Purchasing property can be a big deal. Unfortunately, the antiquated language of ‘land law’ has made purchasing property complicated for first timers. If you’re ‘in the market’, no doubt you will have come across an endless stream of legal terminology that has no use in everyday language (see ‘demise’, ‘fee simple’, or ‘title’). This article sheds some light on one of the most important terms that applies to many new properties: ‘strata title’.
Strata title is a form of land ownership that applies to a building or collection of buildings that have been divided into lots. Each owner of a strata title property owns and is registered on the title to an individual lot, and shares the ownership of common property (e.g. gardens, driveways, stairwells etc.) with other lot owners.
Strata title is an important concept to understand, particularly if you’re looking to purchase an apartment or unit in a stratified (e.g. multi-storey) building. Owning land in a strata title scheme means a lot more than merely owning the four-walls of your apartment. For instance, owners must familiarise themselves with the functions of an ‘owners corporation’, ‘by-laws’, and a host of other rules unique to this type of land ownership.
Why strata title?
Believe it or not, owning an apartment in Australia used to be far more complicated than it is today. The main complication arose out of the traditional ‘two-dimensional’ view of title to land. Over the centuries, other types of land ownership schemes were developed to solve the problem of ‘three-dimensional’ title.
Some of these other schemes still exist, take ‘company title’ for instance, where ‘home unit’ owners purchase shares in a public company entitling them to exclusive use and occupancy of an apartment in a building. In those cases, the resident doesn’t own their own apartment (they are not the registered proprietor on title). Instead, the company is the sole owner of the land, and each ‘member’ is merely a shareholder in that entity, the shareholding giving the member the right to occupy a particular apartment. It is a confusing system of ownership, full stop!
What are the benefits of strata title?
All strata schemes in New South Wales are regulated and managed under the Strata Schemes Management Act 2015 (NSW) (the Strata Act). This legislation is well-known to property advisors and managers, and many of them choose to specialise in strata title itself.
The Strata Act’s objective is to govern the management of strata schemes. It provides a mechanism through which lot owners, owners corporations, and third parties can resolve disputes between themselves in a timely and cost-effective manner through the NSW Civil and Administrative Tribunal (NCAT). NCAT is a cost effective and user-friendly tribunal empowered to resolve disputes in strata living.
Strata schemes are also governed by strata ‘by-laws’. These are the rules governing each owner’s use and occupation of their apartment and common property. Strata by-laws provide certainty to owners about renovations, expected behaviour of owners and occupants, use of the common property, pet ownership and leasing. Strata by-laws are binding on lot owners and the owner’s corporation. If a by-law is breached, either party can obtain an order from NCAT that a specific by-law is enforced or complied with.
Similar legislation and tribunals exist in other states and territories in Australia.
What are the downsides of strata title?
Many of the downsides of purchasing into a strata scheme are present in almost every kind of ‘communal living’ arrangement. As such, it is always important to understand the community that you will be entering into before purchasing an apartment. Difficulties may arise if you wish to conduct certain kinds of renovations to your lot, or if you identify issues with common property (such as pools, staircases, or outdoor decking). Usually, these changes will require consent from the owners’ corporation before works commence which may be difficult if you don’t get on with your neighbours.
It is also very important to ensure that the building has engaged a competent building manager. We recommend conducting some due diligence by speaking with current owners about the quality of the management firm. It may help to Google search the name of the owners’ corporation to see if any legal disputes have arisen in the past with current or former lot owners. The quality of the managing agent’s conduct is usually made clear in the reasons for these decisions.
We can help
Ultimately, strata title is a very common scheme of ownership that applies to most apartment blocks and subdivisions. The legislation is designed to be simple and effective, and many property managers have a comprehensive understanding of how these schemes should operate.
Contact JFMAndreyev on (02) 9199 8597 if you are considering whether to purchase a property in a strata scheme. If you would rather get in contact through email, send your question through or by email at firstname.lastname@example.org.