Australia: What is the difference between Strata and Torrens title properties?

Last Updated: 27 July 2016
Article by Sara Hatcher

When you purchase property it will likely be Torrens or Strata title. It is important to understand the differences between the two and how they will impact your ownership and use of the property.

Torrens Title

A Torrens Title property is the most common form of ownership for free-standing houses and some townhouses. The title includes the house and the land on which it sits as defined by the lot. The owner is solely responsible for the maintenance of the whole lot including the payment of Council and Water Rates. The only restriction on your use of the lot is Council zoning and approval, therefore you have more freedom to use the property as you please.

Strata Title

Properties sold under Strata Title are usually units or villas. The lot you purchase only includes the unit itself, however as an owner you also have an interest in the common property. Therefore, the contract of sale will have two title searches; the lot and the common property.

Common property is areas such as hall ways, drive ways and court yards which are used by all the units. All the owners collectively form the Owners Corporation which is responsible for the maintenance of the common property. The cost of doing so is divided between the owners on a unit entitlement basis, meaning larger units pay higher strata rates.

Strata titles contain By-Laws which control the actions of the owners and occupiers of the lots. These include rules such as those governing parking on the common property, noise restrictions, keeping of animals, carrying out works and many others. There are standard By-Laws set out in legislation which are commonly used, however the Owners Corporation can adopt their own form of By-Laws or approve Special By-Laws which amend the standard form for example allowing the keeping of an animal or the installation of an external air-conditioning unit. It is important to be aware of whether any By-Laws or Special By-Laws directly impact or benefit your lot.

The work you can carry out on a Strata Title property may be limited by the by-laws and as such may impact your intended use of the property. Renovations or extensions must be approved by the Owners Corporation and will likely involve having Special By-Laws drafted and added to the common property title.

Quite often the common property title has a large number of dealings such as rights of way and easements. For example, there may be easements for drainage going under the building or leases for an electricity sub-station if the building is large enough. While these may not directly impact your lot, you still need to be aware of them.

Strata Title properties must still abide by the council zoning. Some Strata titles are zoned so that they can only be used for residential purposes and not short term accommodation, whereas others may be zoned only for serviced apartments. The zoning may differ within the building for example the lower floors may be commercial, middle floors serviced apartments and top floors residential. It is crucial you are aware of the zoning of your unit before exchanging to ensure you are allowed to use the property as you intend.

Inspections

Prior to exchange we recommend purchasers of Torrens Title obtain a building and pest inspection to determine whether there are any structural or pest issues with the building or land.

However, purchasers of Strata Tile should obtain a Strata Report and in some instances also a building and pest inspection. Strata Reports are very important as they disclose any issues with the building the owners corporation are aware of and have been documented (such as issues related to the structure of the building, pest infestation, unruly occupants, non compliant works or legal action) as well as the financial health of the Owners Corporation. If there is not enough money in the Administrative and Sinking funds, special levies may be raised in the future to fund required works. This could mean owners have to pay thousands of dollars on top of their usual rates, the risk of which should be taken into account before purchasing.

Conclusion

It is important to understand the differences between Torrens and Strata Title properties before purchasing so you are aware of your obligations under both.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Sara Hatcher
 
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