Reverse Engineering at a NSW Community Scheme ... and it worked!

Down on the NSW- Victorian border, where the Murray River runs languidly to South Australia, there's been a surge of community title real estate development.

One of those development is Rich River Lake Estate.  A 105 lot development that includes detached houses, roads, open sapce areas, some communal facilities and tourist accommodation.

But Rich River Lake Estate has a complicated titling structure resulting from the way the development was staged.  The 105 lots are divided into a series of neighbourhoods associations as subsidiaries of a community association.  The owners believed the structure was "complicated, unwieldy, unfair and impracticable" and wanted to simplify it.  For instance, the 10 neighbourhood associations were not similar in size and instead there were 2 lot neighbourhoods and one of 52 lots.

So the community association applied to the NSW Supreme Court to terminate the neighbourhoods and vary the community scheme structure to end up with -

• 1 community association
• no neighbourhood associations
• each lot owner having one vote
• integration of all shared use property into the community association
• converting one lot into community property
• extending the benefit of a right of way to all owners

This was an unusual case because its very rare for the NSW Supreme Court to decide any community title cases and even less likely for those cases to be about changing the community association.

An important issue in the case was to understand the position of the owners and the mortgagees as they have the most interest in any changes.  In this case the widespread support for the changes made it a lot easier.  And, the Court had to consider what considerations are relevant (and which matters are not) ultimately needing to be convinced that the existing structure was or had become impracticable.

The Court decided to modify the structure of Rich River Lakes Estate.

In doing so the Court decided that since there was no objection to the proposal after advertising and because the requirements of the mortgagee's consent to the proposal could be satisfied it could proceed.  And the Court decided that the substantive requirements were also satisfied since impracticable did not mean impossible and the current arrangements at Rich River Lake Estate was impracticable since it was different to the original development plan and worse (in practical and theoretical ways).  The Court said "lot owners are entitled to adopt a simplified scheme".

In deciding the case the Court also approved 2 earlier cases involving terminating and change community schemes. Namely, Community Association DP 270064 v Registrar Generalof NSW [2004] NSWSC 961 and Neighbourhood Association DP 285249 v Watson [2008] NSWSC 876.

And the Court also recommend changes to section 70 of the Community Land Development Act 1989 to allow these kinds of changes without a Court application when all owners and mortgagees agree.

The case has the following implications -

1. It means that community schemes can be changed in a range of situations so that existing unworkable or impractical arrangements can be improved.
2. The earlier NSW Supreme Court cases about community titles law are good law.
3. Developing a community title scheme differently to the development plan could lead to later changes if the differences are undesirable to owners.
4. It's easier to get changes approved if all owners agree but that is not enough on its own.

You can find the full decision here -  Community Association DP 270064 v Registrar General Department of Lands [2010] NSW 1558, decided by the NSW Supreme Court on 13 December 2010. 


This is another of my Casewatch - a service reviews important strata and community title cases in an easy to understand way for strata stakeholders 

Francesco ...