In NSW there are two main systems of title: Torrens Title and Strata Title. Both confer ownership of a property, but they differ significantly in the rights and obligations they prescribe to their owner.
If you are considering purchasing or transferring property it is very important to investigate the title to be conveyed to ensure that your purchase will be secure.
When you buy property you not only purchase the land and any buildings on that land but also a series of rights relating to the land and those buildings. Together they are known as legal title and they are determined by the system of title in which ownership of the property is registered.
Almost all property in NSW is Torrens Title. The Torrens Title System is simply a system of ownership, whereby the Government’s Department of Lands, records and documents all ownership of property in NSW:
- For land to be transferred or sold, particular documents must be produced in the Land Titles Office.
- You only become the owner when the documents are accepted and you are registered with the Land Titles Office as the owner.
The plan of the area where the property is located is also kept with the Department of Lands. Upon registration it is the ownership of that area which is transferred – in this sense the system is known as Title by Registration.
Property that is Strata Title is similar to Torrens Title and any transfer of ownership must also be registered with the Department of Lands. But the Strata Title System is unique in that it allows for parts of buildings to be owned by different owners.
Torrens Title registers the horizontal division of the piece of land only. Take for example a residential apartment block: the land itself was once Torrens Title. But the strata plan setting out each apartment creates rights that can be exercised by their individual owners, making them Strata Title.
Property that is Strata Title also includes cubic air space which allows the building to be divided above and below ground. Any part of the building not forming part of any apartment forms the Common Property and is owned by the Owners Corporation.
In the residential apartment block, division is not only horizontal but also vertical. This makes sense when you consider that synonyms for “strata” include “levels”, “layers”, “bands” and “sections”. The Strata Plan divides the building according to the strata scheme, which regulates the rights and obligations and allocates Unit Entitlements unique to each apartment. The rights and obligations of the owners are set out in the Buildings By-Laws.
Do your research with Strata Title properties
If you are thinking of purchasing a Strata Title property, your investigations should consider how the title will impact your exclusive possession. These investigations should include:
- The Strata Scheme, including the location of the common property areas such as driveways, stairs, roofs, gardens and swimming pools;
- The maintenance of the building as well as its continued management and development;
- The relationship between the different owners in the strata scheme, including the presence of any exclusive-use By-Laws entitling one owner in the scheme to have exclusive use of part of the common property;
- The financial state of the Owners Corporation, including the relevant administration and sinking funds as well as strata levies; and
- The compulsory By-Laws and any change to them.
Each property is different and requires tailoring the relevant investigations to each transaction to ensure that your purchase is secure. The above are just a few examples.