what is strata title?

Frank,

You have a lot to learn before you contemplate doing a development. Here is some info for NSW but the concept is the same whatever state you are in.

STRATA TITLE

Horizontal Subdivision

Strata title is also part of the Torrens title system. It permits the horizontal subdivision of land into separate titles for separate “strata” lots or units, which is something that the former torrens system was not set up to do. Each lot or unit represents a separate apartment.

The title or ownership rights in land continues, in theory, along imaginary lines from the centre of the earth up though the boundary on the surface and then upwards to the sky. However, the owner of a strata title home unit has title to that cube of air bounded by the inner skin of the boundary walls of the unit vertically and by the ceiling height above and the floor level below horizontally.

Strata title law is regulated mainly by the Strata Schemes (Freehold Development) Act, 1973 which was substantially amended in 1996, but which began its life known as the Strata Titles Act in 1973 and the Strata Schemes Management Act, 1996. This legislation allows, among other things, for ownership of common (or shared) property, the management and maintenance of that common property and for regulating the social interaction of all the building occupants.

Owners Corporation

The legal title to the land and building structure is owned by the “Owners Corporation” being a corporate body comprising and representing the owners of all the units in the building. There can be several separate stratas in the same building and in major developments there often are.

In your typical flat building, however, the Owner’s Corporation owns the land and building and is obligated by law to maintain all necessary records, maintain and repair the building, look after the gardens and keep current insurance policies protecting the owners corporation’s interest. The individual unit owner cannot insure the structure but must rely on the owner’s share of the common insurance. Of course, the owner can and should insure the contents of the apartment including the carpet on the floor and the paint on the walls.

Example of Common Problems

A common problem is a good example. If the unit on the first floor is water damaged from above it may be the unit owner above who is liable if for instance he leaves his bath taps running and the overflow goes through to the unit below. However, if the pipe in a common wall breaks and causes the damage it becomes the owners corporation’s responsibility.

Common Property

As the common parts of the property are owned by the owners corporation the individual unit owners may use and enjoy the common property (unless all the owners have agreed in the by laws, or “house rules” generally regulating things that can and cannot be done by the residents of the units, to restrict those rights by, for example, granting exclusive possession to, say, a particular garden area nearby a unit for that unit owner).

Title Record

A title deed or “Certificate of Title” will issue to and in the name of the owners corporation for all of the common property areas and a separate Certificate of Title will issue in the name of each particular unit owner in strata subdivision. For new developments, the Certificate of Title for each unit will initially issue in the name of the Developer. Once the unit is sold and the contract of sale is completed, the Certificate of Title will be changed to record the name of the purchaser of the unit, on registration of the transfer document at the Land Titles Office.

Books and Records

The owners corporation must also, by law, keep certain records and registers of its own. So the purchaser will also need to notify it in writing of the completion of the purchase transaction, to enable the purchaser to be registered as the new unit owner in the owners corporation’s register. This registration process, however, although still important, is not crucial from the perspective of achieving ownership of the unit. That will be done by registration at the Land Titles Office, in any case. It is that registration which secures indefeasibility of title.

Unit Entitlement

The owners corporation’s title (or “Common Property Certificate of Title”) will disclose what unit entitlement each unit owner will have in the owners corporation. The number of unit entitlements will depend on the various values of each unit. Assume a 4 lot unit building with 3 approximately similar ground floor units each worth $200,000.00 and a large penthouse on level 2 with a value of $400,000.00. In this case the penthouse owner would have the benefit of say 4 entitlements out of a total of 10 and each of the ground floor owners would have 2 each out of 10.

The Unit entitlement regulates the proportion of levies that an owner must pay and also the voting rights of each unit owner.

The costs of insuring, maintaining, repairing and managing the common property is shared by all the owners in the proportion of their respective unit entitlements. These are collected by the owners corporation making levies on each owner. There are normally three types of levies: one to cover the day to day expenses (administrative fund levies); one to be used in the future for long term repair and maintenance (sinking fund levies) and, special levies for either unexpected repairs or unprovided for repairs such as “concrete cancer”.

Car Spaces

Car spaces and storage areas are often important for unit dwellers. In modern strata schemes the allocated car or storage space is generally marked on the strata plan and therefore actually forms part of the unit title even though on a different level. In older buildings these rights were often granted by giving an owner exclusive rights to use a specifically marked space, but these car spaces were not owned and did not form part of the title.

Meetings

The Strata titles law provides that there must be at least one meeting of the unit owners every year (called “Annual General Meeting or “AGM”) and that certain officials should be elected at these meetings as the governing body of the particular Strata Scheme. There are a number of things which must be canvassed at the AGM, including a budget and striking the levies mentioned earlier. If an emergency arises, any owner can require an Extraordinary General Meeting to be held, provided set procedures are followed.

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Frank,

Strata is a type of title. A normal house on a block is Torrens title. If you build a four unit dwelling and sell the units to four people they would each own one. What they actually own is a strata titled unit and this means everything inside their unit. The building exterior and grounds belong to the Owners corporation and each owner has a 25% share (assuming all units are the same size).

If someone wants to paint the inside of the unit then they can. However they need the Owners Corporations permission to do anything to the common property.

So your example of a development being strata titled means that it is structured this way.

When your development is complete you apply to the local council to strata the block, so you can sell each unit. Your solicitor can do this for you. It is important to build them so they can be strata’d which usually means seperate metering and fireproof construction. Your council will specify what is needed.

I doesn’t affect finance – is a very common thing.

I don’t know why you would compare this to a land surveyor.

I didn’t mean to offend when I said you have a lot to learn. Developments are not simple and many beginners lose a lot of money. I suggest you that doing a development is not the best place to start your investing unless you have some assistance.

http://www.metropole.com.au may be able to help.

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Subdivision and strata are two different things. Sometimes they can both be used to solve a problem othertimes only one or the other.

A subdivision involves splitting land into two or more parcels where a strata leaves the land on one title and creates additional ownership titles of the building only.

You really need to discuss this particular case with the relevant council – the duty planner should be able to advise you quite readily. He or she sees this stuff all day.

Development finance can be quite simple such as for a duplex to very complex ie a 100 unit site. I would suggest you get in touch with a few finance experts and give them a description of what you are planning plus the relevant figures. They should be able to give you a rough idea of what you need after maybe asking a question or two.

I am sorry that I didn’t know you had some development experience. Asking about strata made you sound quite naive and I was just counselling caution.

Cheers,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.