Victoria – Big Housing Build

The Victorian Government has announced as part of the Victorian budget for 2020/21, the Big Housing Build, the largest ever investment in public and community housing in Victoria.

The Big Housing Build will involve a $5.3b investment in social housing, creating:

  • 9,300 new social housing dwellings; and
  • 2,900 new affordable and market homes for first home buyers and renters.

As a result of the Big Housing Build, over the next four years:

  • Victoria’s social housing supply will increase by 10%; and
  • approximately 10,000 new jobs will be created each year.

To facilitate the efficient implementation of the Big Housing Build, the Victorian government has announced the creation of a new government agency, Homes Victoria, to manage the project, and will be streamlining planning approvals for social and affordable housing. Homes Victoria will work closely with industry, the not-for-profit sector and the community to:

  • support Victorians to find secure and affordable housing;
  • manage the more than $26 billion in housing assets that currently house more than 116,000 Victorians;
  • ensure the Big Housing Build is delivered in a timely way and on budget; and
  • make sure we have a sustainable housing system that can deliver for the long-term future of Victoria.

Some of the more particular reforms and programs of the Big Housing Build include:

  • New homes on public land: $532 million allocated to replacing obsolete properties and constructing new homes to deliver 500 new social housing properties and 540 new affordable and market homes.
  • Social Housing Growth Fund: $1.38 billion allocated to support Community Housing providers to deliver up to 4,200 new dwellings. Rapid Grants will be launched in 2020, which will target projects capable of construction commencing before 31 December 2021.
  • Streamlined Planning Reform: Projects funded by the Big Housing Build will have reduced planning approval times (down from 18 months to 3 months) and will no longer require planning permits or scheme amendments (except for industrial or rural land). Community Housing Provider projects on residential land will also have reduced planning approval times (down from 12 months to 3 months) if the projects are ‘by or on behalf of’ the Director of DHHS.
  • Gender equity plan: Homes Victoria has implemented a gender equity plan to increase the participation of women in the construction industry workforce.
  • Existing projects and spot purchases: $948 million allocated to working with the private sector to bring forward existing large developments to deliver 1,600 new social housing properties and 200 new affordable homes. As part of this spot purchase program (known as the Purchase Program – In Progress and Ready to Build Developments), the Department of Health and Human Services (DHHS) is currently seeking to purchase dwellings that can be delivered as turnkey properties for new social housing dwellings from any sized developer, including registered builders, developers and product marketers. The DHHS is accepting ‘Requests for Proposals’ in relation to these spot purchases of dwellings or developments up until 2.00pm (AEDT) on 17 December 2020.
  • Rural investment: 25%, or approximately $1.25b, of the total amount invested will be allocated to rural and regional Victoria (including Geelong, Bendigo and Ballarat).

These particular reforms present not just timely and necessary assistance to those in need of social and community housing, but great opportunities to:

  • builders, developers and property owners to be involved in the Purchase Program – In Progress and Ready to Build Developments program; and
  • community housing providers to partner with the Victorian government in a range of funding rounds – starting this year and continuing through 2021 – for housing projects led by community housing providers.

If you have any questions, or would like to know more about the particular reforms and programs that comprise the Big Housing Build, and how they may be relevant to your business, please phone, or email the key contacts below.

Jane Hodder

Jane Hodder
Partner, Real Estate, Melbourne
+61 3 9288 1692

David Sinn

David Sinn
Partner, Real Estate, Melbourne
+61 3 9288 1509

Lucy McCullagh

Lucy McCullagh
Partner, Core Finance, Melbourne
+61 3 9288 1318

Nicholas Carney

Nicholas Carney
Partner, Projects, Sydney
+61 2 9322 4727

Build-to-rent: Victorian Budget 2020/21 land tax policy

The build-to-rent sector has typically been viewed in Australia as a less attractive investment option due to lower levels of returns compared to other asset classes such as commercial, retail and industrial. This has in part been due to a number of Federal and State taxes, and in Victoria, particular concerns around land tax.

In a build-to-rent development, an investor owns the whole development and provides long-term leases to residential tenants. The investor is liable for the land tax assessed on the entire development and cannot pass this cost on to the residential tenants. Additionally, a build-to-rent asset may trigger the absentee owner surcharge which is payable by an investor on top of the assessed land tax. Under the current state of play, the land tax and absentee owner surcharge payable by an investor on a build-to-rent asset is a significant cost. As a result, property investors are likely to favour other investment sectors, such as commercial and industrial developments, where the land tax can be passed onto tenants.

