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.

New Disclosure Requirements for NSW Sales and Qld BC Records that may be accessed

NEW DISCLOSURE REQUIREMENTS FOR NSW SALES

and

WHAT QLD BODY CORPORATE RECORDS CAN BE ACCESSED

 

  1. New Disclosure Requirements for NSW Sales

 

Real Estate agents in NSW should be aware of a recent change to the Property and Stock Agents Regulation 2014 in relation to agents’ material facts disclosure obligations.

 

From 1 September 2021, agents must disclose any order that is in force under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (the RAB) to prospective purchasers.

 

These orders can include a:

  • Building work rectification order – requiring the developer or builder to carry out or refrain from carrying out building work to eliminate, minimise or remediate serious defects or potential serious defects, or
  • Prohibition order – prohibiting the issuing of an occupation certificate for the apartment building, or its registration as a strata plan. The Building Commissioner may make such an order when:
  1. an expected completion notice was not given or was given less than 6 months before the application for the occupation certificate was made;
  2. an expected completion amendment notice was not given or was given less than 6 months before the application for the occupation certificate was made;
  3. a serious defect in the building exists;
  4. a building bond has not been given.
  • Stop work order – to ensure building work stops due to the likelihood of significant harm or loss to the public or occupiers, or significant damage to property.

Agents who are aware of a material fact set by the regulations, or ought to reasonably know, and fail to inform prospective purchasers (whether intended or not), face a maximum penalty of $22,000.

 

NSW Fair Trading is introducing these changes to restore confidence in the residential construction industry and to make sure that apartments being built are trustworthy. The Department will continue its compliance and enforcement role to ensure real estate agents are meeting their disclosure obligations to buyers. This will include targeted audits of agents who are selling properties where RAB orders have been issued.

 

  1. Qld Body Corporate Records that may be Accessed

 

What constitutes a “record of a body corporate” is much broader than the compulsory list of documents set out in the Queensland regulation modules, and has ramifications for the duties of a body corporate and the breadth of access allowed to an owner or prospective purchaser.

 

The Three categories

 

Consistent with the approach of department adjudicators, the Queensland body corporate legislation in effect creates three categories of records:

  1. records that must be kept;
  2. records that should be kept;
  3. records that are

 

‘Records’ are defined to include the rolls, registers and other documents kept by the body corporate under the Body Corporate and Community Management Act (Qld) 1997 and applicable regulation module. They include paper and electronic documents.

 

What records must be kept?

 

The body corporate regulation modules set out a long list of documents that a body corporate must keep, with varying requirements about the length of time each document must be kept.

 

Examples of these documents are:

  • accounting records for each financial year;
  • insurance policies;
  • orders made against or in relation to the scheme or body corporate;
  • correspondence received and sent by the body corporate;
  • minutes of committee and general meetings.

 

These are however, not the only documents that form part of the records of a body corporate.

 

What records should be kept?

 

A body corporate has a statutory duty to act reasonably in anything it does in carrying out its function given to it under the body corporate legislation and community management statement.

 

Acting reasonably, a body corporate would be required to keep:

  • additional maintenance records;
  • records relating to its obligations under workplace health and safety and fire safety legislation;
  • any other document retained by the body corporate for the purpose of discharging its functions.

 

If records are not kept that are records that a body corporate, acting reasonably, should have kept, then a department adjudicator may find that the body corporate has not acted reasonably in responding to an owner or prospective purchaser’s request to access records.

 

Records that are kept

 

There are often records that are kept by a body corporate that are beyond the scope of records required to be kept under the body corporate legislation.

 

These records also form part of the records of a body corporate and an owner or prospective purchaser may be allowed to access these records.

 

However, there are ways that a body corporate may withhold access to records under certain circumstances, and if a body corporate is unsure as to what documents constitute body corporate records or how to withhold access its records, it should seek assistance before or during the seven day turnaround time for record requests.

 

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.

Who Pays the Costs to Defend a Defamation Claim Involving a Committee Member?

Who Pays the Costs to Defend a Defamation Claim Involving Committee Members?

 

Committee members naturally think that any claim made by or against them while performing their duties should be defended, at the cost of the body corporate (or its insurer). 

However, this is not necessarily the case.

Insurance

Insurance policies for community titles scheme will generally include cover for office bearer’s liability. This policy is designed to provide protection to committee members against losses arising from their conduct performed (or not performed, as the case may be) during the course of carrying out their committee duties. 

However, this policy will generally contain an exclusion from protection for defamation. This means that if a defamation claim is made against a committee member, the insurer will generally not provide cover for any costs incurred in defending that claim. 

Body Corporate 

There are statutory restraints regarding how a body corporate may apply its funds. 

The primary functions of a body corporate include administering the common property, enforcing the community management statement and carrying out other functions – as required by the body corporate legislation. 

Body corporate funds may only be used to undertake these statutory purposes, and cannot be used for other purposes, no matter how worthwhile those other purposes may be. 

