UNDERSTANDING THE DIFFERENCES BETWEEN
OLD SYSTEM, TORRENS, COMPANY, STRATA AND COMMUNITY TITLES IN NSW
There are different title systems for ownership of property in NSW. The following is a snapshot summary of the different ownership.
Old System Title
In the early years of the NSW colony, there was no system for recording land transactions. In some cases, brief particulars of a sale were written on the back of a land grant but in many cases, ownership changed hands without any evidence at all. This changed in 1802 when the Judge Advocate invited parties to record their land dealings, forming the first book of the ‘Old Register’. From then on, landowners would have to show a ‘good chain of title’ to prove their ownership to land. This was (and still is) called ‘Old System Title’.
Under Old System Title, a landowner had to retain (as evidence) the complete chain of documents that ultimately led to that person’s ownership of a property. This chain of documents would often go back over many generations.
(These days, we see very little Old System Titles in NSW.)
The Torrens Title system was introduced into NSW with the commencement of the Real Property Act 1863. Torrens Title is based on the notion of ‘ownership by registration’. You register your ownership of land with NSW Land Registry Services (LRS). Essentially, if you have registered your name as the owner of land then you are deemed to be the rightful owner – despite any other claims. Your ownership is said to be “indefeasible”.
(Torrens title is the most common form of land ownership in NSW – being your traditional parcel of land or your house/land package.)
Under Company Title, the building is owned by a company. When purchasing a unit within the building, buyers do not actually own the unit. They are effectively buying ‘shares’ in the company, which in turn allows them the right to occupy a particular unit.
You also receive a ‘Share Certificate’ rather than a title deed.
The good thing about Company Title units is that they are generally cheaper to buy and, because of the restrictions on shareholders, many company titled properties are occupied only by the owners – meaning less turnover and less risk of noise and other issues that occur with short-term rentals.
The downside with Company Title is that you do not actually own the unit, but rather you own ‘shares’ in the company.
Also, banks are more reluctant to issue loans for company titles units and interest rates are generally higher.
Renting your apartment out may not be possible (or could involve limitations) depending on each company’s constitution (which can vary significantly).
(It is my experience that Company Title works very well in certain limited situations. It is ideal for smaller complexes, where owners want control over who their neighbours may be and also don’t require bank funding to purchase their property.)
The strata system was invented in Australia in 1961, and has since been adopted globally.
Strata Title is ideal for ownership of larger, multi-level buildings, where ownership of each unit is separate, but no unit owner owns the physical building which comprises the units or the land on which the building sits.
The building itself and the adjoining land is referred to as ‘common property’ and includes things such as entrance ways, hallways, swimming pools, tennis courts, driveways, lifts and so on. No single unit owner will own any of these areas. All the unit owner owns is the cubic space inside each unit, other than the paint on the walls.
Common property is managed through the creation of an Owners Corporation. All of the owners of the individual units automatically become members of the Owners Corporation and have a right to participate in the decision-making of the Owners Corporation. The Owners Corporation is created as soon as the strata plan of subdivision is registered with the LRS.
The Owners Corporation is responsible for maintaining and repairing common property, taking out relevant insurances, managing the Owners Corporation finances, keeping records and administering the by-laws (e.g. parking and pets).
The Owners Corporation is financed by the levies that are raised against each of the units. Levies are usually paid every 3 months. The levies that a particular unit owner will need to pay will be determined by the ‘unit entitlement’. When the developer of the strata development first registers the strata plan of subdivision, he or she gives the entire building an ‘aggregate unit entitlement’ (e.g. 100 unit entitlement). A share of the unit aggregate is then attributed to each unit based on their individual value, which involves a consideration of unit size, location, aspect, rules attributable to the unit and so on. In most cases, the allocation of unit entitlements will need to be carried out by a qualified valuer.
The higher the unit entitlement allocation for a particular unit, the more that unit owner must pay in levies to the Owners Corporation. The unit allocation can also affect voting rights, so it is important that the allocation is done properly and fairly.
A Community Title in NSW relates to properties with at least two lots that share a common area, such as a driveway or recreational land. Community Title is often used in developing large estates, which could include residential lots, as well as commercial and retail outlets. A good example is a gated community estate. Within the estate there may be, say, 20 houses, each separated by boundaries and each owned by different people. The owner of each house will own all of the building and all of the land on which the building is situated – like a traditional Torrens housing lot.
At the centre of the estate there may be a tennis court, swimming pool and parking area. To enter the estate, you need to pass by an electric gate, which is monitored by a security company.
In this example, each owner still owns their individual house and adjoining land, but they all share common amenities, including the security system, the entrance gate, the tennis court, the swimming pool and the parking area.
A community title scheme is created by the registration of a Community, Neighbourhood or Precinct plan and (much like a strata scheme) is managed by a body corporate consisting of all lot owners, known as the Community Association. All common areas (including all roads, recreational facilities, promenades and parklands) are referred to as Association property. Unit entitlement is based on site values, which determines unit owners’ voting rights and contributions to maintenance and insurance levies.
The management of a community title scheme can be complex and multi-tiered. Usually found in big developments and complexes, they can often span large areas of land and consist of a mix of commercial, residential and retail lots with conflicting interests. Much like in strata titles, everything is managed via Association meetings. The community scheme committee deals with day-to-day issues and general meetings are held for larger issues, which each individual lot owner may attend.
Community Title lots can be subdivided by strata titled buildings, which means that sometimes the by-laws of both the strata scheme and the community scheme apply.
All by-laws in a community title scheme are detailed in a Management Statement, which differs with each plan.
As every community scheme varies in nature, the by-laws are therefore far less standardised than strata scheme by-laws.
Article Written by Col Myers of Small Myers Hughes Lawyers
Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.