In a welcome move to the real estate sector, the Victorian Budget 2020/21 includes numerous measures to stimulate construction and increase the housing supply. Two such measures are the introduction of a 50% land tax discount and an exemption from the absentee owner surcharge on eligible developments in the build-to-rent sector in Victoria. This follows on from a similar approach adopted in NSW in the middle of this year.

The land tax discount and absentee owner surcharge exemption on build-to-rent assets, which will take effect from 1 January 2022 through to 2040, will reduce an investor’s holding costs and aim to put the different property asset classes on a more level playing field. The measures aim to make the build-to-rent sector viable in Victoria.

The effect of the discount is anticipated to stimulate construction, attract investment in build-to-rent developments and provide an increase in the housing supply and rental market.

There are still more tax reforms that need to occur, including at the Federal level, to further stimulate the sector such as the treatment of GST and the withholding tax rate for MIT fund payments to foreign investors. However, the announcement on land tax in Victoria is a step in the right direction.

By Jane Hodder, Partner and Jordana Cawood, Solicitor.

Get in touch

If you need urgent advice or just have a general query, please contact one of us below.

Jane Hodder

Jane Hodder
Partner, Real Estate, Melbourne
+61 3 9288 1692

Julie Couch

Julie Couch
Partner, Real Estate, Sydney
+61 2 9225 5425

Nicholas Cowie

Nicholas Cowie
Partner, Real Estate, Sydney
+61 2 9225 5551

Julie Jankowski

Julie Jankowski
Partner, Real Estate, Brisbane
+61 7 3258 6515

Michael Back

Michael Back
Partner, Real Estate, Brisbane
+61 7 3258 6611

Frank Poeta

Frank Poeta
Partner, Real Estate, Perth
+61 8 9211 7893

Changes to FIRB guidelines in relation to lease renewals

On 29 March 2020 monetary thresholds for acquisitions of leases of land of more than 5 years (including options to renew) by foreign persons were reduced to zero.  This meant that a large volume of leasing transactions which previously did not require approval fell into the Foreign Investment Review Board (FIRB) net.  On 3 September 2020, the FIRB amended these temporary measures to allow renewals and material variations of leases to proceed without approval in some circumstances. The new measures took effect on 4 September 2020.

What were the key changes?

In summary, the key changes were as follows:

  1. For the renewal or material variation of existing non-sensitive leasehold interests in developed commercial land (where the same acquirer held a substantially similar interest under a lease before 10:30pm on 29 March 2020), the previous monetary thresholds have been reinstated.
  2. The reinstated thresholds for the value of the leasehold interest being acquired (below which approval is no longer required) are set out in the table below:
Type of land Threshold – more than:
Land that is being acquired by a foreign person who is an agreement country or region investor $1,192 million
Land that is being acquired by any foreign person other than an agreement country or region investor, or a foreign government investor $275 million
Land that is being acquired by a foreign government investor $0

In this context, “renewal” means the extension of a lease through the exercise of an option to renew or the entering into of a new lease on substantially the same terms as the previous lease.  A “material variation” can include things like an extension of the term (including adding options) which can be regarded as a new lease for FIRB purposes.

  1. Certain transitional arrangements were introduced which govern the treatment of applications submitted under the regime before 3 September 2020 where such applications relate to actions which are no longer notifiable under the new rules set out above (such as withdrawal of applications and waiver or refund of application fees paid). We can provide guidance on this on a case by case basis if required.
  2. For all other leasehold acquisitions by a foreign person (where the term of the lease including options is reasonably likely to exceed 5 years) the $0 monetary screening threshold continues to apply and the acquisition of the leasehold interest will therefore need to be notified to the FIRB and approval obtained before the transaction proceeds.
  3. Examples of leasehold transactions still caught where the term is sufficiently long are an agreement for lease where the land is vacant at the time and a lease of developed commercial land which is regarded by FIRB as “sensitive” land.

Further information

For more information, the full FIRB guidance note 53 can be found here.

Contact Us

If you have any questions, please reach out to your HSF contact, who will be happy to discuss.







