Understanding Strata Title vs Freehold in Australia

Property Titles in Australia

If you’re a property owner or plan to become one, it can be challenging to understand how property titles differ. Nevertheless, it’s crucial because these titles and building by-laws govern and restrict property owners’ decisions and changes to their properties or lands.

Property titles and responsibilities are full of legal and technical jargon, which can leave a non-expert confused. That begs the question: how do you distinguish each property title? In this simple guide, we’ll set the record straight about the strata title vs freehold in Australia. We’ll also shed some light on the different types of property ownerships.

Types of Property Ownership

Simply put, a property title is a document that demonstrates your legal ownership of a property or land. You’ll find distinct types of property ownership titles in Australia.

  • Freehold: A Torrens title or freehold makes you the sole owner of the building and land on which it’s built. Think detached or single-family homes. With most commercial and residential properties falling under this property title, it’s the most common type (and for a good reason). After all, you have complete freedom over renovations, selling, and property use within reason. Expectedly, freehold investment properties tend to be on the costly side.
  • Limited Torrens: This title property isn’t properly surveyed by Land Registry Services (LRS). Accordingly, it won’t have clear boundaries of land or poverty. However, you can pay a fee to have the property investigated and submit a plan of survey with the property boundaries. Then, you can change it from a limited Torrens title to a regular Torrens title property.
  • Leasehold: If you invest in a leasehold title property, you’re buying the property (condo, house, structure, or townhouse) and leasing its land. The landlord is usually the Australian government or first nations group. You’ll find leasehold title property in rural areas. They may be churches, wheat properties, and cattle farms. The main downsides of this type are that it’s difficult to finance and doesn’t give you the capital growth of a freehold property.
  • Strata title: These titles give you full ownership of a unit, townhouse, or apartment and shared ownership of a ‘common property’. That means you share the ownership and responsibilities of areas, such as elevators, gardens, stairwells, entrance halls, and swimming pools with other property owners. There are various strata schemes available in Australia, as you’ll see, but you only own part of a common piece of land.
  • Community title: This is similar to strata title in its shared ownership of a property with others. However, it’s exclusive to large property estates, including neighbourhoods, subdivisions, and complexes. A property needs to be divided into at least two lots to be considered a community plan one. And all owners of a community title property make payments for the upkeep of the common area (like driveways).
  • Company title: Before the invention of the strata title, company title properties were widespread in the 1960s. Individuals would buy shares in a company title corporation – built under the Corporations Act 2001. Accordingly, each stakeholder can own, use, and reside in a unit and share any common property with other stakeholders. Still, the company remains the registered proprietor of the building and land.
  • Retirement villages: These communities that offer senior Australian citizens accommodation and services can be in any of the property titles above. The land may be registered under strata, community, leasehold, or other ownership models. Owners can rent out or buy retirement villages, but they’ll have to abide by some financing method restrictions.

Torrens Title vs Strata Title Properties

Strata title and freehold torrens properties are the most common options. The main difference is that freehold ownership gives you the land and property, whereas strata ownership only gives you a unit in a building.

Freehold is mostly seen in detached houses, but strata plans are common in apartments, condos, and townhouses. Torrens title plans don’t have common areas. Whereas, strata-plan residents may share foyers, elevators, gardens, fences, and driveways.

Another difference between the two title options is seen in the body corporation. With Torrens title properties having a single owner, they don’t have a body corporation, but strata title ones do.

Torrens titles are usually more expensive than Strata titles. After all, the owner is liable for all maintenance costs, and their ongoing costs are also higher. As for Strata title owners, they only pay a quarterly fee to help maintain the common areas.

If you’re looking for the best long-term investment, freehold properties typically appreciate over time. However, a strata title property value may increase or decrease depending on the value of the surrounding units.

Regarding restrictions, freehold titles grant you full control, whether that means having pets, throwing BBQ parties, making renovations, or selling at any time. To compare, strata title properties may come with these restrictions and more.

Freehold Strata
Ownership Land and structure Unit only
Property types Detached house Townhouse, Apartment, Condos
Body Corporation None Existent
Shared Common Areas None Foyers, elevators, gardens, fences, swimming pools, driveways etc.
Price Expensive Affordable
Value Appreciation Excellent Dependent on other units and Strata restrictions
Restrictions None Pet ownership, parties & entertainment [e.g. BBQs], renovations, and selling

Build Strata vs Survey Strata

The Strata Titles Act provides two forms of strata schemes. On the one hand, build strata schemes are also called strata schemes, which makes sense when you consider the similarities. The scheme refers to the subdivision of a building by cubic space. Also, it may involve the division of surrounding land into lots.

Regarding pricing, build strata schemes lower the cost of creating titles than survey strata. But you’ll need to finish the building process to issue such titles.

On the other hand, survey schemes are similar to freehold land parcels. Their plans only feature the surveyed land boundaries (not the buildings) as defined by a licensed land surveyor.

Still, survey strata schemes can have common areas, by-laws, and other features of strata title properties. Also, you don’t need to finish the properties before issuing titles because these schemes don’t show any buildings.

Role of Owners Corporation & Lot Owners

A body corporation is a legal entity and a committee composed of many owners who manage and maintain the common property. As mentioned, strata title properties have body corporations, but freehold properties don’t because there’s no common or shared area to manage.

In a strata title property, the committee makes decisions governing the use of common property and establishes rules and by-laws that owners and tenants must abide by. However, they must be legally registered and shouldn’t be too harsh. Then, the body corporation oversees the implementation of its rules and by-laws.

Strata management includes handling noisy residents, car parking, and more. Lastly, the committee manages the fees collected from owners by budgeting, keeping financial records, and using the funds to repair common property and conduct renovations.

Anyone who buys a lot in such a property or rents it has responsibilities. Aside from following rules and by-laws, there are annual general meetings (AGMs) where attendees appoint committees, appoint office-bearers, and make large-scale decisions. But, you can skip the meetings and appoint a proxy to attend on your behalf as well.

Of course, owners must pay the required fees and levies, which are quarterly payments agreed upon in AGMs and used for building maintenance. Also, owners must notify the body corporate if the lot owner or tenant changes. Finally, they’re financially responsible for their lots, which includes repairs and upgrades.

Deciding on the Type of Property Ownership

Overall, property titles are legal documents that prove you own property or land. More specifically, they determine the type of ownership you have. Is it full ownership, including property and land, or is it partial? Is the land owned or leased? Do you share common property with others?

Whether you’re purchasing a new home or commercial property, you must carefully decide on the best property ownership form and understand each title certificate’s fine print. Contact a real estate agent or property manager to make the right choice for your goals and make sure to discuss these factors when you buy a property.

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