Are you planning to rent or purchase an apartment, townhouse or a unit? If yes, you’ll most likely come across strata schemes offering those properties, especially in the densely populated regions. A strata property comes with a strata title, similar to the Torrens title for most stand alone properties in Australia.
In the case of strata property, several housing units share one land title. Each unit, commonly referred to as a ‘lot’, holds a strata title. Strata ownership means that you own your unit as well as the common assets in a building complex. We’ll be delving deeper into strata titles a little later, but first, let’s get the basics out of the way.
What is strata?
Strata is a real estate form of ownership introduced in Australia in the early 60s to grant ownership of only a structure or building section. The owned portions are called ‘lots’ and apply to property types, including townhouses, apartments, villas, units, commercial offices, factories, etc. You might not fully understand strata without knowing the strata title concept, as these go hand-in-hand.
What is a strata title?
A common question in the Australian real estate space tends to be: what is strata title ownership and how exactly does it work? A strata property comes with what is known as a strata title. But as an apartment or villa owner, you don’t just own your unit space in a strata building. You also own and are responsible for the common assets, including the staircases, corridors, walls, fences, and so on. The common property and common area do not form part of your individual property but are jointly owned and managed by the lot owners under the Owners Corporations.
The Australians first used the strata titles system in 1961 in New South Wales. Back then, a strata title in NSW would grant you ownership of only apartment blocks, but today, that has been broadened to cover over a dozen other property types.
Before the current strata title management methods, lot ownership was attained using company title, which presented its fair share of challenges, including possible restrictions for property loans such as mortgages.
Since Australia introduced the strata system, many countries have adopted the technique including New Zealand, South Africa, India, Canada, Indonesia, Singapore, the Philippines, United Arab Emirates, Fiji, and Malaysia. Still, several other countries are using the system but under altered descriptions and terminologies.
Strata title schemes comprise individual units within a building complex as well as the associated common areas. However, as earlier indicated, common assets or areas are not individually but jointly owned. Units or lots feature apartments, storehouses, or garages and are reflected in a strata main title as the sole property of a lot owner. The common assets represent everything else in a strata scheme that is not captured in individual lot titles, including the common gardens, driveways, roofs, and stairways.
Most, if not all, strata titles will include additional land parcels including parking slots and air-con ledges. A strata plan will contain a strata title with details of the lot’s schedule.
Now that we’ve spoken about strata title definition, what good is a strata title to an owner?
Why is a strata title important for a homeowner?
Other than indicating you’re the valid owner of a real estate property, a strata title is essential because:
- It protects your property if the developer runs into financial problems with his mortgage company.
- It is a documented proof of the size of ownership you hold in a strata scheme and your share in the total lot size. This helps the management to evaluate your fair share of strata levy and management fees via your lot entitlement.
- It can be used as security when seeking financing.
- It initiates the establishment of the management corporation by the lot owners.
Any delay in issuing a strata title will mean that the entire land in the master title still belongs to the building’s owner/developer. This can become a problem when the lot owner finds himself or herself in a situation where they cannot prove legal ownership of their unit.
When should the strata title be issued?
Strata titles are issued once buyers take possession of the unit. New lot owners should, in general, expect to receive their titles once they have received an official notification from the developer or previous owner alongside unit keys and other property documents.
However, issuance can differ from state to state as they operate under different legislation. This especially pertains to the development of new strata projects where, for example, state legislation can dictate that developers begin to process strata titles upon the completion of a strata project’s super structure.
How to check for the strata title issuance?
You can contact the Land Registry Services in your state and find out where your titles have been issued. Alternatively, you can use the provided master title details to conduct a quick search using one of your state’s free online title search tools.
What happens after your title is issued?
Now you’ve received your strata title – congratulations, you’re now the legal owner of your lot. The post titling processes are not complicated either – you will register with the respective owners corporation. You’ll then be required to make your periodic (mostly quarterly) contributions in the form of strata levies towards running the entire strata complex.
Part of the decisions of an owners corporation is to locate and take out insurance for the building and the common areas. Read more on strata insurance in our simplified guide.
Holding a strata title also means that you subscribe to a set of rules that govern the scheme’s operations. Depending on an owners corporation’s rules, regulations and by-laws, restrictions will generally include:
- Agreeing to seek permission if you wish to keep pets within the strata complex
- Agreeing to maintain your property in a good state at all times
- Agreeing to use your unit only for legal activities
- Agreeing not to disrupt other residents’ enjoyment and right to a peaceful stay in the strata scheme.