 

Overview: The revamped Western Australian Strata Titles Legislation – it’s here

On 1 May 2020, substantial changes to the Strata Titles Act 1985 (WA) came into effect. Those changes to the Act are included in the Strata Titles Amendment Act 2018 (WA) – which was passed some time ago but has remained inoperative until the corresponding updated regulations were prepared.  The Strata Titles General Regulations 1996 (WA) will be repealed by the Strata Titles (General) Regulations 2019 (WA), also with effect from 1 May 2020.

In this note the Strata Titles Act is referred to as the ‘Act’ and the amended Strata Titles Act is referred to as the ‘Amended Act’.   The key changes made to the Act are set out below.

1. Scheme documents

Under the Amended Act, a ‘Scheme Notice’ is required to be registered in order for a strata titles scheme to be registered (and titles created for lots in the scheme).

The Scheme Notice contains basic information including the name of the scheme and the address for serving of notices.   The Scheme Notice will be lodged with the application to register the strata titles scheme and will be registered on the strata plan.

2. Additional disclosure required to buyers before contract

Under the Amended Act, a seller of a strata lot is required to provide more information to the buyer before the contract of sale is entered into.  The additional information is intended to provide the buyer with an insight into the overall financial status of the scheme and the recent matters that have been the subject of discussions between owners at the general meetings of the strata company.

The additional information that a seller will now need to provide a prospective buyer in relation to the strata scheme or proposed strata scheme is:

  • the Scheme Notice (only for new schemes registered after 1 May 2020);
  • the scheme plan including the exact location of the lot on the plan;
  • in relation to a leasehold scheme, the strata lease for the lot;
  • either:
    • the minutes from the most recent annual general meeting of the strata company or any extraordinary general meeting that’s been held since; or
    • if the minutes are not kept then a statement to that effect; or
    • a statement of why the seller is unable to obtain a copy of the minutes;
  • either:
    • the most recent statement of accounts; or
    • if the statement of accounts are not kept then a statement to that effect; or
    • a statement of why the seller is unable to obtain a copy of the statement of accounts;
  • any notice received from the strata company proposing termination of the scheme;
  • the levies payable for the previous 12 months for the lot and the due date for payment and if the scheme is new then an estimate of levies for the next 12 months;
  • information relating to debts owed by the seller to the strata company;
  • details of exclusive use by-laws that apply to the lot; and
  • any voting right restrictions (eg a proxy or power of attorney granted to the seller).

If the scheme is not yet created, a reference to a document to be disclosed (eg scheme plan, schedule of unit entitlements, by-laws) is a reference to the latest draft of that document.

A new approved form has been created to provide the necessary disclosure to buyers and that also includes the general information on strata schemes.  The new disclosure form can be provided by email if the buyer has consented to receive it by email.

The information that is designated in the new disclosure form as being specific to the lot (ie Part B of the approved form) must be included in the contract in a prominent position (such as the front page).

If the disclosure information is not provided, a buyer can avoid the contract if the buyer can demonstrate that if the buyer received the information, the buyer would be materially prejudiced.  In addition, if the buyer is provided with the disclosure information after the contract is signed, the buyer will now have a period of 15 working days (an increase from 7 working days) to terminate the sale contract, subject to proving that it has suffered material prejudice.  Previously there was no requirement for a buyer to show material prejudice in order to terminate the sale contract due to the information not being provided or being provided late.

The provisions of the Amended Act regarding disclosure to buyers do not apply to contracts of sale, and buyers under contracts of sale, entered into before 1 May 2020.  The regime under the unamended Act continues to apply to those contracts and buyers.

3. Additional disclosure required to buyers after contract

Under the Amended Act, the obligation on the seller to give a buyer notice of changes to the disclosure information that occur after the contract is entered into (ie notifiable variations) is retained, however, there are now 2 types of notifiable variations:

(a) A Type 1 notifiable variation – which is:

(1) the lot size is more than 5% smaller; and
(2) the lot unit entitlement is 5% different (bigger or smaller).

(b) A Type 2 notifiable variation – which is:

(1) the scheme plan is amended (in a way that is not a Type 1 notifiable variation);
(2) the unit entitlements are amended (in a way that is not a Type 1 notifiable variation);
(3) the by-laws or proposed by-laws are amended;
(4) an agreement for services to the scheme is entered into or varied; and
(5) a lease, licence, right or privilege over common property is granted or varied.

