If you’ve been scouting ads for an apartment, townhouse, or unit, you may have read terms like strata title and community title.
In Australia, there are different types of properties that you can purchase under various titles, and they are subject to somewhat different legalities.
Purchasing a house is a major decision and will significantly impact your financial situation. Therefore, before buying a property, one of the main things you need to understand is the type of title you are opting for.
In this article, we define the meaning of strata and community titles. Then, compare both title options to help you understand the finer details about your potential property before committing to the deal.
What is a Strata Title?
In Australia, a strata or strata title refers to a model of property ownership. It provides for individual ownership of certain portions of a property or parcel of land and shared ownership of others.
So, if you purchase property under a strata title, you will have ownership of your actual dwelling place. In addition, you will also share the ownership of ‘common’ property, including spaces like lifts, utility lines, gardens, foyers, fences, and swimming pools. These spaces become the shared responsibility of all the property owners of that building without incurring the high cost of individually owning them.
A strata title serves as legal proof of your ownership of the apartment or building. It gives you more control over your property. Another point you should know is that strata title legislation varies across each state in Australia. Therefore, the terminologies or regulations applicable in one state may not hold in another.
Australasian Strata Insights 2020 shows that 9 per cent of the country’s population lives in apartments. There were 340,601 strata schemes and 2.8 million-plus strata lots across Australia. A significant 46 per cent of these schemes have been registered since 2000.
What is a Community Title?
In most states in Australia, a community title refers to a property that has a minimum of two lots with common shared areas. For example - driveways, backyards, detached garages, gardens, or recreational land.
For a community title scheme, when you purchase a ‘lot,’ you become the owner of that lot. Through your purchase, you also become a shareowner of common property areas and have some responsibility for the site.
Strata Title vs Community Title
Though strata and a community title share some similarities, they do have some differences. These include:
Type of Dwellings
Properties like apartments, townhouses, units, commercial offices, factory units, retirement villages, and even caravan parks can have strata titles.
In fact, strata living has evolved from traditional townhouse complexes to include apartment living. This allows home owners to buy affordable homes closer to city centres and their places of work.
On the other hand, community titles can apply to properties with at least two lots that share a common area, such as a driveway. It is mainly used for larger estates with many residential lots, including retail and/or commercial outlets.
Boundaries
Strata titles are defined by the building's boundaries, with an area of common property for all residents. While the lot boundaries and surveyed measurements define community titles.
As strata titles include structures like townhouses, apartment blocks, and duplexes, the boundaries are divided into units determined through structural divisions of a building. For example, the inner lining of the wall, the top of the floor, etc., can indicate where a particular unit starts and ends. Likewise, common property areas in a strata plan can consist of shared driveways, stairways, elevators, foyers, etc.
On the other hand, community titles are typically divided by land allotments (also called lots). Each lot owner’s entitlements and boundaries are set forth with surveyed land measurements, mostly without limitations on height and depth. As a result, community titles can be pretty substantial, incorporating many buildings and significant land, and are commonly used for larger development lots and similar properties that share infrastructure and other services.
In addition, there’s a community strata scheme. The boundaries of each title are defined by referring to parts of the buildings, as in strata titles.
Both strata and community titles include common property areas like the members' swimming pools and other amenities. Unless specified, these shared spaces are not exclusive to any unit or land owner. This implies that strata and community title ownership allow you to access lifestyle amenities, including outdoor entertainment spaces, playgrounds, and more.
Upkeep and Maintenance
In the case of strata titled properties, the maintenance and admin are taken care of by a legal entity - a strata corporation (term varies across different states) on behalf of all unit owners.
Along with managing minor conflicts between owners (noise, car parking, etc.), the entity also manages compliances and financial and insurance aspects of ownership. At the same time, the responsibility for all decisions rests with each apartment owner.
Likewise, in community titles, the building’s community title corporation administers the rules within the community and maintains and insures common properties. A community title scheme should comprise at least two lots, common property (cables, sewers, drains, etc.), a community management statement, and a body corporate (known as owners corporation in NSW, Victoria and ACT).
In both titles, the owners have to raise funds and contribute the capital value of their unit or lot as applicable for maintenance of the common spaces. Therefore, each member's maintenance and sinking fund contribution is directly proportional to their unit or lot size.
