To the unsuspecting eye, a property purchase can seem like buying a house (bricks and mortar). The purchase is in fact far bigger and more complicated than that. You are buying land. In some cases that land is communally shared with other property owners. 

All sorts of complications can arise from the fine print on land sales, including easements, but particularly in the case of shared land ownership, strata titles, and company titles.

If you are buying a property that shares land with other owners, which is the case with buildings such as apartments, units, townhouses, and even some houses, it’s important to know which title it comes under: Strata or company.

Understanding the bigger picture is important for making a quality decision on how you buy and what the terms and conditions are. It’s also important to check local regulations as legalities differ, depending on which state or territory your property is located in.

Different Land Titles

Properties can be sold under different titles, depending on land ownership. 

Usually, houses in Australia are sold as stand-alone properties (i.e. houses) and come under a Torrens title (also known as a freehold title). This means the title holder has full ownership of the property and any buildings situated on the property.

Dangers of Torrens Titles

• Outstanding mortgage

Ideally, when you purchase a property the amount still owed to the bank from the current owner will be less than the property value. That means the vendor will be able to pay back any outstanding money when the sale is completed. It’s important to have a conveyancer or solicitor check against any outstanding mortgages before you sign the sale contract. If any money is still owed to the bank or lender, they are legally able to hold onto the title themselves until their debt is paid.

• Property boundaries

A Torrens title property that hasn’t been surveyed doesn’t have don’t have proper boundaries and is known as a Limited Torrens title. To convert the pretty to a standard title you will need to pay to have the boundaries investigated and confirmed.

• Easements

There can be conditions for how your land is used known as easements. Usually, this applies to part of a property, like the front or back area where council pipes, wires, or gas lines might be laid. You need to be aware of any easements before you purchase a property as they may interfere with any plans you have to do renovations, extensions, or place additional buildings or fences on your property.

What is a Strata Title?

With a strata title, the property owner owns the inside of their particular building only. They do not own the outside. While this sounds confusing, owners are able to access a surveyed structural diagram to illustrate which parts of the property are individually owned and which are common. 

Strata titles usually apply to apartments, townhouses, and villas with common areas, including land, shared by all owners. What these shared areas are will vary widely from property to property but can include stairwells, lifts, garbage shotts, swimming pools, gardens, gyms, foyers or entrances, car parking entrances, etc. There are annual fees that apply with higher fees for more modern and high-maintenance facilities like pools and lifts. Taking these costs into account is important as part of your overall property expenses and obligations.

Strata is a way of handling legal ownership when buildings and land are co-owned by multiple holders, as well as managing the property in a way that is known and transparent to all parties.

As well as the costs it also pays to check over the terms and conditions applied as you’ll need to abide by the laws and regulations set out, which can sometimes affect lifestyle choices for you or your future tenants. 

You’ll need to attend the general meetings to have a say in what’s coming up and be aware of any issues or changes. It also pays to look over the previous minutes from meetings to see if there are outstanding disputes of big expenses to be covered in the coming months or years that you might be required to contribute to even if the incident occurred before your purchase.

Pros and Cons of Strata Titles

Strata title advantages

• All owners get a vote on decisions
• Fair and transparent
• Adds more property value than a company title

Strata title drawbacks

• Commitment to regulations and general meetings
• Fees and levies apply (usually annually)
• Additional payments to cover unforeseen damage repairs and upgrades

What is a Company Title?

Company titles are not so common now and have largely been replaced by strata titles. They were at their peak in the 1960s but still have their place and advantages today, particularly with art deco apartments in CBDs like Sydney, Melbourne, and Perth.

A company title is when a company owns a building in which you purchase shares. You have part ownership of the entire building and land, depending on the share percentage you purchased. As with strata titles, there are limitations to what you can do and how the building can be used, which also covers asking permission before leasing the building or selling the property.

Before you sign a contract for a company title property make sure you understand the restrictions that are part of the ownership and get your conveyancer or solicitor to explain any potential legal and financial issues that you may face as co-owner.

Pros and Cons of Company Titles

Company title advantages

• Because of shared ownership properties, shares mean excellent value for money
• Holding onto a property long-term may see a change to strata title that increases the property value

Company title drawbacks

• No say or consultation in company director decisions
• May have more difficulty securing a loan (as lenders do not have the same flexibility to recoup costs if necessary)
• Can sell more slowly compared to strata properties

Other Property Titles

While not seen as frequently there are a number of other titles you might come across for property purchase and investments. These will make a property quite unique and can be a good fit for the right buyer. It’s important that you understand what the title means and do thorough research into the terms and conditions before you buy.

Community Titles

Community titles are similar to strata ones except that the jointly owned property is managed and maintained by a “community” rather than a board. It is better suited to very large estates, neighbourhoods, and multiple subdivisions where it would be unrealistic to have every member be on the board and contribute to decision-making. In cases of community titles, the upkeep of common areas is supported by owner contributions.

Stratum title

A stratum title is a combination of different titles within the same property.

There can be fully owned land and company titles within the same property (with “company” being all other property title owners taking an equal share). This would be the case instead of a strata title that covered the entire property, there would be individual titles mixed with common ground titles.

Leasehold title

Leaseholds are usually reserved for rural areas (but also apply to the entire ACT). In this case, the government owns the land and withholds the title, and leases it to certain applicants for a specific length of time (typically long-term).

These properties most often consist of agricultural or specific property types rather than residential property, such as wheat farms, cattle farms, and church or community buildings. 

Retirement village

Retirement villages can fall under just about any of the titles mentioned in the blog, depending on who initially set it up, how big it is and how they were set up. It is important to understand the title properly if you’re downsizing, to avoid costly mistakes.

It’s not at all uncommon to see a retirement property fall under strata, leasehold, community, or other title types. While there are fully flexible conditions around owning and leasing these properties under any title, be careful of restrictions around financing.