What is a Company Title vs. Strata Title?

admin | Posted on Friday, June 15th, 2018

If you’ve looked at buying apartments or townhouses, you’ll have come across the terms Strata or Company Title.

Put simply, both exist in order to navigate the legalities of shared common areas within a building or structure. The specifics vary depending on state or territory.

 

What is a Strata Title?

 

The strata system was invented in Australia in 1961 and has since been adopted globally.

If you buy a unit in a building under a strata title, you also have shared ownership and responsibility for the building as a whole including gardens, driveways and recreational facilities.

Everything operates through an entity called the Owners Corporation (or Body corporate, Strata Company or Community Association). The corporation deals with all issues regarding the building’s common areas and structures as well as owner disputes. Corporations often utilise Strata Management companies such as Real Property Services to manage this.

 

Pros

  • You own the unit and share ownership of common areas.
  • You can vote on big decisions regarding the building.
  • Generally, strata titled properties have a higher value than company titled properties.

 

Cons

  • You must adhere to bylaws and pay regular levies for maintenance.
  • You share liability for any issues or damages to the building and common areas.
  • Strata insurance is compulsory.

 

What is a Company Title?

Under this system, the building is owned by a company. When purchasing a unit within the building, buyers do not own the unit. They are effectively buying ‘shares’ in the company which in turn allows them the right to occupy their unit, receiving a ‘Shares Certificate’ rather than a title deed.

 

Pros

  • They are generally cheaper to buy.
  • Because of the restrictions on shareholders, many company titled properties are occupied by the owners meaning less turnover and less risk of noise and other issues that incur with short rentals.

 

Cons

  • You do not own the unit, but rather ‘shares’ in the company.
  • Company directors don’t have to consult shareholders on any decisions regarding the building.
  • Banks are more reluctant to issue loans for company titles and interest rates are higher.
  • Renting your apartment out may not be possible or could involve limitations.
  • Each company’s constitution can vary significantly. You should do your homework and ask about the company’s policies on renting, renovating and maintenance up-front.

 

Which title is best for me?

Your ultimate decision will depend on your financial situation as well as your intentions with the property. Generally speaking however, the Strata title is the more modern system and is seen as the most flexible and transparent.

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