Speaking of a strata scheme…
What is a strata scheme?
The phrase ‘strata scheme’ is an alternative description of a strata title development. It is essentially a single, or several buildings split into lots of separate villas, townhouses, units, or apartments. Upon purchasing a strata unit, you become the owner of that lot and part owner of the common property that comes with it. This may include the common garden, walls, and stairways.
Unlike living in a stand-alone home, a strata community offers a somewhat different experience. For example, your parking areas may be controlled, general activities could be restricted, and the use of the unit could also be controlled.
To avoid running into problems with the management or other unit owners, you want to make sure that you’re aware of your obligations as an owner or occupier of a strata unit. You can do this by checking the bylaws of the strata scheme.
What do you own in a strata title?
Strata titles are quite different from your own stand-alone house or apartment.
With strata properties, you own a particular unit or lot and part of the common areas, such as stairways, common gardens and other communal spaces.
You are the sole owner of your unit or lot property. This ownership applies to household contents such as appliances, furniture, and fittings. Internal walls and doors may also be included.
You also have part-ownership of common property. These properties are managed and maintained by the owners corporation / body corporate. This includes roof tiles, shared plumbing, ceiling, external doors and windows, wiring, original floor tiles and more.
What is – and is not – included in your strata scheme can differ from property to property. By checking the bylaws of your strata scheme you can get an overview of what you own or partly own.
All future decisions or amendments to current rules are made collectively through a body corporate or an owners corporation. This means that you, as part of the owners corporation, have some influence over the rules, maintenance and bylaws of the entire property. However, you are also subject to rules and boundaries that have been established for the strata.
In addition, strata properties will have unified insurance that covers both individual units as well as the common areas.
The Pros and Cons of buying a strata property
You may be asking whether a torrens title house is better than a strata title property.
To aid you in deciding whether a strata title property is right or not, here are some pros and cons of this type of real estate investment:
- Regular strata unit maintenance burden is taken away from individual owners and is instead taken care of by the owners corporation’s quarterly levies.
- Strata properties are generally situated in great locations. They may have cafes and public transport close by and may be much closer to a city than what you could afford with a stand alone house.
- You may be able to access great facilities for a fraction of the cost. How about having unlimited use of a pool, gym or rooftop garden?
- Buying a strata unit is generally much cheaper than a stand-alone house.
Since strata units are more affordable and accessible, their demand has generally remained high and stable over the years.
- Quarterly levies paid by owners to the owners corporation can be quite expensive, especially in projects with more luxurious facilities such as swimming pools, lifts, and gyms.
- Strata properties affected by building defects have been a huge problem, particularly in the eastern states of Australia.
- You may be subject to special levies if unexpected expenses occur or the building has not been managed well in the past.
- Many more neighbours may be living close by and this could lead to noise problems.
What is an owners corporation / body corporate?
An owners corporation or body corporate is an entity that manages the common property and areas of a residential, commercial or industrial strata building.
You become a member of an owners corporation or body corporate if you hold a strata title in Vic, NSW, Queensland, or any other Australia state for an apartment, unit, villa, or townhouse.
What is the difference between a strata title and an owners corporation?
Strata titles relate to property ownership of townhouses and apartments with communal spaces and private residences. Strata titles grant the purchaser ownership of units called “lots” comprising the core purchased building and may also include a few other areas such as the garage, balcony, or storage space. The common assets such as common gardens and stairways are utilized by the strata community and are owned by the owners corporation or body corporate.
An owners corporation or body corporate is made up of all the unit owners in a strata building or community. The members are responsible for voting in officials, appointing people to office, and maintaining the strata community’s common properties and areas.
Since the owners corporation is a body comprising all unit owners, all the members cannot possibly participate in running the strata project. This is why a strata committee is appointed to ensure that timely decisions are made, and operations run smoothly even in the absence of lot owners.
A new committee is voted in each year during an annual general meeting. During the same time, a strata manager may be elected to execute some of the corporation’s duties to the strata residents, including taking out insurance, making claims, and solving disputes.
The owners corporation establishes a set of rules called by-laws to bind all the members of a strata community, including the lot owners, management, and tenants. By-laws generally impose restrictions on things like pet-keeping, double parking, property use, and more. The owners corporation can alter, add or completely remove certain by-laws from its constitution as it might deem fit.
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