Legal enforcement
Unlike strata corporations, community corporations have the legal rights from the beginning to impose penalties of up to $500 upon owners and visitors found breaching any of the by-laws.
In both strata titled and community titled schemes, all the owners have the right to fair input at the committee meetings where decisions are made within the body corporate. In addition, an Annual General Meeting (AGM) is held yearly to discuss budget allocation for the next financial year, owners’ contributions, and to address any other issues like conveyance, etc.
Insurance obligations
If you buy in a strata titled property, you are responsible for the insurance of your unit, i.e. what falls within the four walls of your unit. However, since the building structures are owned collectively and managed through the body corporate, it becomes the body corporate's responsibility to take out a building and public liability insurance for the building, common area, and properties of the strata scheme.
When it comes to insuring property in a community-titled complex, community title owners are generally responsible for insuring any building which sits on their lot. However, the body corporate is solely responsible for insuring common area structures like driveways, service infrastructure, common yards, etc.
Which is Right For You - A Strata Title or Community Title?
According to Graeme John, Head of Growth at Joust, “Deciding between a strata title property and a community title can be overwhelming. Knowing your responsibilities as a unit or lot owner will help you narrow your options. Read the bylaws or articles of the corporation, the minutes of earlier strata meetings and other relevant information. These documents will provide insights into the corporation’s management and information about the common property, fees, and insurance you must pay.”
Review of the Pros and Cons
Having compared the two types of titles, let's look closely at the pros and cons of each. This can help decide which of the two works better for you.
Strata Title - The Pros:
- Since the corporation manages the common area maintenance, you are responsible only for directly managing your unit. This minimises the hassles of looking into the care and beautification of the garden, pool, etc., as they fall in the common area.
- First home buyers and older buyers get an opportunity to buy property in an area they would like to live in, which otherwise would be beyond the budget if purchasing a house.
- You can access more favourable loan terms when applying for Strata finance and enjoy better capital growth due to higher demand from buyers and renters.
- New strata buildings mostly include amenities such as a gym, swimming pool, landscaped gardens, and outdoor entertaining spaces, which would be unaffordable for most first homeowners who buy a house.
- You get to know your neighbours and can create efficient property management councils. With neighbours around, it offers an added sense of security.
Strata Title - The Cons
- Strata surcharges or strata levies are generally paid quarterly and spent on maintaining the building and its facilities. So the more extensive the complex and amenities, the higher your quarterly bill.
- Since the council rates are charged per unit, you will have to incur this cost in addition to strata levies.
- Some buildings can impose restrictive by-laws, and you may have to follow the rules, for example, rules for pet owners, undertaking renovations to your property, etc.
- If the body corporate/owners corporation is inefficient, you may find it time-consuming to make decisions, implement improvements, and approve requests.
- Since your property value is directly linked to the complex, there could only be as much value you can enhance through renovations and home improvements.
Community Title - The Pros
When you opt for a community titled property, you can enjoy the benefits of:
- Lifestyle amenities like swimming pools, outdoor recreational areas and gardens.
- Better input into the management of shared facilities.
- Enhanced property value due to standardised building and landscaping.
- Insurance cover on community lots and facilities.
Community Title - The Cons
Although there are several positive aspects to a community title, there could be deal-breakers such as:
- Higher costs of community levies, although the benefits may outweigh the disadvantages.
- Restrictions on enhancements and improvements for your lot due to standardised landscaping and buildings.
- Varying and complex regulations because of the different types of lots, including residential and commercial, of the estate.
- The association’s insurance does not cover any area of your lot.
When choosing between a strata title or a community title scheme, both have their share of pros and cons. Ultimately, it’s a decision you must make depending on your personal requirements, financial situation, and the unit or lot itself.
How Joust Can Help
Are you new to the property market and want to determine your borrowing power before buying your first home? Our Borrowing Power Calculator can help you. Just enter essential inputs like income, expense, and loan details into the calculator, and you’ll instantly get an idea of how much loan you can apply for based on your current finances.
Thereafter, you can visit the Joust marketplace to search for budget-friendly home loans from some of Australia’s most trusted lenders.
