Conveyancing Sydney: Community Scheme Borrowing Risks

Yes. A community scheme's borrowing can increase the ongoing cost of owning property in Sydney, even when the advertised purchase price and current levies appear affordable. Since 1 April 2026, NSW section 174 community land information certificates must disclose money borrowed or proposed to be borrowed. Buyers should compare that disclosure with association budgets, meeting minutes, financing terms and their expected contribution liability before exchange.

The Debt That Does Not Appear in the Asking Price

A Sydney property can be sold without the buyer personally taking out the loan that may ultimately influence its ownership costs.

This distinction matters in community title developments, where an association manages shared property and may borrow money to finance expenditure across a residential estate, mixed-use precinct or commercial community scheme.

A buyer reviewing a townhouse in North West Sydney might examine the mortgage repayments, council rates, insurance, maintenance expenses and quarterly association contributions. All could appear manageable.

Yet the association may have approved financing for a substantial infrastructure project. Alternatively, its committee may be preparing a borrowing proposal that has not yet reached a general meeting.

Neither situation necessarily makes the property a poor purchase. Borrowing can allow a scheme to undertake necessary work without demanding the entire amount from owners immediately.

The financial question is whether future repayments, interest and related expenditure have already been reflected in the contribution schedule presented to the purchaser.

That is where a relatively modest NSW disclosure change becomes significant for conveyancing.

What Changed in NSW on 1 April 2026?

NSW Fair Trading introduced expanded disclosure requirements for community land information certificates from 1 April 2026.

Under these changes, the section 174 certificate must include information about money borrowed or proposed to be borrowed by the association.

The updated certificate requirements also address other matters, including certain compliance action, meeting information and exclusive supply networks.

However, borrowing disclosure is particularly important because it can reveal a future financing obligation before its consequences become apparent in an individual lot's regular contributions.

The change is explained in the NSW Fair Trading community land law changes for 2026.

The distinction between a section 174 and section 184 certificate

These certificates should not be confused.

Section 174 certificate: An association information certificate under the Community Land Management Act 2021, relevant to community, precinct and neighbourhood schemes.
Section 184 certificate: An information certificate under the Strata Schemes Management Act 2015, relevant to strata schemes.

Where an individual property forms part of a subsidiary scheme within a larger community structure, the conveyancing investigation may need to examine more than one level of association obligations.

The purpose is to identify the correct legal entities, contribution pathways and relevant financial records, rather than treating every development as a simple single-association arrangement.

A Borrowing Disclosure Is Not the Same as a Repayment Forecast

The presence of borrowing information on a certificate should begin a financial investigation rather than end it.

A certificate may identify an existing loan or proposed borrowing. That information does not, by itself, establish the complete future cost for a particular lot.

Buyers need to understand the underlying financing arrangement.

Information to investigate before purchase

- Approved or proposed loan amount

Why it matters: Distinguishes an existing financial commitment from a financing proposal that may change.

- Outstanding principal

Why it matters: Establishes the remaining amount borrowed, rather than relying on the original facility value.

- Interest rate and rate structure

Why it matters: Shows whether financing costs are fixed, variable or subject to future review.

- Repayment timetable

Why it matters: Identifies when principal and interest payments are due and whether repayments increase later.

- Loan maturity or refinancing date

Why it matters: Highlights a potential future cash requirement if a balance remains payable.

- Association budget treatment

Why it matters: Determines whether repayments are already reflected in approved contributions.

- Lot contribution allocation

Why it matters: Helps calculate the buyer's share according to the relevant scheme arrangements.

A particularly important distinction is the difference between a loan that has been approved and fully incorporated into current budgets, and a proposal that may produce higher contributions after settlement.

Both warrant consideration, but they present different levels of financial uncertainty.

How Community Scheme Borrowing Can Reach the Individual Owner

Community scheme borrowing should not automatically be described as a personal mortgage or loan taken out by every individual purchaser.

The association is the borrower under its financing arrangements. An owner's exposure ordinarily arises through the contributions that fund association expenses, subject to the applicable legislation, governing documents and actual arrangements.

Under section 104 of the Community Land Management Act 2021, association borrowing requires a resolution approving the loan at a general meeting.

The legislation also contains restrictions on borrowing during a scheme's initial period. This makes the association's stage of development and approval history relevant to a borrowing review.

The association's financial obligations ultimately need to be supported by its available funds, expected income and lawful contribution decisions.

As explained in the NSW Government's community scheme owner responsibilities guidance, owners may contribute through regular levies and special levies, with allocation affected by the scheme's unit entitlements.

Why a simple division by the number of homes can mislead

Suppose a community association borrows $600,000 and the development contains 40 properties.

Dividing the principal equally produces an illustrative figure of $15,000 per property before interest.

This is not necessarily what any particular owner will be required to contribute.

Actual contributions depend on the relevant unit entitlements, association structure, approved budgets, financing costs and lawful levy determinations.

In a mixed-use development, the financial allocation can be especially important because different lots may have materially different entitlements and ownership arrangements.

The purchaser therefore needs a lot-specific assessment rather than a generic estate-wide average.

The Three Records That Must Tell the Same Financial Story

A useful conveyancing approach is to test the borrowing disclosure against three separate categories of evidence.

1. The section 174 certificate identifies the exposure

Begin with a current certificate for the relevant association and property.

Identify existing borrowings, proposed borrowings, contribution information and the certificate date.

Where an amount or proposal is unclear, request the supporting records rather than assuming that the certificate provides every commercial term.

2. Meeting minutes explain the decision

The association's general meeting records can establish how the borrowing was considered, approved or deferred.

They may reveal the intended purpose of the funds, quotations considered, approval conditions, owner objections or changes to the proposed financing.

Minutes also help distinguish an informal committee discussion from a resolution passed at a properly convened general meeting.

The NSW Government's association meeting and voting guidance explains the procedures governing association meetings and resolutions.

3. Budgets show how the repayment may be funded

The budget and financial statements need to be assessed alongside the borrowing documents.

The purchaser should establish whether projected repayments have already been allowed for, whether expenditure is being met from existing funds, and whether further contributions may be needed.

The NSW Government's guidance on managing association finances explains the relationship between budgets, contributions and financial reporting.

A certificate, meeting resolution and budget that cannot be reconciled should prompt further enquiries before the buyer relies on the quoted levy amount.

The Sydney Purchase Scenario: When the Current Levy Is Already Outdated

Consider an illustrative townhouse purchase in a North West Sydney community scheme.

The selling agent's information identifies quarterly association contributions of $850.

The buyer initially uses this figure to calculate annual ownership expenses.

However, the section 174 certificate identifies proposed association borrowing for a major drainage improvement project.

A review of meeting records shows that the association has been considering a $620,000 borrowing proposal. The current approved budget does not yet include a final repayment schedule.

There is no evidence in these facts alone that the quarterly contribution will definitely increase by a particular amount.

Equally, there is no reliable basis to assume that $850 will remain the relevant contribution after the financing decision is completed.

Before exchange, the buyer's conveyancer should seek clarification about the status of the proposal, relevant resolutions, financing terms and likely funding arrangements.

The association's financial adviser, managing agent or other appropriate professional may also need to provide information that the certificate does not contain.

This example is hypothetical and does not represent a verified Sydney development or actual association loan.

The Timing Problem: Borrowing Can Change Between Certificate and Settlement

A certificate records information at a particular point in time.

A property transaction, however, unfolds over several weeks or months.

During that period, an association may hold another general meeting, approve a borrowing arrangement, revise its budget or determine additional contributions.

For this reason, a buyer should not automatically treat an earlier certificate as confirmation that the financial position remains unchanged.

A sensible sequence is to establish what is known before exchange and review material changes where appropriate before settlement.

Before exchange: Obtain relevant information certificates, meeting records, financing details and budgets.
During contract review: Ask the conveyancer to assess provisions dealing with levies, adjustments, disclosures and changes before completion.
Before settlement: Check relevant updated financial information, current contributions and any significant intervening resolutions.
After settlement: Allow for confirmed association contributions and monitor upcoming financial decisions.

Whether a particular contribution is payable by the vendor or purchaser, or adjustable at settlement, depends on the statutory position, the relevant contribution and the contract terms.

That allocation should be reviewed by the buyer's conveyancer rather than assumed from the date of the borrowing decision.

When a Loan May Be Rational Rather Than a Warning Sign

Not all community scheme debt indicates poor management.

An association may use financing to undertake necessary works that would otherwise require a substantial immediate contribution.