Adjudicators have previously determined that paying for costs incurred by a committee member defending (or initiating) a defamation claim, are not usually considered costs that fall within the functions of a body corporate. 

A body corporate’s duty to act reasonably also applies to the way that the body corporate chooses to spend its money and the circumstances where it might be reasonable for a body corporate to pay the legal costs of a committee member arising from a defamation claim are limited.

In the event that a body corporate was to pay the costs of a committee member arising from a defamation claim, it is likely that an adjudicator would order a body corporate to recover those costs, should an adjudication application be made. 

What to do? 

Before a body corporate makes any payment for costs incurred by a committee member in a defamation claim, it should obtain legal advice, otherwise the body corporate may be embroiled in a dispute in the Commissioner’s Office, despite any good intentions. 

If you are a committee member (including a non-voting building manager) and you are not protected from liability for a defamation claim by the body corporate legislation, it is unlikely that a body corporate will be allowed to pay for costs incurred by you to defend that claim. 

However, if a committee member is required to defend a defamation claim, the circumstances surrounding the claim may make it appropriate for the body corporate to pay for any costs incurred, and legal advice should be obtained about the committee member’s position about the recoverability of costs.

Article Written by Col Myers (August 2021)

 

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.

 

 

GET IN TOUCH

Tel:          +61 7 5552 6666

Fax:         +61 7 5528 0955

Office:      Level 2, 17 Welch Street, Southport Qld 4215

Postal:      PO Box 1876, Southport QLD 4215

 

OFFICE HOURS

Open:        8:30am – 5:00pm Monday to Friday

contact small myers hughes

Categories

Fixing the Lottery this is Building Defects in NSW Strata Buildings

FIXING THE LOTTERY THAT IS BUILDING DEFECTS IN NSW STRATA BUILDINGS

 

We have all heard about the appalling building defects that have occurred in a number of new strata buildings in Sydney in recent years. Complexes such as “Opal Tower” and “Mascot Towers” are shocking examples of innocent mums and dads buying their dream residence, only to find that their unit and their complex were shoddily built and their dream has turned into a financial nightmare. Karen Stiles, from the Owners Corporation Network (which represents apartment owners) has said it “beggars belief that buildings so badly built received occupation certificates which allowed developers to settle on apartments.” How was this allowed to happen?

Design and Construct Contracts

Contractual arrangements for multi-storey projects differ, but commonly developers engage a builder to undertake a design-and-construct project. This means the builder is responsible both for the development of the design and the construction of the building. Whilst the developer might initially engage architects and engineers to prepare early designs to obtain planning approvals, these consultants then become subcontractors. Once contracted, the builder will work to find efficiencies and cost savings in the development of the design and construction of the building.

Although building approvals are required, the nature of a design-and-construct project means that many aspects of the design change after the initial approval is obtained. Many certifiers approve, allow, or are not aware of, variations that have been made. The result is that changes to approved design occur frequently, at the discretion of the builder, project manager and/or contractors and without independent certification.

The Shergold Weir Report commissioned by the NSW Government found that inaccurate designs mean that certifiers can never fully ensure compliance because they then must rely on inspections and some of the most important safety elements are hidden from view and a point-in-time inspection cannot properly assess essential construction processes.

Changes Implemented

The NSW Government has supported the vast majority of the Report’s recommendations and has (or is) implementing the following major reforms across the construction industry:

  1. Appointment of an expert Building Commissioner to act as the consolidated building regulator in NSW;
  2. Putting in place new laws that require building practitioners involved in designing buildings to submit building plans to the Commissioner (so that they may be audited), declare that the plans are BCA compliant and meet other relevant requirements and provide reports explaining why that is the case for performance solutions. Builders will also have to declare that their buildings are constructed in accordance with these plans. It will be an offence to knowingly or recklessly declare non-compliant plans or fail to lodge the documents on time. Disciplinary action will be able to be taken against practitioners who improperly make these declarations. The Building Commissioner will not need to sign off on building plans;
  3. The Building Commissioner will register the building practitioners who can lawfully make a declaration that plans are compliant or make a declaration that plans accurately reflect a building’s as-constructed design. These practitioners will have to maintain the necessary skills and insurance to meet the registration requirements and will be subject to disciplinary action for professional misconduct;
  4. Ensuring that building practitioners owe a duty of care to Owners Corporations and subsequent titleholders of residential developments, as well as unsophisticated construction clients who are small businesses. This means that homeowners will have a right to pursue compensation when they suffer damage because of a building practitioner’s negligence.

From 1 July 2021, most of these changes took effect for Class 2 buildings. These are typically multi-unit, multi-storey residential buildings where people live above and below each other.

The NSW Government see Class 2 as the highest priority right now, but the NSW Government will expand the reforms to other classes of construction in the future.

