Of the different types of property ownership, we have seen an increasing amount of land in recent years being developed as strata or community title.  There are also still blocks of apartments in cities that are under an older system of joint ownership known as company title. 

This Basic Guide is intended to provide a basic overview of these different types of property ownership.  You may find it useful if you are thinking of buying or selling this kind of property, or if you are having problems as an owner of it.

Our experienced, professional and friendly team at Craddock Murray Neumann have a range of Property Lawyers can provide you with advice and assistance with all types of property matters, including strata, community and company title matters.

What is Company Title?

Company title grew in popularity in the 1920’s and 1930’s as a way to provide for separate ownership of apartments. Company title involves a company owning land including a building containing home units. 

The home unit owner does not have ownership of any part of the real estate, instead owning shares in the company that owns that real estate. Those shares have certain rights attached, including the entitlement of the shareholder to occupy and use parts of the building for a residence and car parking. 

As with any company, regulation of Company Title schemes is principally through the Corporations Act 2001 (Cwth).  This includes the company’s Articles of Association (also known as its Constitution), which sets out the rules for the conduct of the company’s affairs.  Those rules include the rights and obligations of the shareholders in relation to their use and occupation of their home units and the common areas available to all residents.

The company is run by a Board of Directors elected by the shareholders. The Board holds regular meetings to conduct the company’s day-to-day affairs.  The shareholders also hold general meetings annually and at other times to vote on more major issues, such as the annual budget.

Unlike the Strata Title and Community Title schemes, Company Title schemes do not have their own dedicated laws regulating them, apart from general company law.  The companies regulator is the Australian Securities and Investments Commission (ASIC), which is responsible for legal compliance by directors and shareholders.

Unlike Strata Title or Community Title schemes, which have dedicated tribunals to hear disputes, disputes about the running of a company title scheme are adjudicated in different courts depending on the nature of the dispute.  

In NSW, the Local Court has broad jurisdiction under s.34A of the Local Court Act 2007 to make a variety of orders in relation to certain forms of Company Title disputes. An application for an order under s. 34A can be made by the company, a shareholder, a resident, or a former resident.  Some more serious types of disputes have to be dealt with in the Supreme Court of NSW (e.g. about winding up the company or about the oppression of minority shareholders).

What is Strata Title?

The Strata Title system was introduced in Australia in 1961 and has since been widely adopted ever since then.

Unlike Company Title, if you own a lot in a strata scheme you do have an ownership interest in the real estate.  What you own is an apartment or other type of space and you have shared ownership in and responsibility for the land and building and improvements, including structures, facilities, gardens, driveways and recreational facilities known as common property.

Each strata lot is 100% owned by each lot owner, but the strata lot comprises essentially just the cubic space within the lot boundaries.  The building structures or improvements and the land and other parts of the common property is jointly owned by all of the owners combined, so each owner owns a fraction of that common property.

Strata schemes can be just residential developments or they can consist of commercial or industrial units.  They can also be mixed use, such as residential, commercial and retail combined in one development.  So, within the same strata scheme you can have apartments sitting above office space that site above retail shops.

Strata schemes ascribe different “unit entitlements” to the different lots, which are determined based on the value of each lot. Unit entitlements are basically a fraction that determines the share that each lot owner must contribute to the levies that are raised for the management of the strata scheme and the maintenance and repair of the land and buildings.

Strata schemes use rules known as by-laws to regulate what owners and occupiers can and cannot do.  They have a decision-making system that utilises an elected committee for the day-to-day management of the scheme (usually with the help of a strata managing agent) and regular general meetings of all owners to decide on the more major decisions, including the annual budget.

The law requires Strata Schemes to hold insurance for the land and buildings within the scheme, because the owners corporation is responsible for the maintenance and repair of all of the common property including the building structures.  Lot owners still need to have insurance to cover their own property within the strata lot.

Disputes in Strata Title schemes commonly involve things like enforcing strata levy payments, compliance with by-laws, applications for apartment renovations, building repairs and the conduct of strata committees. In NSW, if there is a dispute within a Strata Title scheme, the NSW Office of Fair Trading (OFT) can provide assistance and also provides a mediation service to try and resolve disputes before they end up with the Civil and Administrative Tribunal (NCAT).  

Applications to NCAT can be made by the owners corporation, strata committee members, individual lot owners or their tenants.  NCAT has jurisdiction to hear and adjudicate on most disputes that arise within a Strata Title scheme and has power to impose orders on the parties to the dispute.  

What is Community Title?