Borrowing may also allow expenditure to be scheduled while preserving an appropriate level of liquidity for ordinary operations.

The relevant questions are whether the borrowing was properly approved, whether the proposed expenditure is justified, whether repayments are sustainable, and whether owners have been given an understandable financial picture.

A well-documented loan for essential works may represent more disciplined planning than repeated emergency fundraising.

Conversely, a loan with unclear terms, weak budget assumptions or repeated refinancing pressure deserves additional scrutiny.

Borrowing should therefore be assessed on its underlying purpose and financial structure, rather than treated as an automatic reason to withdraw from the purchase.

What the Borrowing May Mean for Renovation and Project Delivery

The financial impact is not confined to contribution notices.

Owners who intend to renovate immediately after settlement may already have committed substantial money to flooring, kitchens, bathrooms, fit-outs or other improvements.

If association contributions rise to support an infrastructure loan, that can reduce the funds available for the private renovation.

Association-funded works may also coincide with planned private projects, creating scheduling considerations around shared access, service interruptions or contractor availability.

The relevant commercial decision is whether the buyer's capital budget remains workable after both shared-property obligations and private improvements have been considered.

For broader community title obligations, including shared infrastructure responsibilities, see Elyment's NSW community title guide covering private roads, facilities and levies.

The Borrowing Due-Diligence Test Before Exchange

A useful financial review should result in answers that the buyer can actually use, not simply a larger collection of documents.

1. Map the scheme structure. Identify the community, precinct, neighbourhood or subsidiary scheme obligations relevant to the property.

2. Obtain the current section 174 certificate. Review disclosed existing and proposed borrowings.

3. Identify the borrowing authority. Request relevant general meeting resolutions, agendas and supporting papers.

4. Review the financing arrangement. Establish principal, interest, repayments, maturity, fees and any material conditions.

5. Reconcile the association budgets. Check whether repayments are already funded through approved contributions.

6. Calculate the lot-specific exposure. Use the relevant unit entitlements and scheme arrangements, with professional assistance where necessary.

7. Review the transaction timetable. Identify upcoming meetings or decisions that could materially change the financial position.

8. Test affordability and obtain advice. Consider a higher-contribution scenario and seek contract, financing and tax advice where appropriate.

Buyers assessing the broader due-diligence process can also refer to Elyment's guide to NSW property searches and settlement checks.

Where exchange is approaching, the Sydney contract review guide explains the importance of identifying unresolved issues before signing.

What Happens if the Borrowing Information Is Incomplete?

An incomplete certificate, unclear loan description or inconsistent budget should not automatically be treated as proof of financial misconduct.

It does mean the buyer lacks information that may be material to the purchase decision.

The next step is to request clarification from the association or managing agent, supported by the relevant records.

NSW Fair Trading's community association record-keeping guidance identifies financial statements, accounting records, meeting minutes and other documents associations are required to maintain.

A buyer's conveyancer can advise on appropriate information requests and available options if material financial information remains unresolved before the contractual deadline.

The objective is not to demand certainty about every future decision. It is to distinguish documented obligations from estimates, proposals and unknown exposures.

The Purchase Price Is Only One Part of the Financial Commitment

Sydney property buyers frequently spend considerable time negotiating the purchase price and mortgage terms.

In a community scheme, those figures may not fully describe the costs of ownership.

Association borrowing can spread major expenditure across future periods, making important costs less visible in the current contribution schedule.

The expanded NSW section 174 disclosure requirements provide an opportunity to identify those commitments earlier.

But disclosure alone does not calculate the cost. That requires financing information, budgets, minutes, the correct scheme structure and a lot-specific contribution assessment.

For buyers, the decisive question is not simply whether an association has borrowed money. It is whether the likely financial consequences have been properly understood before the buyer commits to the property.

Important information: This article provides general information about NSW property transactions and community land scheme finances. It is not legal, financial or taxation advice. Buyers should obtain advice from an appropriately qualified NSW conveyancer or Australian legal practitioner and, where necessary, a financial adviser.

Sources and References

Government and Legislative Sources

NSW Fair Trading: Community Land Law Changes 2026
NSW Legislation: Community Land Management Act 2021
NSW Government: Community Scheme Owner Responsibilities
NSW Government: Association Meetings and Voting
NSW Government: Managing Association Finances
NSW Fair Trading: Community Association Record-Keeping