Also, previous changes to the Strata Schemes Management Act relating to residential strata properties that are four or more storeys now require that:

  • Developers must lodge a building bond equal to 2% of the building contract price, before an application is made for an occupation certificate;
  • Developers must give documents to the building inspector that help with their inspection;
  • There is a means for the developer and owners to agree on the amount of the building bond to be released for repairs, if they can’t agree;
  • A debt recovery mechanism has been put in place that enables the recovery of unpaid or insufficient bonds from a developer

Conclusion

Strata building defects have resulted in enormous extra workloads for Strata Committees and Building Managers – not to mention the emotional and financial hardship caused to unit owners. David Chandler was appointed the NSW Building Commissioner in 2019 after an impressive forty year career in the Australian construction industry.

Hopefully, he is the right man to clean up all of this shoddy construction, workmanship and design in strata buildings.

Article Written by Col Myers (July 2021)

 

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.

 

 

GET IN TOUCH

Tel:          +61 7 5552 6666

Fax:         +61 7 5528 0955

Office:      Level 2, 17 Welch Street, Southport Qld 4215

Postal:      PO Box 1876, Southport QLD 4215

 

OFFICE HOURS

Open:        8:30am – 5:00pm Monday to Friday

contact small myers hughes

Categories

Pros and Cons of Pooled Letting

PROS AND CONS OF POOLED LETTING

 

When an owner lets out their unit through an on-site letting agent, there are two ways that the owner’s letting income is typically calculated. These can be described as the “direct income” method or the “pooled income” method.

The method to be used is set out in the letting appointment (i.e. the agreement between the letting agent and the owner of the investment unit).

The majority of letting appointments pay an income to owners using the direct income method, where the income collected from the unit bookings is paid directly to the owner, after deductions of all expenses.

The pooled income method is used predominantly for short term lettings in a hotel style business. When using pooled income, the combined income and expenses for all units in the letting pool are aggregated and then a share of the profit is paid to all the owners in the letting pool.

In a perfect world, the pooling of income would seem the fairest way for Managers to operate their letting businesses. By pooling the income, owners can’t accuse the Manager of favouring certain owners over others when allocating bookings, and all owners rise and fall together with the success of the letting business. However, as we all know, we don’t live in a perfect world!

There are a number of common issues that can arise when operating a pooled letting business. The types of questions you will encounter include:

  • How to fairly determine the income ratio? Do you allocate based on the number of beds, unit entitlements (which are designed to reflect value), quality of the unit, sea views or some other unique quality? Or do you divide everything equally regardless?
  • How to share expenses? Do you share any or all expenses across the letting pool? Do you share expenses only up to a certain cost? Do you use the same ratio for sharing income to also sharing expenses?
  • How to determine who authorises significant expenditure? Do you ask a committee or one or two owner representatives, or should you be asking all owners – as all owners are sharing the costs?
  • How to operate a maintenance fund? Do you deduct a maintenance levy each month or just withdraw expenses as and when incurred?
  • What happens when an owner leaves the pool or has only just joined the pool? Should part of the retained maintenance funds be returned to the leaving owner? What if an owner leaves the pool after the general maintenance fund has just paid out for a new hot water system or installed new carpet in their unit?
  • How to adjust income when the owner uses their unit? Do you make no adjustment, or do you pro rata adjust for the days used?
  • How to change the terms of the letting appointment? What do you do if not all owners agree to your proposed change?

If you elect to go the pooled income route with your letting business, all of the above questions need to be thoroughly considered and appropriately addressed in your letting appointments with your owners. Unfortunately, we see a lot of letting appointments providing for pooled income where the issues raised above are not sufficiently answered.

When these issues are not suitably addressed we see unfair scenarios arise where owners are not receiving an income that truly reflects their unit’s contribution to the letting pool income. For example, if two bedroom units are in demand far more often than three bedroom units, the owners of the two bedroom units are effectively supplementing the income of the owners of three bedroom units. To add insult to injury, if the distribution of the pooled income is based on unit entitlements (i.e. the value of the units), the three bedroom units will also receive a higher return from the pool than the two bedroom units.

When you look at the questions and examples above, you can see there are many situations where a disgruntled owner could easily start asking some difficult questions. Questions that will be uncomfortable to answer if the terms of your letting appointment are either vague or silent on the issue.

If you operate a letting business that pools the income given to owners and your letting appointment doesn’t have the answers to these questions, it’s definitely recommended that you prioritise a revision of your letting appointments, as it only takes an issue with one owner to be an issue with all owners.

Article Written by Col Myers (June 2021)

 

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.

 

 

GET IN TOUCH

Tel:          +61 7 5552 6666

Fax:         +61 7 5528 0955

Office:      Level 2, 17 Welch Street, Southport Qld 4215

Postal:      PO Box 1876, Southport QLD 4215

 

OFFICE HOURS

Open:        8:30am – 5:00pm Monday to Friday

contact small myers hughes

Categories