The seller must notify the buyer of a notifiable variation within 10 working days of the change occurring (unless settlement is due within 15 working days in which case notice must be given as soon as practicable).

The Amended Act provides some guidance as to what information the seller has to give – the seller must provide the buyer with particulars of the notifiable variation that a reasonable person would consider sufficient to enable the buyer to make an informed assessment as to whether the buyer is materially prejudiced by the notifiable variation.  The seller’s notice must identify the type of notifiable variation and inform the buyer of its rights to terminate the contract when that type of notifiable variation occurs.

The regulations set out when a particular type of notifiable variation is taken to have occurred.

The consequences of not providing that notification will depend on the type of notifiable variation and when notification is provided.  The table below summarises the position:

When notice given Type 1 Notifiable Variations – consequences Type 2 Notifiable Variations – consequences
No notice given Avoid at any time (without reason) Avoid at any time if buyer can show material prejudice
Notice given within 10 working days as required Avoid within 15 working days if buyer can show material prejudice Avoid within 15 working days if buyer can show material prejudice
Notice given late (ie after 10 working days) Avoid within 15 working days (without reason) Avoid within 15 working days if buyer can show material prejudice

The provisions of the Amended Act regarding notifiable variations do not apply to contracts of sale, and buyers under contracts of sale, entered into before 1 May 2020.  The regime under the unamended Act continues to apply to those contracts and buyers.

4. Stage developments

The regime under the Act to implement staged strata subdivisions gave a developer limited flexibility to make changes to future stages.  If the stage documents did not match the documents in the stage by-laws, a developer was required to obtain consents from existing lot owners in earlier stages and parties who had an interest in those existing lots – and those owners and parties could simply refuse to provide that consent.

The Amended Act marks a shift in this ‘balance of power’ by making the process for delivery of strata schemes in stages less cumbersome for developers, while still protecting the rights of owners who bought into earlier stages of the development.

Under the Amended Act, details of the staged development can still be set out in the scheme by-laws and these are now called staged subdivision by-laws.  If the subdivision proceeds in accordance with these by-laws, the developer can progress the staged subdivision in accordance with those by-laws without requiring further consents.

However, the Amended Act introduces the concept of a ‘significant variation’ to an agreed stage of a subdivision, which includes:

  • the unit entitlement of an existing lot changes by more than 10%, whether increased or decreased;
  • the number of lots in the next stage is modified by 10%, whether increased or decreased; and
  • a change to a registered easement or restrictive covenant has an adverse material impact on existing lots within the scheme.

Determination of whether the variation is significant or not is to be made by an independent licensed valuer.  If the change in the scheme documents from those disclosed in the by-laws is not a significant variation, the developer can proceed to register the stage documents.

Where the variation is considered a significant variation the following applies:

  • the developer will need to obtain a unanimous resolution from the strata company;
  • the holders of a designated interest must have been given notice and have given their consent or if no response with a written objection is received by the end of the 60 day period in which they have to respond, then consent is taken to be given;
  • consent has been obtained from the WA Planning Commission (where required);
  • written consent of the owner of the leasehold scheme (if relevant) and each affected owner must be given; and
  • the developer can apply to the State Administrative Tribunal for an order to disregard an objection on the grounds that the objection is unreasonable.

5. Leasehold strata schemes

The Amended Act will introduce a new form of strata being a leasehold scheme. This allows for freehold and conditional tenure land to be subdivided and a leasehold scheme created in respect of that land. Certificates of title will be issued in respect of each leasehold lot.

The owner of the leasehold scheme will be considered the lessor, while the owner of the leasehold lot will be considered the lessee. Together the lessor and lessee will enter into a strata lease in respect of the leasehold lot.

A strata lease commences when the leasehold lot is created on the registration of the leasehold scheme and will expire on the same date that the scheme expires. The scheme will have a fixed life-span, with a term that must be longer than 20 years and not exceed 99 years, with all strata leases in a leasehold scheme expiring on the same day.

The lessor’s role in the day to day operation of the leasehold scheme is limited. The lessor cannot interfere with the use and enjoyment of a lot or common property and cannot terminate a lease unless authorised by SAT.

A lessee of a strata lease will have a strata leasehold estate in the lot and an undivided share of the strata leasehold estate in any common property as tenant in common with the other lessees, which is proportional to the unit entitlements of their respective lots (adopting similar concepts to freehold schemes).

