The Amato Property Blog

Strata Title Property: Pros & Cons

What are the main types of property titles in Australia?

In Australia, there are two main types of property title systems: Strata title and Torrens title.

Strata Title

Strata title properties are typically multi-unit or multi-level developments, such as apartments, townhouses, or duplexes. They can also come in the form of commercial property, retirement villages and retail premises.

In a strata title, each unit or lot owner owns a portion of the overall property. This includes your individual unit or lot, as well as a share in the common property, such as the building’s entrance, shared spaces like gardens, fences and amenities like swimming pools and lifts.

Strata title properties are managed by a body corporate, which is made up of the lot owners. According to Stratacare there were around 340,601 strata schemes In Australia in 2020 with 2,869,845 lots.

Torrens Title

Torrens title, on the other hand, is a system where each property has its own individual title. This system is used for houses, standalone buildings, and undeveloped land. In a Torrens title system, the government maintains a register of all land titles in the state or territory, and each property has a unique identifying number. When a property is bought or sold, the title is transferred to the new owner.

What is the difference between Strata Title and Torrens Title property?

The main difference between Strata title and Torrens title is that the ownership structure is different, with strata title owners owning a portion of the overall property, while Torrens title owners own their individual property outright.

So what are the Pros & Cons of owning a Strata Title Property

Strata property is a popular form of ownership in Australia, especially in urban areas. While owning an individual unit or apartment within a larger building or complex may present an affordable entry level to the property market, sharing ownership of common areas and facilities with other owners in does come with some limitations. Here are some of the pros and cons of strata property ownership.

The Pros:

• Affordable entry-level home ownership: Strata property ownership can be a more affordable way to enter the property market, especially in expensive urban areas where freehold property may be out of reach for many first-time buyers.
• Shared maintenance costs: As an owner of a strata property, you share the costs of maintaining the common areas, such as the building’s exterior, roof, gardens, and amenities, with other owners in the building. This can save you money compared to owning a freehold property where you would be responsible for all the maintenance costs. Although care needs to be taken with complexes that have additional facilities like swimming pools and lifts as maintenance and repairs on these items can be expensive.
• Amenities and facilities: Many strata buildings offer shared amenities and facilities, such as a pool, gym, or communal gardens, that may be too expensive to own or maintain individually.
• Community feel: Living in a strata building can help with social networking and building relationships. The random coming and goings of neighbours and close proximity can provide added security. There is also opportunity for owners who wish to take a more active role in the management of the building to do so.

The Cons:

• Strata fees: As an owner of a strata property, you are required to pay strata fees to cover the costs of maintaining and managing the common areas and facilities. These fees can be expensive and increase over time, making strata property ownership less affordable in the long run and reducing cashflow for investment purposes.
• Limited control over common areas: As an individual owner, you have limited control over the common areas and facilities in the building. Decisions about the management and maintenance of the building are made by the owners’ corporation, which may not always align with your interests or preferences.
• Complex rules and regulations: Strata property ownership is subject to a complex set of rules and regulations that can vary from building to building. These rules can govern everything from noise levels to pet ownership, and violating them can result in penalties or fines.
• Potential for disputes: Sharing common areas and facilities with other owners can lead to disputes over maintenance, management, or use of the shared spaces. Disputes can be difficult and expensive to resolve, especially if they escalate to legal action.

Overall, strata property ownership in Australia can be a good option for those seeking affordable entry-level home ownership or access to shared amenities and facilities. However, it is important to weigh the potential benefits against the costs and complexities of strata property ownership before making a decision.

Key definitions

• Strata: A type of property ownership where multiple units or lots are owned by different individuals or entities, but there is also shared ownership of common areas such as hallways, elevators, and parking lots.
• Lot: A specific area within a strata property that is owned by an individual or entity.
• Common property: The shared areas within a strata property that are owned by all lot owners, such as hallways, elevators, and recreational facilities.
• Body corporate: A legal entity that is responsible for the management and administration of a strata property. The body corporate is typically made up of all lot owners and has the authority to make decisions on behalf of the owners.
• By-laws: Rules and regulations that govern the use and behaviour of lot owners and residents within a strata property. By-laws are established by the body corporate and can cover things like noise levels, pet ownership, and the use of common areas.
• Strata title: The legal document that provides evidence of ownership of a lot within a strata property.
• Strata manager: A professional who is hired by the body corporate to manage the day-to-day operations of a strata property. The strata manager may be responsible for tasks such as collecting fees, managing maintenance and repairs, and enforcing by-laws.
• Levy: The fee that lot owners pay to cover the costs of maintaining and managing the strata property. The amount of the levy is typically determined by the body corporate and may vary depending on factors such as the size of the lot and the amenities offered by the property.
• Maintenance fund: A fund that is set up to cover the ongoing maintenance and repair costs of the strata property. Lot owners may be required to contribute to the maintenance fund as part of their regular levies.
• Capital works fund: A fund that is set up to cover the costs of major repairs or upgrades to the strata property, such as roof replacements or upgrades to common areas. Lot owners may be required to contribute to the capital works fund in addition to their regular levies.
• Sinking fund: A reserve fund that is established by a strata property to cover the costs of future capital expenses or major repairs, such as replacing a roof, repainting the building, or upgrading common facilities. This ensures that funds re available when these costs arrive and owners don’t need to provide the full amount all at once

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Disclaimer

Park Avenue Property Group, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances.