Internal Roads within Subdivision
Dec. 2019
If a subdivision is big enough you may need to create roads within it. If the council won't build them and take ownership, then the roadways will need to be privately owned, and most commonly they are owned by all the separate lot owners who use them.
What happens when the first pothole appears? You need a set of rules to determine how the roadway is maintained, and some means of enforcing them.
A recent 15 lot countryside-living subdivision we did had 3 internal private roadways. It was proposed to us that the rules could be set through an Incorporated Society under the Incorporated Societies Act 1908 that all the owners had to belong to, as was done at Omaha. We chose not to do that. The main reason is that owners have to join when they buy and resign when they sell, and there is a quite complex set of additional paperwork needed which adds cost. Sometimes people (and their lawyers) forget to do this and it becomes messy. And, an Incorporated Society needs a constitution and a set of administration rules, like having a committee, holding an annual general meeting, appointing a chair person, setting levies for the cost of running the society, insurance, a maintenance fund and so on. Owners don't want to commit significant time or money, and the developer doesn't want to remain involved after selling all the lots.
So, our solution was to include maintenance covenants which attached to the title. These maintenance obligations dealt with keeping the roadways and associated areas in a good state, but the important thing is, it is for the owners in their own time to organise to fulfill these obligations. There is no positive obligation to pay a levy or insure the roadways, have a committee or meet periodically. In terms of insurance, if there is a problem with the roadways such as a pothole then the contractor who carries out those works will be insured, and it is for owners to determine whether they need any additional insurance.
Every subdivision requires a different approach depending on its size and complexity but for this particular subdivision, having a governance structure for the private roads which was more owner driven and less rigid made better sense.
Written by Blair Franklin, Partner.