A lessee can transfer, mortgage or sublet the leasehold strata lot, without the lessor’s consent and is a member of the strata company of the leasehold scheme.

Leasehold strata schemes give the freehold land owner (lessor) an opportunity to develop land which they otherwise wouldn’t or couldn’t develop.  This is of particular benefit to organisations such as churches and universities who need to retain ownership of their land and make it available for development.   Private landowners can contract with a developer to construct a strata building and to sell leasehold interests, without being actively involved in the maintenance of the building. The lessor then has a limited role in the leasehold strata scheme decisions during the term of the scheme.

6. Scheme management matters

6.1. Maintenance plans

Under the Amended Act, if the scheme has 10 lots or more or the cost of replacing the buildings and improvements on the common property is more than $5million, the strata company must ensure that there is a 10-year plan for the maintenance, repair, renewal or replacement of common property.

The 10-year plan must be submitted at the first annual general meeting that is after 1 May 2021 and the plan must be revised every 5 years to cover the next 10 years after the revision.

6.2. Categorisation of by-laws

The standard by-laws under the Amended Act are still contained in schedules 1 and 2, however the name of each schedule has changed to ‘Governance by-laws’ (schedule 1) and ‘Conduct by-laws’ (schedule 2).

Some of the by-laws have been re-categorised from the schedules under the previous Act and some of the previous by-laws in Schedule 1 of the Act have been included in the body of the Amended Act, which means that they cannot be amended. These provisions relate to the requirements of general meetings of the strata company, including in relation to voting and appointing proxies.

When a strata company makes a new by-law or amends or repeals an existing by-law, the strata company is required to register a consolidated set of the current by-laws with Landgate.  This is designed to improve access to a complete set of scheme by-laws for existing owners and prospective buyers.

The Amended Act also includes a list of circumstances when a by-law will be invalid, which includes where, having regard to the interests of the owners use and enjoyment of the lots and common property, the by-laws are unfairly prejudicial or discriminatory against 1 or more of the owners, or the by-laws are oppressive or unreasonable.

6.3. Regulation of scheme managers

The Amended Act includes statutory duties that require strata managers to:

  • act honestly, with reasonable skill and care;
  • have a good knowledge of the Amended Act;
  • not improperly use information or their position;
  • inform the strata company of any conflict of interest as soon as practical; and
  • disclose any benefit/remuneration that is more than $100 from one source in a year.

A strata manager will also need to:

(a) attain educational qualifications by 1 May 2024;

(b) have a written contract with the strata company, specifying the functions they are contracted to perform;

(c) obtain a current national criminal record check for themselves and employees who perform strata management functions;

(d) have professional indemnity insurance coverage; and

(e) lodge an annual return to Landgate with general information about the schemes they manage (the first annual return will need to be lodged between 1 January 2022 and 31 March 2022, and then annually after that for the next four years).

Schemes can still have a volunteer strata manager. A volunteer strata manager is subject to the statutory duties of a strata manager and must also:

  • have a written agreement or contract with the strata company;
  • own one of the lots; and
  • cannot earn more than $250 for each lot in the scheme, over a full year.

However, volunteer strata managers do not need to attain educational qualifications or hold professional indemnity insurance.

6.4. Termination of schemes

The Act previously required all lot owners to unanimously agree before a scheme could be terminated.

The Amended Act has sought to introduce a scheme that allows for termination of schemes with 5 lots or more without requiring a unanimous decisions but with safeguards for all strata owners.

Briefly the steps involved are as follows:

  1. an outline of the proposal is prepared by a lot owner or a person who has a contract to buy a lot, which sets out what will be done to the land and what funding will be provided;
  2. the outline proposal is provided to lot owners to allow them to obtain advice on the proposal;
  3. if a resolution (50% majority) of the strata company is passed in favour of the outline proposal, then a full proposal must be prepared within 12 months from the vote, which contains more detailed information including what is offered for each lot, details of the new development and a termination infrastructure report;
  4. the strata company must vote on the full proposal and if:
    1. the vote is unanimous then the scheme proceeds to termination;
    2. the vote is 80% or more than the full proposal is referred to the State Administrative Tribunal (SAT) for a ‘fairness and procedure’ review; and
    3. the vote is not least 80% in favour then the proposal is rejected;
  5. SAT will review the process followed, the full proposal and submissions from dissenting owners and make a decision as to whether the scheme is to be terminated.

