Company Title vs. Strata Title – Know the Difference

 

If you are purchasing an apartment, villa or townhouse, it will likely be governed by either strata title or company title. But what is the difference between these two terms and what are their practical effects. We take you through what each title effectively means to you, as well as their respective pros and cons.

 

Strata Title: Strata title is the more recent of the two, having been introduced in Australia just 55 years ago. Start title is a system designed to handle the legal ownership of a portion of a building. Strata title can be applied to both residential and commercial property. Individual “lots” (e.g. apartments, villas or townhouses) are privately owned, with the owners collectively owning the shared common property.

If you are purchasing a property that is under strata title, it is important to conduct a strata search as part of your due diligence to ensure you are familiar with how the owners’ corporation operates and that the strata plan is being managed properly. As a member of the strata scheme, you will need to adhere to the relevant bylaws, pay regular levies for maintenance and other expenses, and attend annual general meetings run by the strata management company.

 

Pros:

  • A surveyed structural diagram clearly shows the areas which are common property and the areas which are privately owned by individuals
  • Owners get to take a more hands-on approach and vote on the bigger decisions
  • Strata title typically adds value to a property when compared with company title.

Cons:

  • Owners are required to pay levies, adhere to bylaws and vote at meetings
  • Owners have to assume liability for anything that goes wrong (however, strata insurance is compulsory).

 

Company Title: company title is a system by which owners effectively purchase shares in the building, which entitled them to exclusive use and occupation of their unit, and shared use of any common property. While some older buildings remain under company title, it is becoming increasingly rare. Before purchasing a property under company title, it is important to check the company constitution for any restrictions or other key clauses.

 

Pros:

  • Dealing with a company can be easier and less time-consuming than dealing with strata management.
  • Properties can represent good value for money
  • If you purchase the property under company title and the property is later converted to strata title, this will often result in an instant value increase to your property
  • Investors can make easy money by buying into a company title block that is later changed to strata title, as this change will often add instant value to the property.

Cons:

  • Owners do not own the title, but simply a “share” in a company that owns the title
  • Banks may be more reluctant to lend money for company title units. This in turn leads to company title properties often selling more slowly than strata title properties
  • The company directors do not have to consult shareholders, even on big issues
  • A company’s constitution can sometimes be onerous and even arbitrary in terms of its restrictions and clauses.
  • It is more difficult to rent out your property under a company title. Some constitutions may outright forbid this. Even when renting is allowed, restrictions and approval processes may be put in place. However, on the flipside, these restrictions mean that a property under company title is usually predominantly occupied by owners and permanent residents. This reduces the likelihood of problems caused by short term letting, noise levels and illegal parking.

 

If you are buying an apartment or townhouse, it is important to know if it is under a company or strata title. For all your conveyancing needs, get in touch with Moissons’ conveyancing team today!

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