managing agent, the association must give them at least one month notice of that decision.
Managing agents now need to disclose conflicts of interest and commissions
Managing agents must disclose certain interests to the association before being appointed by the association. The managing agent must disclose:
if they are connected with the developer
any direct or indirect pecuniary interest in the scheme, other than the interest arising from the prospective management contract.
Managing agents must report to the AGM whether they have received any commissions in connection to the exercise of their functions on behalf of the scheme during the last 12 months. They must also provide an estimate on the commissions they believe they will receive in the next 12 months.
Finances Sinking fund is renamed to capital works fund The 'sinking fund' of the association is now called the 'capital works fund'. The name change better reflects the purpose of the fund as the former name could cause confusion about its purpose.
Auditing of association accounts and financial statements is now mandatory for larger associations
Associations with an annual budget exceeding $250,000 must now ensure that their accounts and financial statements are audited before being presented to the AGM. The audit must be carried out in accordance with the Australian Auditing Standards.
Associations with annual budgets not exceeding $250,000 can still choose to have their accounts and financial statements audited.
Statement of key financial information The association is now required to prepare a statement of key financial information, in addition to the financial statement.
The statement of key financial information summarises the key financial information of the association in an easy to read manner to ensure association members can easily understand the financial position of the association.
The statement must specify:
the fund and reporting period it is being prepared for
the balance carried forward from the last period
the total income received
the total interest earned
the total contributions paid and total in arrears
the total expenditure for maintenance
the total expenditure for administration costs
the balance of the fund and balance of the previous period
the principal items of expenditure for maintenance proposed in the next year.
Management statements and by-laws
By-laws cannot be harsh, unconscionable or oppressive
The 2021 Act gives association members new protection from unjust by-laws. By-laws that are adopted by the association are prohibited from being harsh, unconscionable or oppressive.
Association members can now seek an order from the NSW Civil and Administrative Tribunal (Tribunal) revoking part of the management statement if they believe a by-law to be harsh, unconscionable or oppressive.
Associations can adopt limits on occupancy within the scheme An association can now adopt a by-law to limit the number of adults who may reside in a lot by reference to the number of bedrooms of the residence. The limit may not be fewer than two adults.
These limits can be imposed to help prevent overcrowding within a scheme and the overuse of association facilities.
Managing, repairing and maintaining association property Association members can make a claim for damages against the association if they suffer a loss because it failed to maintain and repair association property.
Associations will continue to have a duty to maintain and repair association property under the 2021 Act. The new law allows association members the ability to hold the association accountable for failures to comply with its duty.
Association members are able to apply for an order from the Tribunal for damages suffered due to the association breaching its duty to maintain and repair if the loss was reasonably foreseeable.
The association member will have 2 years to seek these damages. This 2-year period begins when they first become aware of the loss.
The 2021 Act, however, does recognise that sometimes it may not be appropriate for the association to repair or replace property. As such the association can determine by special resolution to not maintain, repair or replace association property as long as the decision will not affect the safety of the building, structure or association property, or detract from the appearance of the property.
Developers must prepare an initial maintenance schedule and hand it over before the first AGM
Developers are now required to prepare an initial maintenance schedule at the end of the initial period. This is to be provided to the association at the first AGM.
The initial maintenance schedule provides for the maintenance of association property and is intended to set out those matters the association needs to be mindful of in preparing its capital works fund plan. However, the association is not bound by what is outlined in the initial maintenance schedule.
The initial maintenance schedule must include maintenance and inspection schedules for such things as:
embedded networks and micro-grids
stormwater and other drains
dams
gas and water monitoring wells
asset protection zones, if the property is on bushfire prone land.
If your association has already exited the initial period prior to the new Act commencing then the developer is not required to provide your association with an initial maintenance schedule.
Associations can now more easily install sustainability infrastructure
Associations can now pass ‘sustainability infrastructure resolutions’ to seek the approval of the following:
finance sustainability infrastructure
add, alter or erect a new on association property for the purpose of sustainability infrastructure
amend the management statement to change the by-laws to install and/or use sustainability infrastructure.
These resolutions, like special resolutions, are passed based on the value of the votes. This is determined by examining the unit entitlement of each lot that votes on the measure. However, unlike a special resolution where not more than 25% can vote against the resolution, the threshold is lower so that less than 50% of the vote are against the resolution.
Sustainability infrastructure is broadly defined to capture many changes to the association property where it seeks to achieve the following purposes:
reduce consumption of or to increase the efficiency of the consumption of energy or water
reduce or prevent pollution
reduce the amount of waste sent to landfill
increase the recovery or recycling of materials
reduce greenhouse gas emissions
facilitate the use of sustainable forms of transport, including installing electric vehicle charging stations.
Utility supply contracts for neighbourhood associations now have contract limits Any agreement that a neighbourhood association enters into for the supply of electricity, gas or any other utility will now automatically expire either at the conclusion of the first AGM if entered into during the initial period or after 3 years in any other case.
This is to protect neighbourhood associations from having unfair long term utility supply contracts entered into on its behalf by the developer and give the association the flexibility to explore other options for contracts at regular intervals.
To provide a transition period for pre-existing contracts, any contracts that are in force before 1 December 2021 will instead expire 10 years after the law commences unless the contract was due to expire earlier.
This provision does not apply to an electricity embedded network that may exist in a neighbourhood scheme.
Facilities managers
Associations can now appoint facilities managers to help manage the scheme
A community land scheme may engage a facilities manager. These are sometimes called building managers, caretakers or resident managers.
The facilities manager helps with the day-to-day running of a scheme within community lands. They may help the association:
manage association property
control the use of association property by people other than owners and residents
maintain and repair association property.
The facilities manager may also perform duties such as security, cleaning, and managing the gardens and grounds of the scheme.
Restrictions on facilities manager appointment and mandatory disclosure An association can vote at a general meeting to appoint a facilities manager. The appointment must be in writing under a facilities management agreement and the contract cannot be for more than 10 years.
Before they are appointed, a facilities manager must disclose to the association:
if they are connected with or providing services on behalf of, the original owner (the developer) since this would present a conflict of interest where the association’s interests may not come first
any direct or indirect benefit – called a pecuniary interest – in the scheme (other than them benefiting from the prospective appointment itself).
Initial period definition A new definition for 'initial period' will make it easier for it to end, to shift the association from developer control to association member control.
The initial period of a scheme begins when the plan is registered. The initial period ends at different times for different schemes:
neighbourhood and strata schemes – the initial period ends when one-third of the total unit entitlement has transferred from the original owner
precinct and community schemes – the initial period ends when at least one-third of the total unit entitlement under the scheme is made up of either or both:
former development lots that have been subdivided into subsidiary schemes (that is, precinct, neighbourhood or strata schemes), for which the initial period has expired, and
development lots that are not owned by the original owner and for which an occupation certificate under the Environmental Planning and Assessment Act 1979 has been issued for development on the lots.
Resolving disputes Voluntary internal dispute resolution The ability for associations to establish a voluntary internal dispute resolution process has now been recognised in the law.
This allows associations to establish processes to manage and resolve issues internally before escalating to external dispute resolution services like NSW Fair Trading and the NSW Civil and Administrative Tribunal.
Adjudicators have been abolished The 2021 Act abolishes the role of adjudicators and their ability to make binding determinations for associations. Instead, the functions have been streamlined and consolidated into the NSW Civil and Administrative Tribunal.
If associations or association members wish to seek binding orders, they must now make an application to the Tribunal.