For schemes of 4 lots or less the decision to terminate must be unanimous for the termination to proceed.

6.5. Dispute resolution

Changes to the Act are intended to make the State Administrative Tribunal (SAT) a ‘one-stop’ shop for strata disputes (with only very limited exceptions).

SAT is an independent tribunal with less formal and more flexible procedures than traditional courts, and is seen as a more cost-effective and efficient dispute resolution forum.

The Amended Act gives SAT broader powers to resolve strata scheme disputes and enforce by-laws so that essentially all strata disputes will be heard by SAT (the exception being disputes relating to the recovery of unpaid levies which are still to go through the civil courts).

Frank Poeta

Frank Poeta
Partner - Real Estate, Perth
+61 8 9211 7893

Jenny Allpike

Jenny Allpike
Senior Associate - Real Estate, Perth
+61 8 9211 7231

Overview: The new Western Australian Community Titles Legislation – it’s coming

1. What is the new community titles legislation in Western Australia?

The Community Titles Act 2018 (WA) (Community Titles Act) was passed by the Parliament of Western Australia in November 2018. However, the Community Titles Act is not yet in operation.

As set out further below, regulations associated with the Community Titles Act need to be prepared and passed before the Community Titles Act will become operative.

The current anticipated timeframe (as advised by Landgate, being the Western Australian Land Titles Office) is for the regulations to be finalised, and for the Community Titles Act to be operative, is during 2020-21.

2. Does the Community Titles Act replace the current strata titles legislation?

The Community Titles Act does not replace the current strata titles legislation in Western Australia, being the Strata Titles Act 1985 (WA) (Strata Titles Act). The Community Titles Act is stand alone and does not reference the Strata Titles Act. In particular, a strata scheme cannot form part of a community titles scheme. However, many of the concepts in the Community Titles Act are similar to those in the Strata Titles Act (for example the concept of lots, common property, unit entitlements, bylaws and strata companies).

Once the associated regulations are passed, the Community Titles Act and the associated regulations will include all the necessary features to facilitate the development and subdivision of lots (in the same way as strata lots can be created under the Strata Titles Act and its associated regulations).

3. What is the community titles legislation intended to do?

One of the key features of a community title scheme (as distinct from a strata scheme) is that it is possible to have ‘tiers’ (or layers) of community title schemes – ie it is possible to have ‘schemes within a scheme’. This is not possible under the Strata Titles Act. Each community title scheme will have its own:

  • common property;
  • community corporation (the equivalent of a strata company under the Strata Titles Act);
  • scheme plan (the equivalent of strata and survey strata plans under the Strata Titles Act);
  • bylaws; and
  • unit entitlements.

Each scheme within an ‘umbrella’ community title scheme is called a community titles scheme. A maximum of 3 tiers of community titles schemes is permitted.

There are 2 types of community titles schemes:

  • a community titles (building) scheme – which is a scheme comprising a subdivided building where lots are defined by reference to part of a building (being the equivalent of a built form strata titles scheme); and
  • a community titles (land) scheme – which is a scheme comprising subdivided vacant lots where lots are defined by reference to part of land (being the equivalent of a survey strata titles scheme).

Below are diagrams to illustrate how a community titles scheme and the development of a community titles scheme may look.

Diagram – Layers of a community titles scheme – a maximum of 3 layers is possible

Step 1: Development site

Initially the developer will own a parcel of land (or an existing wholly or partially developed site or building) from which the community title scheme will be created.

Step 2: Creation of Tier 1 Community Title Scheme

The developer creates a community title scheme by registering the scheme at Landgate:

Step 3: Creation of Tier 2 of Community Title Scheme

The developer creates Tier 2 of the community titles scheme by subdividing Tier Lot 1 and Tier 1 Lot 2 into the Tier 2A and Tier 2B lots as shown below. Tier 2A comprises 2 lots on which schemes may be developed (being Tier 2A Lot 1 and Tier 2A Lot 2) and Tier 2B comprises 3 lots on which schemes may be developed (being Tier T2B Lot 1, Tier 2B Lot 2 and Tier 2B Lot 3).

