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Strata Title, Stratum or Company Title: What’s The Difference?
If you’re buying a property – whether it’s a house, apartment, villa or townhouse – it pays to know which title it comes under.
But what exactly do those terms mean and how are they different?
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Types of property titles for units and apartments in Australia
Titles are a system for handling the legal ownership of a portion of a building or structure, and can be applied to residential or commercial property.
Different types of properties can be sold under different titles, and they each come with slightly different legalities depending on which state or territory the property is in.
Individual “lots” (apartments, villas or townhouses for instance) are owned privately while common property is shared.
Strata and company title are not the same thing: each system is legally distinct and comes with its own pros and cons. It’s important to do some research first to make sure you’re familiar with how life under strata or company title works – and what limitations there might be – before making a decision to buy.
Torrens title
Most standalone houses in Australia is sold under a torrens or freehold title, as opposed to apartments, which are sold under strata title.
This means the title holder fully owns both the property and the building within the property boundaries.
Limited torrens title
If the boundaries of the property haven’t been officially defined then the owner can request an official site survey to get the boundaries clarified.
The title would then revert back to a regular torrens or freehold title.
Strata title
If you’re buying an apartment, villa or townhouse it will most likely be part of a strata scheme.
It’s important for prospective buyers to conduct a strata search as part of their research to make sure they’re familiar with how the owners’ corporation operates and that the strata plan is being managed properly.
You’ll need to adhere to bylaws, pay regular levies for maintenance and other expenses, and attend annual general meetings run by the strata management company.
Strata title pros:
- It is widely considered a fair, transparent and equitable system.
- A surveyed structural diagram clearly shows which parts of the property are common and which are owned by individuals.
- Owners get to vote on bigger decisions.
- Typically strata title adds value to a property when compared to company title.
Stratum title
Stratum title is a combination of stratum and company titles.
An owner will hold the strata title for the portion of the land that is theirs, while a company title would cover any land that is shared, which would be part-owned by each individual in the group.
Company title
Company title is less common than strata title, as most buildings have chosen to change to strata title but in some areas company title remains the norm.
Company title pros:
- Properties can represent good value for money.
- Investors can make easy money by buying into a company title block that is later changed to strata title, as this change will often add instant value to the property.
Company title cons:
- Owners don’t own the title, but simply a “share” in a company that owns the title.
- Historically some banks have been reluctant to lend money for company title units. Some lenders will only loan on a case-by-case basis, or require a particular loan-to-value ratio.
- Because of this, company title properties often sell more slowly than strata title properties.
- Company directors don’t have to consult shareholders, even on big issues.
- A company’s constitution can sometimes be onerous and even arbitrary. For example, it might limit who can buy into the property, whether the property can be rented, what changes can be made to the property, or even how much buyers can borrow.
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