In my last blog the keys concept of a strata scheme were explained. Just as important for investors and potential property owners is an understanding of community title schemes. Why? First, rising housing prices, limited land availability, urban consolidation and life style choices have led to an increase in community title properties and this growth is only expected to continue. What I find is that many lot owners in community title schemes do not understand what they have bought into and a little knowledge may mean a lot owner can change their course of action slightly to obtain the same (or better) end result, for instance an approved renovation that fits in with the rest of the scheme.
What is community title? Basically, it is a way to subdivide and develop land and, if required, to provide shared community facilities that are maintained by the community. These shared facilities may be infrastructure such as roads or recreational facilities such as community meeting rooms, pools or even a golf course or a marina. They are owned by the community title scheme. If you consider a strata scheme as a vertical community with the owners corporation responsible for the common property in the scheme, a community title scheme is a horizontal community with the community scheme responsible for the shared facilities which can include not just a building but infrastructure and recreational facilities. Often, in a new land release, the entire release will be part of a community title scheme so that the developer can institute a master plan for the development. Breakfast Point, Liberty Grove or Wentworth Point in Sydney are good example of this.
It is important for property owners to know if they are part of a community title scheme as each scheme will have a management statement that must be abided by, and depending on the scheme potentially more than one. A management statement is the equivalent of by-laws or rules in a strata scheme. In many community title schemes, a management statement will include an architectural guideline setting out details such as approved construction styles, fencing and colour schemes that may be used.
Architectural guidelines can be very specific going so far as to indicate approved paint shades and are generally comprehensive. If you breach the guidelines by, for instance, changing your roof to a non-approved colour or material i.e. tiles instead of slate, you can be forced to remedy the error at your own cost. This one of the most common mistakes made by new owners in a community title scheme. As can be seen in a community title scheme your home is not necessarily your castle.
The second reason is your hip pocket. Lot owners within a community title scheme have to contribute to the scheme for its management costs and the cost of maintaining and keeping its shared facilities. If you buy into community scheme unknowingly you will receive an unpleasant shock when you receive a contributions notice requiring payment. Also, if buying into an aging community scheme you need to consider if any infrastructure requires an upgrade and the potential costs of an upgrade.
As community title schemes can be complex and vary in size and structure it is essential to understand what responsibilities you will take on when buying in and what privileges you will have to use the shared community facilities. The range of each schemes shared facilities and association property is an indication of the inevitable management and maintenance costs. In one instance that I know of, the only shared facility is an open piece of land unusable for anything due to its size so costs are minimal. However other community title schemes have extensive shared facilities and association property to manage and maintain.
In NSW, the legislation provides for up to a three tier management structure. As such a community title scheme can consist of a community association and a mix of precinct and neighbourhood associations with each association subject to its own management structure and limits on decision making powers. Generally, a community association is the top tier of a community title scheme and its management statement provides the overarching rules for the entire scheme.
How does this work? If, for example, you own a free standing home in a neighbourhood scheme, you will be part of a neighbourhood association. That neighbourhood association may either be part of a precinct association or part of a community association. If it is part of a precinct association, that precinct will be part of a community association. Complicating matters, a community title scheme lot may contain a strata scheme, in which case the owners corporation is the representative to the relevant association.
If you are considering buying into a community title scheme ask your conveyancing solicitor to explain your obligations and entitlements. Also recommended is a reading of the rules and architectural guidelines and determining if there are any shared community facilities requiring significant upgrades or repairs.