Step 4: Creation of Tier 3 of Community Title Scheme

The end result of the above is a 3 tier community title scheme as follows:

Tier Details and use of common property  
Tier 1 The Tier 1 Scheme Comprises:

  • ‘Tier 1 Lot 1’ and ‘Tier 1 Lot 2’; and
  • common property that can be used by each Tier 1 lot (ie the ‘Tier 1 CP 1’).
Tier 2 The Tier 2 scheme comprises:

  • the 2 schemes to be developed on what was originally Tier 1 Lot 1 (being the ‘Tier 2A Schemes’, comprising ‘Tier 2A Lot 1’ and ‘Tier 2A Lot 2’) and the 3 schemes to be developed on what was originally Tier 1 Lot 2 (being the Tier 2B Schemes, comprising ‘Tier 2B Lot 1’, ‘Tier 2B Lot 2’ and ‘Tier 2B Lot 3’);
  • common property (being ‘Tier 1 CP1’) that can be used by all of the Tier 2 Lots (being Tier 2A Lot 1, Tier 2A Lot 2, Tier 2B Lot 1, Tier 2B Lot 2 and Tier 2B Lot 3);
  • common property (being ‘Tier 2A CP 1’) that can only be used by each of the Tier 2A schemes on Tier 2A Lot 1 and Tier 2A Lot 2; and
  • common property (being ‘Tier 2B CP 1’) that can only be used by each of the 3 Tier 2B schemes.
Tier 3 The Tier 3 community title scheme comprises:

  • the schemes to be developed on what was previously each of the Tier 2A Lots (ie Tier 2A Lot 1 and Tier 2A Lot 2) and the schemes to be developed on what was previously each of the Tier 2B Lots (being Tier 2B Lot 1, Tier 2B Lot 2 and Tier 2B Lot 3); and
  • common property that can be used by all of the schemes and common property that can only be used by owners within a scheme.

For example, the ‘Tier 3B (Apartment Scheme)’ comprises:

  • the lots in that scheme (ie the apartments); and
  • the common property in that scheme,

and the owner of a lot in that scheme has an interest in and can use:

  • the common property in that scheme;
  • the common property in the Tier 2 scheme to which it belongs (ie Tier 2A CP 1); and
  • the common property in the Tier 1 scheme (ie Tier 1 CP 1).

4. What are the key benefits of a community titles scheme?

Some of the key benefits from the community titles regime are set out below.

4.1. Greater certainty for developers with staged developments

A community title scheme will require a ‘community development statement’ (CDS). The CDS shows the overall proposed subdivision and development of the scheme and is to contain similar information to that which is found in a local structure plan. Once approved, a CDS binds developers, planning decision makers (who must approve development and subdivision applications if the applications are consistent with the CDS) and owners of lots in the parcel (owners cannot object to development or subdivision if it is consistent with the CDS).

Therefore, the community titles regime will provide greater approval certainty with a ‘pre-approved’ planning regime for the site the subject of a community titles scheme.

At present, completing staged developments under the Strata Titles Act can be challenging. This is because the Strata Titles Act requires developers to have finalised building plans for each stage of the development at the start of the development. Minor changes to the development can then require the consent of all owners of units in earlier stages. This provides developers with little flexibility.

4.2. Better separation of schemes

The community titles legislation will provide for better separation of schemes with different uses. Under the Strata Titles Act, it is not possible to create different layers of schemes for residential, retail and commercial aspects of a development which are to share common property.

If a mixed use development is created in a single strata scheme, complications can arise when matters in one part of the scheme require the consent of all owners of units in the scheme (for example, a tenant fitout in the retail section of the scheme needing the approval of owners of residential lots within the scheme).

The community tiles scheme will allow ‘schemes within schemes’. For example, separate schemes can be create for the residential, retail and commercial areas of a development. This structure allows for better management of the scheme and for relevant owners to only having voting rights on matters which they should be concerned with.

4.3. Better sharing of common areas

Under the Strata Titles Act, it is not possible for separate schemes to share the use and upkeep costs of common areas without specific contractual arrangements being put in place. The relevant common property would often need to be located on one scheme, with the strata company for that scheme granting the other scheme contractual rights to use that common property. Such arrangements can get complicated.

A community titles scheme allows common property to be created at each tier level. For example, ‘Tier 1’ common property would be able to be used by all owners in the scheme and all owners would contribute to the upkeep of that common property. ‘Tier 2’ common property would be able to be used by all owners at the Tier 2 level and all owners at the Tier 2 level would pay for the upkeep of that common property.

4.4. Multi-layered schemes

Under the Strata Titles Act, it is not possible to create different schemes within a building. For example, it is not possible to have a 50 storey building where the first 20 levels are a commercial office scheme, levels 21-40 are a hotel scheme and levels 41-50 are a residential scheme. The Community Titles Act allows for this to occur. This will provide developers with much greater flexibility for multi-level built form schemes.

5. When does the community titles legislation come into effect and when can developers use it?

Regulations need to be prepared and passed before the Community Titles Act can become operative. The regulations will contain many of the forms and procedures required for the implementation of community title schemes. For example, the form of the CDS required and details of the disclosure requirements which developers will have to give to buyers.

Until the regulations have been passed, it will be difficult for developers to properly plan a development as a community titles scheme.

Frank Poeta

Frank Poeta
Partner - Real Estate, Perth
+61 8 9211 7893

David Rowan

David Rowan
Senior Associate - Real Estate, Perth
+61 8 9211 7248

 

Implementation of eConveyancing in NSW – the (almost) Final Milestones

The transition to electronic conveyancing (eConveyancing) has a been a long time coming, with legislation first passed by the NSW Parliament to facilitate the process in 2012.[1] A transition timetable was introduced in 2017 by the NSW Government following its announcement that the transition into eConveyancing would be accelerated in 2016. With version 5 of the Conveyancing Rules (Rules) which became effective on 1 July 2019, a major milestone in the government’s mandated timeline has been reached.

Subject to some minor exceptions, the Rules now mandate that all Mainstream Dealings or combination of Mainstream Dealings signed between 1 July 2019 and 30 June 2020 must after 1 July 2019 be lodged electronically (except where accompanied by another dealing which is not a Mainstream Dealing) be it standalone, or in combination of Mainstream Dealings. Unless a waiver or exemption applies, they include:

  1. Transfers;
  2. Mortgages;
  3. Discharges of Mortgages;
  4. Caveats;
  5. Withdrawals of caveat; and
  6. Transmission applications.

To find out more about whether a particular dealing is eligible to be lodged electronically, please see the Registrar’s General’s Guidelines or call us.

Waivers & Exemptions

From time to time, the Registrar General (Registrar) may waive compliance with all or any provisions of the Rules in accordance with section 12E of the Real Property Act 1900 (NSW). The Registrar has issued a variety of waivers that include the following where:[2]

  1. an unrepresented party is lodging a caveat or withdrawal of caveat; the caveat requires a plan or affects only part of a lot or affects a leasehold or other registered interest; there are multiple caveators and they are separately represented; or the written consent of the caveator is required;
  2. an unrepresented mortgagee (an individual) is registering a mortgage or a discharge of mortgage;
  3. both the transferee and transferor are unrepresented; the parties wish to register a standalone transfer which will create a life estate and estate in remainder; where the transfer has an attachment or creates an easement; or not all registered owners are affected;
  4. an unrepresented applicant wishes to lodge a transmission application or the transmission application affects an interest in land is, rather than the freehold;
  5. the transaction involves a transfer of a water access licence; or
  6. written evidence from the OSR or an ELNO saying that the transaction cannot be processed electronically is presented to NSWLRS with the paper dealings.

For more detail about the Registrar’s waivers and exemptions, please see the Conveyancing Rules Waivers published by the Registrar or call us.

Beyond 1 July 2019

Moving forward, the Registrar will gradually remove various waivers and exceptions. Marking the end of the transition into eConveyancing, rule 8.8 of the Rules mandates that all dealings that are available electronically, must be lodged electronically from 1 July 2020. The detail on this will be released next year and we will update clients on this blog when the information becomes available.

Action required

There is additional work and time required to assess whether transactions can be processed manually or electronically and, if electronically, to set up workspaces and engage with the other parties to the transaction electronically. Please call us early on to discuss your transaction and we can assess how it should proceed.

Footnotes:

[1] Electronic Conveyancing (Adoption of National Law) Act 2012
[2] https://www.registrargeneral.nsw.gov.au/__data/assets/pdf_file/0007/526732/Conveyancing-Rules-Waiver-CR-2-2019-Mainstream-dealing-exceptions.pdf

Nicholas Cowie

Nicholas Cowie
Partner, Sydney
+61 2 9225 5551

Chrislynn Soong

Chrislynn Soong
Solicitor, Sydney
+61 2 9322 4678