On 1 December 2021 the new community title legislation came into effect. Of interest are the restrictions on the by-laws for an association and in particular, section 130(1) of the Community Lands Management Act 2021 (the “Act”) states:

“130 RESTRICTIONS ON BY-LAWS FOR ASSOCIATION SCHEMES

(1) By-law cannot be unjust A by-law for an association scheme must not be harsh, unconscionable or oppressive.

Note : The by-law may be invalidated by the Tribunal (see section 140).”

This is very similar to the restriction on an owners corporation’s by-laws contained in section 139(1) of the Strata Schemes Management Act 2015 (NSW). The NSW Court of Appeal, in the Cooper case in the context of whether or not a by-law prohibiting the keeping of animals, set out a two-fold test. Firstly it looks at the purpose of the by-law and whether it was within the power of the owners corporation to make and then whether the behaviour sought to be regulated under the by-law would have an adverse affect on any other lot owner. You can read more on that case in my NSW Law Society Journal article here: https://kerinbensonlawyers.com.au/harsh-unconscionable-oppressive-angus-has-the-last-bark-on-strata-by-law/

The key question is will the new restriction that a by-law must not be harsh, unconscionable or oppressive be interpreted in a community, precinct or neighbourhood association in the same way as in strata schemes?

Section 130(1) and any by-law that is being interpreted must be considered in the context of the Act.

While in many ways they are similar strata schemes, community title schemes are fundamentally different in other ways in that they can be purposely developed with a theme or essence. For instance, Pacific Dunes is a community association centred around a golf estate, Mobys Beachside Resort has (not surprisingly given the name) a short term accommodation beach resort theme, The Cove is an over 55s residential resort and Narara Eco Village has an environmentally friendly theme.

Where for instance the essence of the association is as an environmentally friendly scheme would it be harsh, unconscionable and oppressive if that scheme’s management statement required owners to use environmentally sustainable building materials when constructing their home or to restrict occupant’s use of pesticides on their individual gardens?

Similarly, in a premier golf estate would it be harsh, unconscionable and oppressive if that scheme’s management statement required owners and occupants of lots adjoining the fairways to use fencing to prevent balls entering their private gardens and to provide a cohesive aesthetic for the greens?

In both cases the content of the by-law has a relevant connection with the essence or theme of the scheme and, in my view are within the purpose of the scheme and are within the power of the association to make. Section 128(2) of the Act explicitly provides the power for an association to make a by-law that relates to the control or preservation of the essence of the scheme by

(a) limiting occupancy under the scheme to persons of a particular description, or

(b) fixing the architectural, building or landscaping styles to be permitted, or

(c) limiting the kind of materials that may be used in buildings and other structures, or

(d) requiring that specified association property be used only for particular purposes, or

(e) imposing any other kind of restriction.

But do these examples meet the adverse affectation test and how should it be applied? As a reminder, the adverse affection test is whether or not the behaviour being regulated would negatively affect any other lot owner or occupant in the scheme. Quite simply, it needs to be considered in light of the association’s essence or theme. This is because lot owners have chosen to buy into the scheme having knowledge of its theme. As such, to consider a by-law that goes to the essence or theme of the scheme as being harsh, unconscionable or oppressive and therefore invalid when all it does is to reinforce the association’s theme would in itself negatively affect lot owners and occupants.

Say for instance in an environmentally friendly development, despite a by-law setting a building standard and a by-law setting out environmental principles, Ms Grey uses unsustainable building materials requiring the use of air conditioning in summer and installs appliances, taps and shower heads that use a high amount of water. Other owners and occupants are not directly negatively affected by the build and Ms Grey’s use of the property as they do not pay for the electricity or water bills. Yes, when the theme of the development is considered they are affected in that Ms Grey’s property is not in keeping with it and the environmental credentials of the scheme as a whole are reduced.

As can be seen a by-law restricting behaviour that does not directly negatively affect another lot owner may be required in community schemes to prevent a breach of the essence or theme of the scheme. It will be interesting to see if, and how far, the essence or theme of a development is used to interpret the effect of section 130(1) and its restrictions on by-laws.

This is general information and should not be considered to be legal advice. If you are affected you should obtain legal advice specific to your individual situation.