A Community Title scheme is similar to a Strata Title scheme in that when you buy a lot in a Community Title scheme, you own that lot and you have shared ownership and responsibility for common areas on the property. 

Community Title schemes fall into 3 types: Community schemes, precinct schemes and neighbourhood schemes:

Community Scheme

A Community Scheme is where a developer creates a large staged development with a multi-tiered management structure.  The land is subdivided by a registered plan to create Association property and individual lots.  A community scheme can contain precincts, neighbourhoods and strata schemes.

Precinct Scheme

As with a Community Scheme, a Precinct Scheme is used when land is developed in stages and requires a multi-tiered management structure.  The registered plan subdivides the community development lot (or lots) to create a precinct with other lots proposed for further development.

Being interposed between a Community Scheme and a Neighbourhood or Strata Scheme, Precinct Schemes add to the overall complexity of such developments.  That is why they tends not to be used as much, since developers can achieve essentially the same result (with less development restrictions) through the use of a combination of Community Schemes, Neighbourhood Schemes and Strata Schemes.

Neighbourhood Scheme

Neighbourhood Schemes are commonly used in tiered, stand-alone and staged developments on smaller pieces of land featuring freestanding houses or terrace-style homes with the only shared property being a driveway.  

Although a neighbourhood scheme can outwardly resemble a normal suburban collection of individually owned houses, the Management Statement for the scheme can be used to impose architectural or design controls to ensure the properties within the scheme are maintained to a certain standard and style.

Let’s just call all these variations “Community Title schemes” for this Basic Guide. 

As a general observation, it is fair to say that such schemes in NSW usually comprise large estates spread over a larger area of land than a strata scheme.  They can also include a mix of residential commercial and retail space. They can look a bit like a suburban subdivision, with defined areas of land containing free-standing houses.  They can also contain two or more apartment blocks.

One of the main differences between Strata and Community Titles is the way the land boundaries are defined. Strata Titles are defined by the boundaries within a building rather than the land, with an area of common property for all residents, while community titles are defined by the lot boundaries and surveyed measurements. Because Strata Title applies to structures like apartment blocks, townhouses and duplexes, boundaries are divided into units, rather than land allotments.

The common areas (including all roads, promenades and parklands) are referred to as Association property. Community Title schemes also use “unit entitlements” determine each owner’s levy contributions.

Community Title schemes can comprise several strata schemes located within the community property, with a committee system to ensure that the interests of all strata scheme owners are represented for the management of all of the common facilities.

As with Strata Title schemes, Community Title schemes use a set of rules known as by-laws.  A Community Management Statement will usually contain the rules applying to the whole scheme, whilst individual strata schemes within it will also have their own sets of by-laws.

In a Community Title scheme, there is no obligation on the owners to maintain and insure other lot owners’ buildings. Instead, the owner of each individual lot is responsible for the insurance of any building on that lot (unless they are owners within a strata scheme within the community scheme). The community corporation is then only responsible for insuring any common areas or buildings such as driveways and service infrastructure.

Dispute resolution in a Community Title scheme is essentially the same as for Strata Title schemes.  The NSW Office of Fair Trading (OFT) can also provide assistance on management and dispute resolution in Community Title schemes. The OFT also provides a mediation service for disputes before they are referred to a community schemes adjudicator or to NCAT, which has power to impose orders on the parties to the dispute.

Below is a summary of all the information provided:

Key points

Company Title

  • Everything operates through the Board of Directors of the Company Title
  • The directors don’t have to consult shareholders, even on big issues.
  • A company’s constitution can sometimes be onerous and even arbitrary and can vary significantly between company titles.
  • The company’s constitution can limit who can buy into the property, whether the property can be rented, what changes can be made to the property.
  • A company title owner would be advised to be thoroughly familiar with the company’s  constitution as failure to comply with the constitution may have potentially serious consequences, including the forfeiture of the right to occupy  the property
  • Should renting be permitted there can often be limits on the length of lease term and tenant will need to be approved by the board of directors and be subject to an interview.
  • A company’s constitution can under some circumstances can revoke a shareholders shares or force the sale of shares and right to occupy the property.
  • It can be difficult to obtain finance from banks when buying into company title especially in small blocks and where finance can be obtained there are restrictions on (LVR) Loan to Value Ratios.
  • “Cooling off” provisions, which normally apply to residential sales by private treaty, do not automatically apply in Company Title sales as the sale of shares representing the Company Title unit is not caught by the definition of “residential property” under section 66Q of the Conveyancing Act 1919.
  • The company directors must approve the incoming purchaser of the company title unit and this can restrict the size of the market for the seller
  • there is no comprehensive or specific legislation regulating company title buildings as there is with Strata schemes, and the Strata Schemes Management Act 2015 (NSW) does not apply to company title. 

