Responsibilities of an association

On this page:

• The role of an association
• Initial scheme period
• Insurance requirements
• Executing documents

The role of an association

An association on behalf of its members oversees the management and control of the use of the association property, and the administration of the scheme.

How are associations formed?

A community, precinct or neighbourhood association starts when a community, precinct or neighbourhood plan is registered with the Registrar General. In most cases, the builder or developer will do this.

The Community Land Development Act 2021 and Community Land Development Regulation 2021 governs the subdivision and development of land with shared property, and the registration of a plan with NSW Land Registry Services.

The association is made up of property owners. At the beginning of the scheme, this may also include the builder or developer. Under the law, builders or developers are considered the original owners of the scheme.

What are associations responsible for?

Associations are responsible for ensuring association property is looked after, including the cost of maintaining it. They are also required to oversee the creation of by-laws, the appointment of managing agents and facilities managers, insurance, and dispute resolution.

The Community Land Management Act 2021 and Community Land Management Regulation 2021 set out the responsibilities of associations and provide direction on how meetings are to be held and decisions by the association or committees are made.

There are special provisions in the Act for the installation, financing and by-laws for sustainability infrastructure.

As of 1 December 2021, community land laws have been updated to modernise the development and management of schemes in NSW. It is important you are up to date with the new laws and what they mean for your scheme or association.

What meetings are associations required to hold?

Associations must have an annual general meeting (AGM) each financial year. This meeting deals with matters that the owners need to consider, including but not limited to adopting the financial statements, considering the insurance policies of the scheme and election of the association committee.

Meetings other than the AGM are called general meetings which can be held throughout the year, when necessary. They may cover items such as changing, cancelling, or making by-laws, changes to the management statement, or raising additional funds to cover unexpected works.

For more information on what is required for meetings, including agendas, quorums and voting, visit the scheme association meetings and voting page.

Is my association required to have a management statement?

Yes, all schemes must have a management statement.

Management statements are created by the association at the start of a scheme. Among other things, they set out by-laws that help the scheme run efficiently. Each management statement must be registered with NSW Land Registry Services.

Management statements are binding on everyone who lives and works in a scheme, including visitors.

Visit the scheme management statements page for more information.

Initial scheme period

What is the initial period for a scheme?

The initial period is the time where the developer has control of the association. It begins when a plan is registered with the Registrar-General and ends at different times depending on the type of scheme:

• Neighbourhood and strata schemes: the initial period ends when one-third of the total share of the community property, otherwise known as unit entitlement, has been transferred from the original owner.
• Precinct and community schemes: initial period ends when at least one-third of the total unit entitlement under the scheme is made up of either or both of:
  • former development lots that have been subdivided into subsidiary schemes (that is, precinct, neighbourhood or strata schemes), for which the initial period has expired, and
  • development lots that are not owned by the original owner and for which an occupation certificate under the Environmental Planning and Assessment Act 1979 has been issued for development on the lots.

Are there restrictions during the initial period?

During the initial period, an association cannot:

• incur a debt for more than is set aside in its funds to repay it
• borrow money or give securities
• change or cancel the by-laws or make additional by-laws to create restricted property
• add land to the scheme.

Additionally, during the initial period, neighbourhood associations must not:

• give a lease of neighbourhood property
• create an easement burdening or restricting use of any land in the scheme
• release an easement, or a restriction on the use of land, that benefits neighbourhood property
• dedicate association property
• sell neighbourhood property, except to a resuming authority
• erect a structure on neighbourhood property
• subdivide or create neighbourhood property.

If any of the above tasks need to be carried out during the initial period, the association or developer can apply to the NSW Civil and Administrative Tribunal (Tribunal) for authorisation.

Service agreements during the initial period

During the initial period, associations may enter into agreements for the supply of services or recreational facilities. These agreements will end at the first AGM unless disclosed in the management statement before any lots are sold, or the agreement is ratified at the first AGM.

Insurance requirements

What insurance is required?

Policies must be with an approved insurer under the Insurance Act 1973. It is the responsibility of the association to ensure all necessary insurance policies are in place and up to date.

Insurance includes a building insurance policy, public liability, workers compensation and voluntary workers insurance, all of which need to be arranged for the scheme.

The total sum insured under the damage policy must be sufficient to cover:

• if the building or structure is destroyed: the cost of rebuilding or replacing the building or structure so that the condition of every part is not worse or less extensive than it was when new
• if the building or structure is damaged but not destroyed: the cost of repairing or restoring the damaged part of the building or structure so that the condition of the repaired or restored part is not worse or less extensive than it was when new
• expenses incurred in removing debris, and
• the remuneration of architects and service providers who are necessary so that the rebuilding, replacement, repair or restoration can be carried out.

An association is liable for a penalty of up to $550 for its failure to insure association property in accordance with the Act.

Valuations for insurance must be carried out at least once every five years by the association. Valuations must be carried out by a qualified valuer, who:

• has membership of the Australian Valuers Institute (other than an associate or student membership), or
• has membership of the Australian Property Institute (other than student or provisional membership), or
• acquired in connection with his or her occupation as a valuer, or
• has membership of the Royal Institution of Chartered Surveyors as a chartered valuer.

Executing documents

Community land associations give formal approval to documents by physically affixing the association’s seal.

From 30 September 2022, associations will be able to keep their seal in electronic form and execute documents by affixing the seal to documents electronically. Associations will also be able to continue to use the physical seal to execute documents.

The community land laws do not prescribe a particular type of electronic form for the seal. There may be different technologies that community schemes can use for an electronic seal. For example, a scheme may choose to use an electronic scan of the physical seal or a digital version of the physical seal. One consideration when making a choice may be the security features of the technology.

Who can keep the seal?

The persons who can keep an association’s seal, whether in physical or electronic form, are:

• if an association only has one owner, that owner or the managing agent of the association
• if the association has 2 or more members:
  • a member the association has nominated to keep the seal, or
  • the managing agent of the association.

How is the seal affixed?

The Community Land Management Act 2021 and sections 17A and 17B of the Community Land Management Regulation 2021 provide requirements for affixing the seal to a document physically or electronically.

In both cases the seal has to be affixed to a document in the presence of certain persons. They are:

• if the association only has one member, that member or the managing agent of the association
• if the association only has 2 members, both members or the managing agent of the association
• if the association has more than 2 members:
  • 2 persons nominated by the association for this purpose (who must be members of the association or the association committee for the electronic affixing of the seal), or
  • if no nomination has been made, the secretary of the association and another member of the association committee, or
  • the managing agent of the association.

If the seal is affixed in the presence of a managing agent, they must attest the fact and date of the affixing of the seal with their signature. If the managing agent is a corporation, the law enables an officer of that corporation to sign for the managing agent. Officers who can sign are:

• the president, chairperson or other principal officer of the corporation, or
• any member of staff of the corporation authorised by the president, chairperson or other principal officer to attest the affixing of the seal.

If the seal is affixed electronically, the signature of the managing agent can be done electronically. The electronic signature must identify the person and indicate their intention, be appropriate for the circumstances, and the person requiring the signature consents to the use of an electronic signature.