Legislation regulating communities with shared ownership of common property (“shared communities”) that do not fall within the ambit of a Strata has been on the horizon for some time now. Examples of such shared communities include townhouse developments, commercial developments and developments with semi-detached or detached units.
The government has acknowledged the need for the implementation of legislation that will effectively deal with the multitude of challenges faced by shared communities, including but not limited to non -payment of maintenance contributions of the owners. In an effort to address the increasingly growing concerns, the government has reached out to various stakeholders to obtain feedback on proposed legislation now referred to as the Registration (Shared Community) Act (“the proposed Act”).
Some of the key areas that the proposed Act intend to address include:
- The establishment of a regulatory authority with overall responsibility for the management and regulation of community operations.
This regulatory body would have a wide ambit of power including receiving and processing applications for registration of communities, investigating and addressing complaints, facilitating dispute resolutions, and issuing certificates authorizing corporations to exercise the power of sale in appropriate circumstances as outlined in the legislation, among other things.
A developer who intends to develop and sell property which is classified as a shared community will also be required to register with the said regulatory body. The proposed Act provides that any developer who contravenes this provision will be liable on summary conviction, to a fine or a term of imprisonment to be determined.
- The requirement for the establishment of body corporate comprised of the owners within the respective communities which will have perpetual succession and be capable of suing and being sued in its name.
Another important provision in the proposed Act is the requirement of owners within the shared community to become a body corporate referred to as “the community corporation”. The community corporation will be capable of suing and being sued. The proposed Act provides that there must be an executive committee of the community corporation which shall consist of not less than three but no more than nine owners. The executive committee will be tasked with performing the duties of the community corporation which are clearly set out in the proposed Act. Some of the duties will include: keeping a record of all the owners within the community; ensuring the common property is in good state of repair and properly maintained; determining the amount of contribution to be raised to cover administrative expenses; levying contributions on the owners; recovering unpaid maintenance; demolition of unauthorized extensions to existing external walls or illegal structures, preparing yearly financials, and exercising power of sale in accordance with the legislation.
Interestingly, the proposed Act requires that all shared communities comprising more than twenty lots must be managed by a property manager. Only shared communities with less than twenty lots can be self-managed.
The community corporation is also required maintain insurance for the common property and building elements which is defined as infrastructure of the shared community, including drains, receptacles, guard houses, tennis courts, swimming pools, club houses and other common property.
- The calculations of maintenance contributions and the recovery of unpaid maintenance contributions.
The proposed Act provides that contributions paid by each owner will be based on proportion of entitlement registered on the shared community plan. It also provides that in circumstances where the unit entitlement is not assigned on the shared community plan such contributions will be equal among each owner. The term shared community plan has not yet been defined in the Act. This definition of shared community plan is very essential as it is one of the supporting documents that must be provided by a developer in the registration process. It also provides the basis on which contributions will be determined.
Unpaid contributions, together with any reasonable costs incurred in collecting same will be recoverable as a debt due to the community corporation, by the person who was the owner at the time of the contribution became payable or by the person who is the owner at the time proceedings are instituted.
The outstanding contributions will be treated as a charge in each lot and shall run with the lot. This charge shall be ranked in priority to any existing mortgage or other charges.
This provision is noteworthy, as the obligation to settle unpaid contributions will not be limited to the owner who defaulted but can extend to a person who is the owner at the time proceedings instituted, this could include a subsequent owner.
- Order of possession and power of sale in respect to unpaid maintenance.
Another interesting provision is the ability for the community corporation to apply to a court for an order of possession in circumstances where a) an owner has not paid his/her contribution for a specific time period stipulated in the proposed Act; b) all efforts to locate the owner of the lot have been unsuccessful and c) the community corporation intends to rent the lot to recover the unpaid contributions until the owner or his agent is found and resumed obligations with respect to the contributions. In this instance the Court can make an order granting possession of the lot to be rented and make relevant orders directing that all rental income is paid directly to the community corporation and that maintenance contributions be deducted therefrom.
Surprisingly, there is no requirement for the community corporation to ensure best efforts are made to secure reasonable rental rate or direction as to the rental rate to be used.
The community corporation will also have the infamous power to sell a lot to recover unpaid contributions in circumstances where an owner fails or refuses to pay contributions levied. The proposed Act details the steps that must be taken by the community corporation before this power can be properly exercised.
- The Creation of by-laws
Similar to Strata developments, shared communities will be regulated by by-laws which will be used in the control, management, administration use and enjoyment of the common property. Like the Registration (Strata Titles) Act will be binding on the community corporation and the owners. The by-laws set out the rights and obligations of the owners, voting rights of owners, the roles and responsibilities of the executive committee and the community corporation.
The proposed Act is a new mechanism that will assist with the day-to-day problems arising in communities with shared common property. Often times owners in such communities are left with little or no recourse which ultimately negatively impacts relationships among owners, the state of the property and the value of the properties within the communities. While the proposed Act will play a positive role in the governance of shared communities, there are a few things that must be considered before its implementation. The proposed Act must ensure that basic property rights are protected, it must contemplate how existing shared communities will be dealt with, and take into consideration the minimization of costs now associated with effectively registering operating and managing shared communities.
Natasha Rickards Baugh is a Partner in Myers, Fletcher & Gordon’s Property Department. She may be contacted via email@example.com or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.