Purchasers often ask us, ‘What is the difference between a Community Title and a Strata Title? this blog will explain what each of them are and the differences between the two.
What is a strata plan?
Strata property consists of units which are individually owned and ‘common property’. Common property is property which each of the owner of a unit has a right to use. The purpose of a strata title instead of individual titles for each of these units is for efficiency. An example of this efficiency is a pool which could be used by each of the unit owners in a strata plan but excluded to the public. This way, each of the owners of the units can enjoy the right to use the pool without having to pay the high cost of owning a pool individually. Other examples of Common property include shared driveways, utility lines and garden areas.
What do I own if I own a unit in a strata plan?
A unit in a Strata plan is normally defined by the ‘inner surface of the wall’ of the unit (Strata Titles Act 1988 (SA)). This means that the owner of a unit is entitled to ownership of the space within the inner walls, as well as the walls themselves. Each Unit may also have ‘unit subsidiaries’ (like carports or yard areas), which allow the owner to access the land exclusively. Other than the inner surfaces of the land and any unit subsidiaries given to the unit owners, other property contained on a strata plan is owned by all of the owners as a collective.
Who manages Strata plans?
The strata corporation oversees the administration of the strata articles which define how the strata plan is to be run. Strata plans can include hundreds of units or at a minimum, two. Since larger strata plans can be difficult to manage, professional strata managers are usually employed to hold strata meetings, collect levies and manage the strata corporation. Smaller strata plans (two or three units) can be self-managed by the owners of the units. When you purchase a unit in a strata plan, you become a part of the strata corporation and can attend strata meetings.
Who maintains the Common Property?
The owners of the units pay annual fees for insurance, maintenance and administration. How much each owner must pay is usually determined by how much land they own compared to the other unit owners. Water use can also make up part of these annual fees, but it can also be divided based on the size of the unit. An example of how these fees could be used is to pay a maintenance person to mow the lawn on a piece of common property or fix potholes in a shared driveway.
Can Strata Titles still be created?
In 1996, law was passed to the effect that strata plans could no longer be created in South Australia. However, those that had already been created were allowed to continue to exist.
What is a Community Title?
The new law in 1996 meant that all newly constructed lots on the same parcel of land had to be created as community lots instead of strata units. While the two are very similar, units in a community plan are defined by the land, not the structural sections of the buildings, as was the case with strata units. As with strata plans, there is still common property in community plans.
Who manages a community corporation?
Like a strata corporation, a community title will have a ‘community corporation’. Community corporations enact by-laws instead of articles (which are used in strata corporations). The by-laws vary between each community corporation.
The owners of each of the lots usually share the cost of maintenance and insurance based on the size of their land. In a community corporation, owners are responsible for maintaining and insuring structures on their lots. Water use is calculated based on the lot size and is usually paid by the individual owner.
When a community corporation consists of more than two lots, a strata manager is typically appointed to carry out and manage the community corporation
COMMUNITY strata TITLEs
Community Strata properties only exist when one lot may be physically above another (like in an apartment complex). The difference between these lots and regular community plan lots is that the boundary of the lots is not clearly defined by the land on which the lot is placed. Lot owners in a community strata plan are otherwise treated like lot owners in a community plan – they must still pay fees and abide by the by-laws. Community strata title owners can benefit from ‘unit subsidiaries’ (like in strata titles). This means a lot owner could enjoy exclusive use of property like balconies if this is allowed for in the by-laws.
While rare nowadays, units and flats (portions of a whole parcel of land) which are leased out from the owner of the whole of a parcel of land are known as ‘moieties’. Individual leases will exist for each of the people leasing the land. These leases will set out the rules for those leasing the units or flats (instead of by-laws or articles). A company title occurs when a company is the registered proprietor of the whole of a parcel of land and leases out flats or units on that parcel. If this is raised by the agent or appears on any searches when purchasing a property have a talk with you Conveyancer.
BUYING A STRATA OR COMMUNITY TITLE PROPERTY?
Before you buy a strata or community title property, it is important that you read the by-laws or articles of the corporation, the minutes of the strata meetings and any other relevant information about the corporation. These documents show how the corporation is run, information about the common property and information about fees and insurance you will have to pay as an owner of the lot or unit.
If you are unsure as to how to do this or how to access these documents, be sure to contact your conveyancer. It is a good idea to have your conveyancer read these strata particulars BEFORE you sign a contract. As mentioned earlier, once you own a property, you are obliged to contribute fees to the corporation.
The team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers