Strata titles are not widely understood even though this Australian concept has been adopted all over the world.
In simple terms, strata titles refer to property whereby an owner has a “lot”, which is part of a property complex such as a row of townhouses or an apartment block. They only own the actual lot on which the built structure sits.
The rest of the assets, such as the gardens, driveways, foyers, and perhaps swimming pool and gym, are known as “common property”, in which strata titles have shared ownership through the owner’s corporation.
When you come across a strata title company, they will usually have quite a new website, because the concept itself has only existed for about half a century. That said, there are now over 2 million lots in Australia and some 270,000 schemes with strata titles.
Over 50% of all residential leases and sales in Sydney are now strata titles, mainly because investors love the concept. And, increasingly, retail and commercial properties are now strata titled. In fact, even vineyards are!
The Legalities of Strata Titles
Legally, the following developments can be strata titled:
- Mixed use
- Retirement villages
- Service apartments
- Caravan parks
A Brief History of Strata Titles
Before strata titles existed, the land on which flats were constructed would be sold, making the landowners Tenants in Common. Alternatively, they would be marketed as a company title, meaning that shareholders could use residential units exclusively.
With the Tenants in Common construction, several people would own pieces of the land parcel, while ensuring that exclusive use would be offered to a purchaser.
Individual occupants, however, could not have separate ownership, and building societies and banks found these purchases too risky. As a result, high-interest rates were charged. The New South Wales government was pressurred to make it easier for people to borrow money, leading to the Conveyancing (Strata Titles) Act, 1961. It was accepted on July 1, 1961. On July 28, 1961, Lindsay Gardens became the first strata titled building in Australia, and perhaps the world.
The Strata Titles Act, 1961 remained into force until 1973, when the NSW Strata Titles Act and Regulations was passed. Under this new regulation, strata plans had to be far clearer about where each lot was placed. New South Wales continued to be innovative and enacted the first community title legislation. This was in 1989.
Strata titles became increasingly popular. After 50 years, many complexes were developed, including the Q1 on the Gold Coast, where 526 are based, as well as dining and retail areas, conference and meeting facilities, a day spa, and resort pools.
Once these types of complex, large strata developments came about, new management challenges also arose. Complexities included appropriate support services, tenant responsibilities, owner engagement, aging infrastructure, rising costs, and operational difficulties.
However, strata titles continued to grow and have become increasingly sophisticated. This mirrors the history of organizations and companies like the Strata Community Australia, which addresses the different administrative challenges.
Additionally, it is now increasingly common for a property development business to focus on strata. In fact, many now advise solely on these financial investment constructions.
Joe Tirimacco is a former Property Developer who now works as a qualified Mortgage Broker. In his leveraging your wealth podcast, Joe outlines tips and advice for buying property and increasing your wealth through leveraging what you already own.
In the Flip or Flop podcast, Joe Tirimacco and Accountat Nick Corbett discuss the different aproaches taken to proerty development from the perspective of a Mortgage Brokwr and Accounant, respectuvcely.