2 Strata and Community Title Fundamentals

2.1 Strata Title

Strata schemes are usually apartment buildings, ranging from two-storey walk-ups to multistorey high-rise buildings. They are created and regulated by strata title legislation, which although state-based is largely consistent throughout Australia. This chapter will use the New South Wales legislation as the basis for discussion.

In NSW, strata schemes are created under the Strata Schemes Development Act 2015 (‘SSD Act’) by the registration of strata plans under s 9. Drawn by skilled surveyors, strata plans subdivide ‘land’ — which is a column of space from the centre of the earth to the heavens^[1] — into individually owned lots (apartments) and collectively owned common property (corridors, lifts, car parks etc). Exploring a real strata plan will greatly aid understanding. It includes a page for each level of the building, as well as a schedule of ‘unit entitlements’ for each lot.^[2]

Registration of the plan automatically creates a body corporate, called an owners corporation (‘OC’) in NSW. This is a separate legal entity, made up of all lot owners (not tenants), and is responsible for the ongoing operation of the strata scheme in accordance with the Strata Schemes Management Act 2015 (NSW) (‘SSM Act’).^[3]

The SSM Act imposes extensive obligations on the OC to manage finances, take out insurance, keep records and accounts, and crucially, to manage, repair and maintain the common property.^[4] In what is arguably the most significant aspect of strata title, the OC must estimate the costs of maintaining and running the strata scheme each year^[5] and ‘levy’ — that is, extract money — from owners in accordance with their unit entitlement.^[6] Any sustainability infrastructure that is attached to common property will prima facie be a fixture, part of the common property, and subject to statutory obligations for the OC to maintain it through owners’ levies.^[7] OCs are often assisted by a strata manager, but the manager is simply an agent who has been delegated OC functions.^[8] Colloquially, people sometimes refer to ‘the strata’, but there is no such thing. Ultimate power in all strata schemes rests with the OC, the collective body of owners.

Strata plans must be registered with a set of by-laws that regulate the use of both common property and individual lots.^[9] These can be the model by-laws in the legislation^[10] or bespoke by-laws written by the developer’s lawyer. By-laws simply need to relate to the ‘management, administration, control, use or enjoyment of the lots or the common property’, an expansive description that captures almost any activity.^[11] A by-law banning people eating meat in their own apartment relates to the use or enjoyment of a lot and is prima facie valid. By-laws banning washing on balconies, compelling residents to use fossil-fuel powered dryers, are routine. However, by-laws can be amended through special majority vote, and in an effort to address climate change, resolutions for sustainability upgrades only require majority agreement.^[12]

The SSM Act s 139(1) also prohibits by-laws that are ‘harsh, unconscionable or oppressive’, and case law has emphasised that the power to create by-laws does not extend to activities that have no meaningful effect on others.^[13] But by-laws remain a double-edge sword: they have the capacity to produce negative and positive environmental, social and economic outcomes.^[14]

2.2 Community Title

Community title developments are essentially flattened out strata schemes or master planned estates, created by the Community Land Development Act 2021 (NSW) (‘CLD Act’) and regulated by the Community Land Management Act 2021 (NSW) (‘CLM Act’). Individual lots might be vacant land, a house or townhouse, and common property will be parks, roads, pavements, recreational facilities and increasingly infrastructure, including sustainability infrastructure. Like strata schemes, community schemes have a governing body corporate made up of all owners (a community or neighbourhood association’)^[15] and a set of by-laws (a ‘management statement’) that regulates the use of lots and common property.^[16] In mainstream market housing, these often contain architectural rules, but they can include rules for ecologically sensitive land use as illustrated by the management statement hyperlinked in the first case study below.

Community schemes can be tiered, with multiple subsidiary neighbourhood or strata schemes within an overarching community scheme. Community title is used for a wide range of housing developments, from low-rise ‘resort style’ developments and rural ecovillages through to high-density, high-rise estates. For example, Wentworth Point, in Sydney, is made up of multiple high-rise strata schemes (each created by the SSD Act and regulated by the SSM Act), within an overarching community scheme (created by the CLD Act and regulated by the CLM Act). It should be noted that it is not necessary to have quite so many pieces of legislation: Queensland has a single Act, the Body Corporate and Community Management Act 1997, that covers the creation and management of both low- and high-rise schemes.