Strata Title

  • It is considered to be a fair, transparent and equitable system
  • A plan known as a Strata plan clearly defines the unit or lot ownership and which parts are common property
  • Everything operates through an entity called the Owners Corporation.
  • All owners get the right to vote on bigger decisions at either an Annual General Meeting or Extraordinary General Meeting.
  • Strata Title is governed by legislation called the Strata Schemes Management Act.
  • The building also know as a Strata Plan will have clear defined regulations known as By-laws.

Community Title

A community title gives you shared ownership of common areas. Some benefits of this include:

  • All owners get Greater input into the management of common facilities
  • Community lots and facilities are covered by insurance
  • Depending on the estate owners may also be able to access and benefit Country club membership; Security patrols; Walking trails and bike paths; Community activities and events
  • Standardised landscaping and buildings can mean restrictive rules and regulations for your lot
  • Regulations can be complex because of the varying lots (commercial, residential etc.) of the estate
  • No part of your lot is covered by the Association’s insurance

Vendor’s Pack

 It is important that all incoming purchasers are given sufficient information about the company to allow them to determine whether they want to buy shares before they enter into a contract to do so. Purchasers should not be surprised about levies that are due to be paid or major capital works that are on the horizon. 

Companies can manage this issue by developing a vendor’s pack. A vendor’s pack is a set of documents that are distributed by vendors to purchasers on a confidential basis to help purchasers develop an understanding of the governance of the company and their likely liabilities as shareholders.

The vendors pack should include a copy of: 

  • the constitution; 
  • the house rules; 
  • any minutes approving renovations which may be taking place after the sale; 
  • any minutes approving levies that may be payable after the sale; 
  • any minutes concerning future capital works; 
  • any significant liabilities that the company has taken on, such as loans secured against the property or by circulating security interest. 

Companies which interview incoming shareholders may wish to require all persons who are being interviewed to have first received and reviewed a vendor’s pack. 

Selling Shares

The Australian Securities and Investments Commission has issued a Regulatory Guide which allows shareholders who wish to sell their shares in a company title company to escape some of the onerous requirements associated with the marketing and sale of shares in other types of companies. 

Shareholders who wish to enjoy the benefit of a reduced compliance burden will need a contract which satisfies the requirements set out in the Regulatory Guide.

Community Title 

Community Title is a mix of Torrens and Strata and there are many similarities between strata and community schemes. 

However, community schemes have an added level of flexibility, with a tiered management structure based on three main types of schemes enabled by the legislation:

  • “Community” scheme

A Community Scheme is necessary where the developer proposes to create a large staged development with a multi-tiered management structure.  The plan subdivides the original parcel of land to create Association Property and lots that are usually intended for future development.  Within a Community there can be Precincts, Neighbourhoods and Strata schemes.

  • “Precinct” scheme;

A Precinct Scheme, like a Community Scheme, is necessary only where a development is developed in stages and requires a multi-tiered management structure.  It subdivides the community development lot (or lots) to create a precinct with other lots proposed for further development.

This structure is interposed between a Community Scheme and a Neighbourhood Scheme or Strata Schemes and adds yet another layer of complexity to the overall structure.  Precinct Schemes are not usually used since essentially the same result (with less development restrictions) can be achieved through the use of a combination of Community Schemes, Neighbourhood Schemes and Strata Schemes.

  • “Neighbourhood” scheme.

A Neighbourhood Scheme is the most widely used within this system and may be used in tiered, stand-alone and staged developments.  It commonly consists of freestanding houses or terrace-style homes with the only shared property being a driveway.  This is very popular and is an ideal combination of a home on a smaller piece of land with a minimal contribution in the form of levies.  With this there’s no visual difference to houses under freehold Torrens title in a residential street.  

Strata schemes are often developed as subsidiary schemes within community lands, where the Strata Schemes Development Act 2015 and the Strata Schemes Management Act 2015 apply alongside the community schemes laws.

Community Schemes in NSW are governed by two Acts:

  1. The Community Land Development Act 1989, which facilitates the subdivision and development of land with shared property, setting the requirements for registration of plans, changes to the subdivision and dealing with lots; and
  2. The Community Land Management Act 1989, which provides for the management of community schemes and their subsidiary schemes, including management of funds and accounts, association and committee meetings, maintenance of common property, insurance, the management statement (including by-laws) and dispute resolution.

For more information on how our property lawyers can help you with your property needs please contact our team at craddock@craddock.com.au.