Difference between Old System, Torrens, Company, Strata and CT in NSW

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.)

Torrens Title

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.)

Company Title

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.)

Strata Title

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.

Community Title

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.

From the Ground Up – The Application of New STRA

FROM THE GROUND UP – THE APPLICATION OF
NEW STRA LAWS IN NSW

About a year ago, some operators of short-term rental accommodation (STRA) in New South Wales started hearing a strange noise in the air and naturally assumed it was the sound of the sky falling. As the months passed, more and more operators started to hear the same noises and the growing consensus was indeed that the sky was falling. As of 1 November 2021, the sky fell. Or did it?

A new regime of laws that deal with STRA have been progressively coming into effect in NSW over the last 12 months, with the last piece falling into place on 1 November. At first glance, the latest batch of these new laws specifically targeting the use of dwellings for short-term accommodation, appear to affect every person who lets out a house, apartment or room on a short-term basis.

Under the new laws, established STRA operators understandably are focussing a lot of attention on the fact that if your dwelling is not registered and doesn’t have certain physical attributes or safety features, the dwelling cannot be used for STRA. However people who previously didn’t live next to a house, or in a complex, that provided STRA, are now more concerned by the fact that under the new laws, any residence could potentially start offering STRA if the owner ticks all the boxes.

Although the new STRA laws are primarily intended to regulate Airbnb style accommodation and other similar practices, the language used in the laws can be quite confusing and appear to make the scope of the laws reach well beyond the average Airbnb host. This has led many organisations that deal with STRA (such as online booking agencies) to require any and all STRA operators jump a number of hurdles if they wish to continue using their services after 1 November 2021.

This would be an appropriate response if the new STRA laws applied to all short-term accommodation. However, not all STRA operators need to take any action as a consequence of the new STRA laws, as the laws simply don’t apply to every operator. So who do the laws apply to?

The new STRA laws apply to residential buildings that have not been specifically approved by the local Council to be used as tourist or visitor accommodation. Instead of stressing about whether you are offering hosted or non-hosted accommodation, whether you have the right kind of door locks or fire alarms, or if your building is Class 1a or Class 2, the first question you should answer is “What does the Development Approval for my complex say?” Your Development Approval is one or more documents that have been issued by your local Council which states how your building may be used, provided the building is constructed in accordance with the Council’s requirements.

As stated in the STRA Frequently Asked Questions document dated September 2021, issued by the NSW Department of Planning, Industry and Environment:

“Approved tourist and visitor accommodation such as serviced apartments, bed and breakfasts, eco-tourist facilities, hotels, motels, resorts, camping grounds or caravan parks are not required to register for STRA.

They are allowed to continue to be listed on online accommodation platforms.”

If the Development Approval that applies to your building confirms that your building is allowed to be used as tourist and visitor accommodation (or some subclass of that use) it means that the new STRA laws do not apply to you at all. It also means that if you (or anyone else) are operating STRA in the building, the sky is not falling after all.

However, if the STRA laws do apply to your complex, the units you rent will need to meet new safety standards and be registered. You, and all other participants in the short-term accommodation arrangement, will need to comply with the STRA Code of Conduct (this includes the letting agent, the online booking agent, the owner of the unit and the guest). Plus there may be a limit on the maximum number of days the unit can be let each year set by yo

ur local Council (generally between 180 to 365 days a year).

Be sure to get legal advice if you are unsure how to interpret your Development Approval documents, or if you simply can’t find them. And like most laws, be aware that there are exceptions to the exceptions that might apply in your personal circumstances.

 

Article Written by Ben Ashworth 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.

ARAMA Service Provider Finalist

ANNOUNCEMENT

ARAMA Service Provider Finalist 2021

ARAMA FInalist 2021

ARAMA FInalist 2021

 

 ARAMA Australian Resident Accommodation Managers’ Association congratulates Col Myers on becoming a finalist in ARAMA’s Management Rights Industry Top Awards.

These Awards are designed to Target Outstanding Performers and this acknowledges that Col is certainly one of them.

 

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.

 

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