Can a Community Association increase Levies after a lot is Subdivided?

A common issue in New South Wales community title schemes arises when a lot is subdivided into two or more lots. The subdivision may increase the number of dwellings, occupants and demands on shared infrastructure, but the owner’s levy contributions do not automatically increase.

This raises an important question:

Can a community association require a subdivided lot owner to pay more, even if unit entitlements remain unchanged?

The answer may be yes, in some circumstances, through the use of a carefully drafted exclusive use by-law.

Does subdividing a lot automatically increase levies?

No.

In a community scheme, levy contributions are determined by unit entitlement. Subdividing a lot does not automatically result in an increase in unit entitlement or levy contributions.

As a result, a lot that was previously contributing one share of community costs may continue to contribute the same amount despite creating additional dwellings and increasing the use of shared facilities and infrastructure, because the unit entitlement of the original lot, is now apportioned between the lots that result from the subdivision (which share the original unit entitlement).

Can a community association change unit entitlements after a subdivision?

Potentially, yes.

The legislation provides mechanisms for unit entitlements to be reviewed and adjusted where circumstances justify a change.

However, a unit entitlement review requires:

• valuation evidence;
• legal costs;
• formal approval processes; and
• an application to NCAT.

For many schemes, the cost and complexity of a full review may outweigh the potential benefit.

Can an exclusive use by-law require additional payments?

In some circumstances, an exclusive use by-law may provide an alternative approach.

A by-law can grant a lot owner exclusive use of a defined area of association property. In return, the by-law may require that owner to pay an ongoing fee to the community association.

Importantly, the fee is separate from ordinary levies. It arises because of the exclusive rights granted under the by-law rather than from the lot’s unit entitlement.

This means a community association may be able to increase the overall financial contribution made by a subdivided lot owner without changing the scheme’s unit entitlement schedule.

When might an exclusive use by-law be useful?

An exclusive use by-law may be worth considering where:

• a lot has been subdivided into multiple lots;
• owners believe the existing contribution structure is unfair;
• the scheme wishes to avoid a costly unit entitlement review; and
• the benefiting owner is willing to accept additional obligations in exchange for exclusive rights.

Every scheme is different, and legal advice should be obtained before implementing such an arrangement.

Is an exclusive use by-law a substitute for changing unit entitlements?

Not necessarily.

A by-law does not alter unit entitlements and should not be viewed as a replacement for a formal entitlement review where one is warranted.

However, where a subdivision creates a perceived imbalance in contributions, an exclusive use by-law may provide a practical and commercially sensible solution that avoids the cost, delay and uncertainty of a full unit entitlement adjustment.

Frequently Asked Questions

Can a community association increase levies after a subdivision?

Not automatically. Levies are generally determined by unit entitlement, which does not necessarily change when a lot is subdivided.

Does a subdivision require a reallocation of unit entitlements?

Not in every case. However, a review may be appropriate where the subdivision significantly changes the relative value or use of lots within the scheme.

Can an owner be required to pay more without changing unit entitlements?

Potentially. An exclusive use by-law may impose additional payment obligations linked to the grant of exclusive rights over association property.

Is an exclusive use by-law cheaper than changing unit entitlements?

Often yes, although the suitability of the approach will depend on the particular circumstances of the scheme.

Should a community association obtain legal advice before adopting this approach?

Yes. The validity and enforceability of any by-law will depend on its drafting and compliance with the applicable legislation.

Next steps

Property issues often involve more than a single legal question. Whether you are dealing with a community title subdivision, a property development, a sale or purchase, leasing arrangements, easements, title issues or broader property-related disputes, the Property Law team at Penmans can assist. We advise developers, community associations, owners corporations, primary producers, businesses and private clients across a wide range of property matters throughout New South Wales. If you would like advice tailored to your circumstances, please contact our team.