Thinking of buying an apartment near your workplace, or a unit in a glamorous new high-rise development? Before you start browsing through the property ads, you will need to become familiar with strata and community titles – two kinds of titles you’re likely to encounter as the owner of an apartment. If you’re not yet ready to purchase your dream home with a sprawling garden in the suburbs, you may be considering a more economical choice, such as a unit or apartment. These types of properties have a strong ongoing appeal with tenants and owner-occupiers alike, with many considerable benefits. Not only are they generally much cheaper than houses and are therefore more affordable, they usually require less overall maintenance, resulting in lower bills and ongoing costs. When your property shopping in high profile, desirable locations, apartments can be half the price of a house in the same neighbourhood, sometimes even lower.
Furthermore, apartment complexes are designed around structures and guidelines that are highly regulated, meaning they have their own set of rules that ensure equal rights and obligations to every homeowner. These rules fall under either a strata or community title. Before you buy an apartment or unit, it’s important to know the differences between both. Strata titles can apply to properties like apartments, units, townhouses, commercial offices, factory units, retirement villages and even caravan parks.Community titles can apply to properties that have at least two lots and that share a common area, such as a driveway. While strata and community titles might sound similar, there are a number of key differences between the two types of titles, including the following:
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 of the 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 titles apply to structures like apartment blocks, townhouses and duplexes, boundaries are divided into units, rather than land allotments. Unit divisions are determined through structural divisions of a building, not by reference to the land. For instance, the inside lining of the wall, the bottom of the ceiling, the top of the floor – all of these can be used as references of where a particular unit begins and ends. Common property areas in a strata plan can consist of areas like shared driveways, elevators, stairways, lobbies, landscapes and gardens.
On the other hand, community titles are usually divided by land allotments referred to as lots rather than units. Instead of dividing the space based on building parameters, each lot owner is entitled their respective parcels of land with its own title, defined by surveyed land measurements, often without limitations on height and depth (unless specified in the community scheme). Community titles are most commonly used for gated estates, large development lots and other similarly structured properties that contain shared infrastructure and services. To complicate matters a little further, there is another type of community title known as a community strata scheme, by which the boundaries of each lot can be defined by parts of the buildings in the same way as strata titles.
Both strata and community titles have common property areas like communal swimming pools and other amenities. These common areas are shared by the members of each strata or community and generally aren’t exclusive to any particular unit or land owner, unless exclusive use of a particular common area is allocated by the developer or granted by the strata or community corporation (such as car spaces, lift foyers, rooftop access, etc). This means that when you become an owner of either a strata titled property or community title property, you may be buying into a property that offers access to other lifestyle amenities, including outdoor entertaining areas, BBQ areas, playgrounds, communal relaxation areas and more.
If you’re thinking about purchasing property that falls under a community or strata title and you’re confused about the boundary lines, your conveyancer should be able to shed some light on the situation for you by going over the plans and explaining where the boundaries of your potential purchase begins and ends, including any common property areas.
For strata titled properties, a legal entity called a strata corporation (or also known as an owners corporation or body corporate, depending on the type of scheme and which state or territory the property is situated at) administers and maintains the common property areas on behalf of all unit owners.The strata corporation also manages any issues that might arise between owners such as noise complaints, car parking conflicts and so on. They are responsible for managing the compliance, financial and insurance aspects of ownership, though ultimately, the final responsibility for all decisions rests with each individual apartment owner. The same goes for community titles: the building’s community title corporation is responsible for administering the rules within the community, as well as maintaining and insuring common properties.
To be considered as a community title scheme, the area must consist of at least two lots, common property (such as reticulation, cables, pipes, sewers, drains and plant and equipment), a community management statement and a body corporate. To maintain the common areas, owners in either type of title have to raise funds and contribute based on their unit or lot entitlement – the capital value of their unit or lot compared to the value of all units or lots (as the case may be). In other words, the bigger your unit or lot is, the higher your contribution to the corporation will be. If you own a two-bedroom unit, your unit allowance might be 10 units. Your neighbour owns a three-bedroom unit in the same complex, and due to the increases size of their property, their unit allowance is 14 units. The total number of unit allowances in the whole complex is 180. The larger property attracts a higher unit allowance, because the property is likely to have more residents who will use common facilities such as pools and parking spaces. When raising administration and sinking funds, you as the owner of a two-bedroom apartment will have lower fees based on 10 units out of 180, versus your neighbour, who will pay fees equivalent to 14 units out of 180.
Regardless of whether the property is attached to a strata titled scheme or a community titled scheme, any decisions made within the body corporate must be done so at committee meetings, which allows all of the owners to have fair input. A general meeting is held annually, known as the AGM (annual general meeting), which covers allocation of the budget for the next financial year, collecting owners’ contributions and completing any other necessary conveyancing works.
A key difference between community and strata titles is insurance. Residential strata insurance applies to the general insurance that encompasses the common property areas and common content that is managed by the body corporate. Strata corporations take care of the building and public liability insurances to cover the whole building and its common properties, typically by sharing the premium insurance costs. Strata insurance is compulsory, as is the necessary public liability covering that covers anyone injured or harmed on common property. However, it’s the unit owner’s responsibility to cover the contents insurance of his or her respective unit.
On the contrary, community title owners have no obligation in maintaining and insuring other lot owners’ buildings. This is because in a community title situation, the individual owner of each lot is responsible for the insurance of any building on their lot. The community corporation is only responsible for insuring any common area buildings or structures, such as driveways or service infrastructure. This is one of the biggest differences between community title and strata title, and it could potentially expose you as a property owner to some risky outcomes. For instance, can you imagine the potential for financial loss if a complex of 8 apartments catches fire and burns to the ground – and only 5 of those individual property owners have building insurance?
If you are considering buying a property with a community or strata title, RACV Building Insurance could be a great solution for you. It’s also a good idea to get personalised legal advice to ensure you’re aware of any risks and have a full understanding of how these structures work.
This article is provided for general information purposes only. Its content is current at the date of publication. It is not legal advice and is not tailored to meet your individual needs. You should obtain specialist advice based on your specific circumstances before taking any action concerning the matters discussed in this article.