Residents’ associations and the Incorporated Societies Act 2022: restrictions on distributing surplus assets

What is changing

Many existing residents’ societies hold valuable land and infrastructure on behalf of their members, often on the assumption that those assets can ultimately be transferred back to residents or otherwise dealt with flexibly if the society ever winds up. Under the Incorporated Societies Act 2022 (Act), that assumption is no longer safe. The law now imposes strict rules on how land and other surplus assets must be dealt with when an incorporated society winds up, and for many societies, those rules have significant and often unexpected consequences.

Under the new regime, an incorporated residents’ society is generally prohibited from distributing land or other surplus assets to its members when it winds up (which may happen when the society is no longer required). Instead, the Act requires that those assets be transferred to another not-for-profit organisation, in accordance with the society’s constitution. This reflects a deliberate policy shift away from treating incorporated societies as vehicles for member benefit and towards a model where assets must remain within the not-for-profit sector once a society ceases to exist.

Transitional regulations: a temporary exception

Recognising the disruptive impact this would have on residents’ societies that own communal facilities (such as private access roads and utilities) and were registered under the old 1908 Act, the Government introduced the Incorporated Societies (Transitional Arrangements – Disposal of Surplus Assets to Members) Amendment Regulations 2025 (Regulations). The Regulations provide a temporary exception for certain existing societies to retain the ability to distribute surplus assets, including land, to their members on winding up.

However, these transitional provisions are both time-bound and limited in scope. They came into force on 15 January 2026 and expire on 5 October 2028 and only apply if the society actively elects to rely on them in its constitution. After that date, the general prohibition on member distributions applies in full, with no discretion or extension to amend the constitution afterwards. The transitional regime does not provide a permanent solution; it simply creates a window of time in which societies can plan, restructure, or, if appropriate, wind up on terms that still reflect member expectations.

The importance of getting it right

From a legal perspective, a society’s constitution is crucial. It must be carefully drafted to reflect whether the society intends to rely on the temporary exception or transition fully into the new regime. If the constitution is unclear, inconsistent, or not properly aligned with the society’s intentions, control over how land is ultimately transferred may be lost. In some cases, the Registrar of Incorporated Societies may determine how surplus assets are applied, particularly if a winding up occurs after the transitional period has expired.

Practical implications for residents’ associations

For many residents’ societies, this framework sits uncomfortably with how communal land is viewed in practice. Roads, reserves, and shared facilities are often funded and maintained exclusively by residents, who consider them as belonging to the community.

This is why early legal advice is now critical. The transitional Regulations offer breathing space, but they also have the potential to create a false sense of security. Decisions about whether to rely on the transitional provisions, amend constitutions, restructure into a different legal vehicle, or plan a wind up all carry long-term and often irreversible consequences.

What residents’ societies should do now

For any residents’ society that owns land or communal infrastructure, the key question is no longer simply how assets are managed today, but what the law will require to happen to those assets at the end of the society’s life and whether that outcome aligns with members’ expectations.

If your residents’ society has not yet re-registered, or is considering its long-term structure, or holding land or communal facilities for the benefit of its members, now is the time to seek advice.